What is a gig-contract and who can conclude it?

A gig-contract is a new form of cooperation with specialists that combines labor and civil law relations. Recently, it has been increasingly used by IT companies — residents of Diia City — to hire employees for specific projects. Let’s consider the features of a gig-contract and the way it is concluded in this article.

Who can conclude a gig-contract?

A gig-contract combines the features of an employment contract and a service agreement. Its characteristics are defined by the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” No. 1667-IX dated July 15, 2021 (hereinafter — the Law of Ukraine No. 1667-IX).
Specifically, clause 1 of Article 1 of the Law provides a definition of a gig-contract and determines the range of persons who may enter into it:

Cooperation under a gig-contract has advantages for both the specialist and the company, including transparent relationships. The specialist fixes the conditions for vacations, bonuses, KPIs, etc. in the gig-contract, and the company fixes the rights to the result of work and other interests.

How is a gig-contract concluded?

Like any other agreement, a gig-contract is concluded in writing according to the standard procedure. Article 17 of the Law of Ukraine No. 1667-IX allows these contracts to be concluded in electronic form and signed with a qualified electronic signature.

What is the difference between a gig-contract and a contract with an individual-entrepreneur?

Diia City resident companies may enter either into regular employment contracts with employees in accordance with the provisions of the Labor Code of Ukraine or civil law contracts with individuals-entrepreneurs.

The Law of Ukraine No. 1667-IX defines the following differences between a civil law contract with an individual-entrepreneur and a gig-contract.

Registration

A gig-contract with a specialist can only be concluded by a resident of Diia City — a legal entity that meets the following requirements:

• it is engaged in the types of entrepreneurial activity established by the Law of Ukraine No. 1667-IX;
• It has at least nine employees and gig-specialists;
• the average monthly salary of employees/gig-specialists is at least EUR 1,200;
• the amount of qualified income is at least 90% of the company’s income;
• It has none of the negative criteria listed in clause 2 of Article 5 of the Law of Ukraine No. 1667-IX (for example, when the company is not registered in Ukraine, has not disclosed its beneficial owners, its shares are directly or indirectly owned by citizens of aggressor countries, etc.)

Diia City residents are registered by the Ministry of Digital Transformation within 10 days of receiving the relevant application.

Unlike an individual-entrepreneur, a gig-specialist does not register with the tax authorities and does not report on income. The company that hired the specialist is the tax agent of the specialist taxpayer of the Diia City resident.

Social guarantees

In comparison to contracts with individuals-entrepreneurs, gig-contracts provide more social guarantees for specialists. In particular, they regulate

• time for performing tasks and rest;
• the possibility of non-standardized time for work;
• the duration of breaks during the day;
• the duration of weekly rest, paid and unpaid breaks in the performance of work on working days;
• the procedure for paying for the days of such breaks in work performance;
• provisions on annual paid breaks in work performance;
• temporary disability;
• compulsory state social insurance of a gig-specialist and other social guarantees.

Taxation

The amount of taxes for gig-specialists and individuals-entrepreneurs is practically the same: Personal income tax — 5%, single social security tax — 22% of the minimum wage, military tax — 1.5%. Unlike an individual-entrepreneur, a gig-specialist does not draw up financial statements, calculate or pay taxes. This is done by the employing company.

Extra documents to the gig-contract

If necessary, the parties shall enter into a non-disclosure agreement (NDA) and/or a non-competition agreement (NCA) separately from the gig-contracts. They cannot be included into the content of a gig-contract, as the subject matter of the agreements is different.

The requirements for them are set out in the Law of Ukraine No. 1667-IX. If necessary, a gig-contract should include a clause stating that non-disclosure and/or non-competition provisions are governed by additional agreements.

How to sign a gig-contract online?

Practice shows that many IT companies sign employment contracts or gig-contracts remotely in electronic form. For this purpose, it is convenient to use electronic document workflow services. To sign a contract, an employee does not need to visit the office, and the company does not need to send documents by mail. With an ODE service, the entire process of document exchange and signing takes up to 5 minutes.

To make an electronic gig-contract legally binding, it must be signed with a qualified electronic signature. For example, the Vchasno.ODE service uses Diia.Signature, Vchasno.KEP, and digital signatures obtained from any qualified electronic trust service provider in Ukraine.

Vchasno.KEP is the most convenient way to use your signature. It is a part of the Vchasno.com ecosystem of services, which means that technical problems in the process of signing documents online are minimized. You can use Vchasno.ODE to apply an e-signature from a personal computer or smartphone from anywhere in the world.

Once the company and the employee sign a gig-contract in Vchasno.ODE, it is stored in the personal account of the service for both parties. If necessary, it can be found in the document archive in a few seconds.