The new Labor Code of Ukraine will not provide the promised economic effect, it is worth preserving the current one, an expert says

This was reported by Socportal with reference to an expert on labour law, lawyer of the Social Rukh organization Vitalii Dudin.

Calculations are based on an outdated version of the document

The Ministry of Economy, Environment and Agriculture of Ukraine published a release, where it notes that the draft Labour Code developed by it will allow to bring 302 thousand workers out of the shadow and additionally attract 302 thousand workers to the labour market, as well as bring UAH 43.4 billion to the budget. But the legal innovations on the basis of which these calculations were made are absent in the final version registered in the Verkhovna Rada under the number .

As Vitaliy Dudin notes, the figures released by the Ministry of Economy are taken from a study by the Tony Blair Institute called "White Paper", which contains an assessment of the potential impact of the draft Labour Code on the socio-economic sphere. This institute, set up by the former British prime minister, is linked by the media to the American billionaire Larry Ellison. Despite some remarks (in particular, the relaxation of protection for mothers with children over 1.5 years old), the study approves of the new Labour Code. However, the experts analysed the text current as of July 2025.

Minimum wage and fiscal effect issues

According to experts' calculations, the biggest fiscal effect will be provided by an increase in the minimum wage. According to the Directive (EU) 2022/2041, it should be at least half of the average. With this approach, with an average salary of UAH 28 thousand, the "minimum wage " should be UAH 14 thousand as of the beginning of 2026 - almost 40% more than the current one.

According to the calculations of experts from the Tony Blair Institute, the taxes received from the increased income of millions of low-paid workers would bring UAH 19 billion out of the expected UAH 43.4 billion.

The draft Labour Code also sets an adequacy criterion: the minimum wage should not be lower than 50% of the average monthly wage (for January - June, for the whole economy), gradually introducing it from 40% by 2 percentage points every January 1, until 50%, the analysis says on page 15, citing Article 157(4) and paragraph 2 of the Final and Transitional Provisions of the draft Labour Code.

However, as Vitaly Dudin points out, the version submitted to parliament does not contain such innovations. Article 157 of the Draft Labour Code only states that the minimum wage shall be set as a percentage of the average monthly wage, and the amount of the percentage shall be determined by the Cabinet of Ministers of Ukraine.

Norms like the one excluded from the Labour Code regarding a clear 1:2 ratio between the minimum and average wage are common in the EU. But the draft, which was finally submitted to the Rada, will cannibalise the model where the minimum wage will not rise while the average wage increases. Currently, the "minimum wage" has fallen to 30% of the average wage, and the draft will not change this, so the stated forecast of fiscal effect at the level of 19 billion hryvnias per year is unjustified, - says the lawyer.

Detinisation of the labour market: dubious forecasts

According to Vitaliy Dudin, the economic effect as a result of detenisation will also be doubtful. The calculation assumes that the strengthening of labour inspections will bring UAH 14 billion to the budget as a result of detenization. The toughening of control should also bring the most half of new jobs: we are talking about the increase of legal workers by 160 thousand (it is 53% of the projected additional 302 thousand jobs). It was planned to achieve such figures by introducing signs of labour relations, which would allow inspectors to determine whether a person is an employee or self-employed.

The Draft Labour Code introduces a legislative test to distinguish between employment and civil relations. Article 38 lists the indicators of an employment relationship and creates a presumption that the presence of three or more attributes indicates employment regardless of the name of the contract. This is in line with ILO Recommendation No. 198 on employment relationships. In practice, it provides inspectors and courts with a checklist and may reduce reclassification disputes," described the innovations on pg. 30.

But in reality, the authors of the reform have moved away from this approach. The latest version of the Labour Code says that relations that meet five of the eight attributes listed in Article 38 will be recognised as labour relations.

Such a construction will allow employers to avoid concluding labour contracts, since a very small number of cases meet the five characteristics. In comparison, the Polish Labour Code in Article 22 contains a simple and clear definition of employment relationship, where only three attributes are recognised as key . It says that by entering into an employment relationship, an employee undertakes (1) to perform work of a certain type for the employer and (2) under the employer's direction at a place and time determined by the work. hire the employee for remuneration. The content of the Draft Ukrainian Labour Code is much more loyal to employers and will allow them to disguise labour relations in a civil law form. Consequently, the work of labour inspectors to detect undeclared labour will not be effective," Vitaliy Dudin believes.

Possible consequences for workers

According to the lawyer, in the end, the Rada may adopt a new Labour Code without innovations beneficial to workers, but with such controversial innovations as:

• expansion of the grounds for dismissal on the employer's initiative (Article 89);
• increasing the length of the working day to 12 hours (Article 123).
• application of technical control over employees (Article 36);
• approval of internal labour regulations by an act of the employer (Article 22);

In this case, according to Vitaliy Dudin, the new Labour Code will only worsen employment indicators, as the narrowing of workers' protection may demotivate them to work in Ukraine.

The most valuable innovations in terms of employment and fiscal effect can be introduced right now. The current Labour Code could, first, include an article on regulating a reasonable ratio between the minimum and average wage. And, secondly, to introduce signs of labour relations. For this purpose it is not necessary to adopt a cumbersome and contraversion document, which will become effective only in 6 months from the date of termination or cancellation of martial law in Ukraine, - the lawyer voiced his proposal.

Synopsis

Over the past decades, Ukraine has repeatedly tried to replace the current Labour Code, adopted in 1971. Drafts of the new Labour Code were presented as designed to modernize labour relations, adapt them to the market economy and European standards, as well as to regulate new forms of employment. However, each time such innovations provoked discussions due to possible weakening of guarantees for workers and expansion of employers' powers. The current CLLT has been amended several times during its existence and has no outright atavisms. Instead, it provides substantial protection against dismissal and broad powers to trade unions. EU member states such as Poland (1974) and Bulgaria (1986) have also taken a similar approach to modernising their Soviet-era labour laws.