The arithmetic at equal net pay
Compare company cost at identical take-home, not headline rates. Take UAH 100,000 net per month.
Employment contract. To leave 100,000 after withholding you must gross about UAH 129,870: 18% income tax and 5% military levy come out of salary. On top, the employer pays 22% social contribution on the gross — another UAH 28,571. Company cost: about UAH 158,442.
Sole-trader contractor, group 3. To leave 100,000 after their own taxes you pay about UAH 108,407: the contractor pays 5% single tax, 1% military levy and UAH 1,902.34 of social contribution. Company cost: about UAH 108,407.
The gap is roughly UAH 50,000 a month, or 46%. Across a team of five that is over three million hryvnia a year.
Which is why "employee or contractor" is barely debated on the merits in Ukrainian business. The number is too big.
The disguised-employment test
Here the second half of the calculation begins.
If a contractor in fact works as an employee, a contract with a sole trader does not make the relationship civil-law. Form does not override substance.
The markers, read together rather than singly:
- works to a schedule the company sets;
- on the company's equipment and premises;
- reports to a manager and follows day-to-day instructions;
- receives the same amount monthly for years, regardless of output;
- has no other clients;
- has a workstation, a corporate mailbox and a place in the org chart;
- is accountable for attendance rather than for a result.
One or two markers prove nothing — a freelancer can work from a client's office. The problem is when most of them coincide.
The distinction it reduces to: in a civil-law relationship you commission a result; in employment you direct a process. If you tell someone when to arrive and what to do today, you are directing a process.
What reassessment looks like
The consequences land on the company, not the contractor. That matters, because negotiations often produce "the contractor answers for themselves" — true for their own taxes, not for how the relationship is characterised.
The company is assessed income tax, military levy and social contributions for the whole period, plus penalties for failing to register an employee. The sum is calculated on payments already made, so on a long engagement it exceeds everything that was saved.
The 46% saving works until it does not, and then it works in reverse with interest.
Making the engagement honest
If the work genuinely is project-based, document it that way — not as a formality, but because this is what gets examined.
A contract for a result, not a process. The subject is specific work with a measurable output, not "performance of duties".
Acceptance acts against actual work. Not an identical sum on the 30th every month for years, but acts describing what was delivered. Amounts can vary, and should — that is what real work looks like.
The contractor is independent. Decides when and where to work. Has other clients. Uses their own equipment, or receives yours under a separate agreement.
No employee attributes. No position in the structure, no reporting line, no attendance schedule.
Our position: if reading that list convinces you the engagement cannot be reshaped without losing control, that is your answer. You need the person as an employee and should engage them as one. The objection holds for genuine contracting: a developer with three clients delivering a module against an act stays a contractor however many times you pay them.
When employment turns out cheaper
Not on direct cost — on the total.
- A long engagement with one person full time. Risk accrues monthly and the assessment covers the whole period.
- You need control. You cannot tell a contractor to be available nine to six without that becoming a marker.
- Work with data and access. Employment contracts carry protections a civil-law agreement does not.
- The company is a Diia City resident. Then a third option exists: a gig contract, which costs more than a contractor but removes the question by construction.
Verified 17 September 2026. Calculations use the UAH 8,647 minimum wage and current rates; check before deciding.