Economic and labour market context
Over the past three decades, Ukraine has advanced towards a functioning market economy, the consolidation of democracy and rule of law, and greater labour market flexibility and digitalisation. On 24 August 2021, Ukraine marked its 30th anniversary of independence from the Soviet Union and the establishment of an independent state. On 24 February 2022, Russia launched a large-scale military invasion, attempting to expand the conflict in eastern Ukraine and consolidate the illegal annexation of Crimea in 2014.
The war against Ukraine has inflicted devastating destruction, human losses and displacement on the country. Ukraine has a population of 41 million (excluding the temporarily occupied territories of the Autonomous Republic of Crimea and the city of Sevastopol (State Statistics Service of Ukraine 2022 data)) and, of these, 6.6 million had been internally displaced and 5.6 million had taken refuge across Europe (UN Refugee Agency (UNHCR) and International Organization for Migration (IOM) estimates, July 2022) at the time of drafting this profile. According to various estimates, the majority of internally and externally displaced Ukrainians are women, around 50% are highly skilled and many became unemployed or inactive because of the war. Emigration and fast ageing trends were present before the invasion, but the current large-scale displacement could lead to catastrophic human capital loss in Ukraine.
In its assessment of Ukraine’s EU membership application in May 2022, the European Commission noted Ukraine’s macroeconomic and financial stability and resilience, despite the invasion, and called on the Ukrainian authorities to pursue a reform and reconstruction agenda focused on improving the functioning of the market economy and labour market flexibility, strengthening private property rights, improving educational outcomes and innovation, and upgrading infrastructure and physical capital.
Before the invasion, Ukraine’s economy was on a recovery path after the COVID-19 pandemic; its real gross domestic product (GDP) grew by 3.2% in 2021 compared with 2020, when it fell by 4% compared with the previous year, thanks to a record grain harvest and strong consumer spending (according to the International Monetary Fund (IMF)). Current estimates show a GDP contraction ranging between -35% (IMF, 2022) and -45% (World Bank, 2022) in 2022. The State Statistics Service of Ukraine announced a GDP decline of -15.1% in the first quarter of 2022.
The activity rate has been declining, from 63.4% in 2019 and 62.1% in 2020 to 61.8% in 2021 (among 15- to 70-year-olds), with a 12-percentage-point gap between male and female participation in the labour force; however, the same indicator is rather even between urban and rural areas. Employment losses due to the war are currently estimated by the International Labour Organization (ILO) to be -30%. The COVID-19 pandemic took a heavy toll on employment, with an almost 3 percentage-point loss between 2019 and 2021. By 2021, the employment rate stood at 55.7% (among 15- to 70-year-olds), with a gender gap of over 10 percentage points. Among all those employed, 83.7% had the status of employees. The informal employment rate reached 19.5% in 2021, the majority of whom were self-employed.
Before the invasion, the unemployment rate in Ukraine ranged between 8.8% in 2018 and 9.9% in 2021. Against the backdrop of the COVID-19 pandemic, the total number of jobseekers increased from 1.4 million in 2019 to 1.7 million in 2021, with only 25% of these being long-term unemployed. The average duration of a job search was six to seven months in 2020–2021. In 2021, one in five young people aged 15–29 was not in employment, education or training (NEET); most of them belonged to the category ‘inactive’, while, overall, young women were more exposed to the risk of becoming NEET.
As in other countries, the search for employment in Ukraine can be done individually through direct contact with employers or online or via specialised institutions and organisations. The main player in the areas of supply–demand matching and job placement in Ukraine is the State Employment Service of Ukraine. The State Employment Service has over 600 employment centres throughout the country and provides a wide range of activation programmes, job orientation activities, employment, (re)training and placements for the unemployed, as well as specialised services for employers.
Digitalisation is an important economic driver in Ukraine. Online work modalities, including platform work, have been on the rise in recent years for both web-based and on-location work in Ukraine; various sources consider Ukraine to be among the main exporters of platform labour in Europe and globally (ETF, 2021a).
In February 2021, the Cabinet of Ministers of Ukraine launched 94 digital transformation projects in the fields of education, healthcare, justice, economy and trade, energy, and infrastructure, among others, which will contribute to the development of a digital state (President of Ukraine, 2021a). The law on stimulating the development of the digital economy in Ukraine (2021) aims to stimulate the digital economy by creating favourable conditions for conducting innovative business, building digital infrastructure and attracting both investments and talented specialists.
