Are you looking to engage and pay contractor in Ukraine?

Engage and Pay Ukrainian Contractors Without a Local Entity

Many international companies ask:

• How can I legally engage and pay Ukraine-based contractors if I don’t want to set up or maintain a local entity?

• What’s the fastest and safest way to onboard key personnel without delaying start dates?

• How do I retain high-performing individuals without being seen as a risk or interim solution?

• When should I convert contractors into full-time employees?

If these questions are familiar, you’re not alone. Businesses often start with flexible contractor relationships but quickly realise they need structure, consistency, and long-term compliance, especially when core work, client IP, or leadership roles are involved.

Understanding Employment Classifications in Ukraine

There are two primary classifications for work relationships in Ukraine:

• Independent contractors (private entrepreneurs / ФОП): These individuals operate under their own registration, manage their own tax filings, and are not protected under labour law. The client has no payroll obligations, but also no legal control over working hours, location, or exclusivity.

• Employees: Hired under a local employment contract. The employer is responsible for payroll, taxes, and social contributions. Employees are protected by Ukraine’s Labour Code and entitled to benefits such as paid leave, severance, and job security.

Engaging someone as a contractor when they function as an employee (e.g., fixed hours, direct supervision, ongoing responsibilities) improperly increases the risk of reclassification, especially if the relationship ends poorly.

Misclassification Risk: A Real Case

A U.S. tech company worked for three years with a Slovakian IT contractor who operated under a freelance arrangement. Their HR team flagged the classification risk and contacted Acumen to convert the contractor to full-time employment under our local infrastructure.

The finance team delayed approval due to perceived cost differences. Six months later, the contractor relationship had deteriorated, and the freelancer filed a claim with local labour authorities. Although we later received approval to formalise the employment, the contractor refused to sign. The client faced claims for unpaid social contributions, severance, and statutory benefits,  totalling approximately €70,000.

Why Formal Employment Matters in Ukraine

Acumen International enables companies to employ workers in Ukraine without opening a local legal entity, using our PEO (Professional Employer Organisation) infrastructure. This approach ensures:

1. Full legal compliance with Ukrainian labour and immigration laws.
2. Employment contracts in local language aligned with statutory requirements.
3. Secure IP and customer relationships, backed by enforceable local agreements.
4. No risk of reclassification, the individual is a registered employee.
5. Accurate payroll with statutory tax and social security contributions.
6. Structured onboarding and disengagement, including terminations when needed.

You gain all the benefits of compliant employment without the need for entity setup, operational delays, or legal exposure.

Use the Global Payroll Calculator to Estimate the Cost of Compliant Employment in Ukraine

If you’re considering converting a Ukrainian contractor into a full-time employee or hiring new talent without setting up a local entity it’s critical to understand the full financial implications.

The Global Payroll Calculator is designed to help you:

• Estimate the total cost of compliant employment in Ukraine, including gross salary, employer-paid taxes, and statutory contributions

• See how much of the budget goes toward net pay vs mandatory charges

• Make informed hiring decisions without relying on rough assumptions or outdated benchmarks

• Justify employment model changes internally with clear, country-specific data

• Plan budgets more confidently for new roles, team expansion, or compliance restructuring

This tool is not intended for comparing contractor rates or direct-entity hires — it models the total cost of full-time, fully compliant employment through Acumen’s infrastructure.

Before deciding to convert or onboard new talent, use the Global Payroll Calculator to validate costs and understand your true financial exposure under Ukrainian labour law.

Five Strategic Reasons to Convert Contractors to Employees

1. Retain key people — formal employment increases loyalty and reduces attrition

2. Reduce risk — compliant employment eliminates reclassification and penalty exposure

3. Control IP and confidentiality — enforceable local contracts provide legal protection

4. Build long-term team structure — create stability, not just project-based work

5. Support future funding, audits, or M&A — clean employment records strengthen your legal and financial position.

Cost and Flexibility Benefits of Using an Employer of Record in Ukraine

Contrary to common assumptions, hiring through a global PEO is not more expensive:

• Up to 30% cheaper than operating your own entity when accounting for accounting, legal, and operational overhead

• Around 50% cost savings compared to in-house setup, especially for small teams.

• Faster market entry — no registration, no bank account setup, no tax filings.

• Ability to scale up or down easily, based on project or team needs.

Start with Our Employee vs Contractor Transitioning Checklist

We’ve developed a practical checklist to help companies assess whether a Ukrainian hire should be treated as an employee or an independent contractor.

This document helps you:

• Understand classification thresholds under Ukrainian law;

• Evaluate legal, financial, and operational risks;

• Decide when to convert contractors into full-time employees;

• Present a business case for compliant structuring to your internal stakeholders.

Hiring high-performing professionals in Ukraine is entirely possible without opening a legal entity, but it must be done correctly. Whether you’re building an IT team, managing cross-border consultants, or onboarding senior advisors, Acumen International enables you to act immediately, reduce risk, and retain talent, all within the boundaries of local law.

Contact us to scope a compliant workforce solution for Ukraine or request our classification checklist.