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 Quite common situations in modern realities are the conclusion of civil law contracts by business entities with individuals. Under such agreements, ordinary individuals perform certain work or provide services. However, most businesses are not aware that they are tax agents and are required to charge and pay appropriate taxes to the budget for such individuals (income tax and military duty).

 And from this order is unlikely to depart. However, in the framework of such an order of interaction, the advantage for entrepreneurs is that he does not have to provide leave, do not pay sick leave. In addition, this is a disadvantage for individuals, who must be aware at the time of the contract.

The main feature to pay attention to is that the contract with an individual should not contain any mention that would suggest the existence of an employment relationship. To do this, be sure to indicate the list of works and the period during which they must be completed. That is, such works are essentially one-time and have a certain time frame. Otherwise, the State Labor Service may regard such relations as hidden labor.

 The next feature that should be noted is that the employment contract fixes the agenda. There is no such fixation in the civil law contract. That is, you record only the list of works (services). The cost of work is not fixed with reference to a month or a week, but is fixed, although it can be divided into several payments (advance and the main part). Therefore, we recommend avoiding payment twice a month if the services (works) are long. In such situations, you can make a calendar plan for the work, within one project, to which you can link payment with the signing of an intermediate act of work performed or services provided.

 Liability for violation of labor legislation and labor protection is provided by Article 41 of the Code of Administrative Offenses of Ukraine, according to which for concealment of employment provides for a fine of 500 to 1000 non-taxable minimum incomes, ie from 8 500 UAH. up to UAH 17,000 This is an administrative liability that can be brought to justice in the detection of almost any violations of labor law. Please note that this penalty only applies to an official of the entity.

 If we talk about sanctions against the business entity itself, they are provided for in Article 265 of the Labor Code. Thus, in the case of actual admission of an employee to work without an employment contract (contract), a fine of ten times the minimum wage established by law at the time of detection of the violation, for each employee in respect of which the violation is committed .). That is, if there are several undocumented workers, the fines will be applied in multiples of their number.

 If you have any questions – contact law company Prikhodko & Partners, we know how to protect you from sanctions.

Author: Kristina Vorozhbitova

Chief Accountant

Prikhodko & Partners Law Firm

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