The main legal act in the field of labour in Ukraine is the Labour Code, adopted in 1971. The code is one of the few legal acts that was adopted in the Soviet period and not cancelled, although hundreds of amendments have been made since Ukraine gained its independence in 1991. The code is composed of 19 chapters, covering the main areas of labour relations, including collective and individual labour agreements, working and rest time, wages, labour discipline, the material responsibility of workers, women and young people’s labour regulation, individual labour disputes, trade union activity and safety at work.
The representation of social partners (trade unions and employers) is regulated by the law on social dialogue in Ukraine (2011). As regards collective bargaining, it is regulated by Chapter 2 of the Labour Code and by the law on collective agreements (1993).
On 19 July 2022, the law on amendments to certain legislative acts on simplifying the regulation of labour relations in the field of small and medium-sized businesses and reducing the administrative burden on business activity was adopted. The law is aimed at reducing the bureaucratic burden on employers, simplifying labour regulation and reducing unnecessary bureaucratic procedures in the field of labour relations, as well as creating favourable conditions for the activity and development of small and medium-sized enterprises.
This law introduced, in particular, a contractual regime for the regulation of labour relations, which could be applied, on a voluntary basis, to labour relations arising between:
- employees and employers of small and medium-sized enterprises with up to 250 employees
- an employer and an employee whose salary is more than eight times the minimum wage per month
The contractual regime sets out:
- a special procedure for concluding an employment contract under the conditions of the contractual regime
- specific regulations of the essential conditions of an employment contract (including the general principles of the organisation of individual working conditions and changes to these conditions, safety at work, an employment contract, and the specifics of granting annual paid and unpaid vacations)
- terms and the periodicity of salary payment
The social partners had differing reactions to the adoption of this law: trade unions asked the President to veto the law (Новини, 2022), while business associations expressed support for the law (ЛІГА.Бізнес, 2022). A short analysis of the legal changes and social partners’ views is available in Shemakov (2022).
In addition to the specific chapters of the Labour Code, separate laws further regulate labour relations and social partners, for example the laws on trade unions, their associations, rights and guaranties of their activity (1999), on leave (1996), on collective agreements (1993), on safety at work (1992) and others.
The COVID-19 pandemic has changed the traditional regulation of labour relations. In particular, the unpaid leave taken in the period of quarantine was excluded from the general period of unpaid leave per year (Article 84 of the Labour Code); a written form of the labour contract was introduced for those working remotely or from home (Article 29 of the Labour Code); and the definition of discrimination in labour relations was adjusted in line with ILO Convention No 111, the Convention Concerning Discrimination in Respect of Employment and Occupation (Article 2-1 of the Labour Code).
In the context of Russia’s war against Ukraine, certain limitations and special provisions concerning labour relations were imposed in accordance with the special law on the organisation of labour relations in the conditions of martial law (2022).
Industrial relations context
Ukraine has a transitional industrial relations system for the market economy. It has been undertaking privatisation processes with a significant proportion of state property, trying to sell the less profitable property.
From a business perspective, weak court and law enforcement systems make Ukraine unattractive to foreign investments (Кінах, 2021).
The country’s system of social dialogue is tripartite and, although it is functioning, its effectiveness is quite low owing to the high degree of formality regarding the social partners’ engagement mechanisms. Such shortcomings of the social dialogue system have led to trade unions not being very active. Trade unions seem to consider such social dialogue forms as collective labour disputes and collective bargaining at sector and national levels as efficient means for protection of their members’ interests (author’s opinion).
The COVID-19 pandemic has greatly affected the industrial relations system in Ukraine, leading to new developments in the area of labour regulations. Although the Labour Code of Ukraine has not changed significantly, new types of employment and labour relations have become instrumental in reducing the devastating impact of the COVID-19 pandemic on the economy and jobs and in avoiding an escalation of inequality and poverty. In practice, the crisis triggered the emergence of new forms of work: for example, telework, part-time work and employment through digital platforms.
The war that the Russian Federation started in Ukraine on 24 February 2022 led to the adoption of the Ukrainian law on the organisation of labour relations under martial law (No 2136-ІХ). This law influenced Ukrainian labour legislation, in particular the validity of employment contracts, the definition of essential working conditions, new provisions concerning the transfer of employees, the performance by the employee of work not stipulated by the individual employment contract at the request of the employer for the period of the imposed martial law, the introduction of remote work from abroad, the increase in the normal duration of working time from 40 to 60 hours per week, and other significant changes to labour legislation for the duration of war in Ukraine.