IT OUTSOURCING PLAYBOOK
Taxes and hiring models
Ukrainian taxation system is very favorable to IT companies since they work under private entrepreneurship model, meaning that they sign agreements with a company. There exists certain system of single tax payment. The model suggests monthly payment to the state budget regardless the income amount. The complete employment model offers are listed in the table below:
Unlike other countries (Asia, Europe and USA) IT industry in Ukraine is not working under labor law/legislation, our developers mostly work like private entrepreneurs.
The reason is simple – the optimization of taxes.
- more than 90% of IT industry works on the ground of PP. Taking into account all the terms of the contract that consist of vast number of partitions, the transfer of copyright should be noted as well. As a result, according to the law, the employee is responsible for the entire process of the product creation. For the customer, this situation is very favorable. The companies benefit from such cooperation. They can terminate the contract at any time. Labor legislation taken, you have to pay compensation; in addition, there is a pile of paperwork.
- 4% receive money in cash: these are very small companies that pay their employees “under-the-table” wages, and don’t have any significant impact on the market.
- 5-6% – Labor legislation allows an employee to work two weeks, but the contracts are different, sometimes these are two weeks, sometimes 2-3 months, some companies overwrite to perform monthly workload. Large foreign companies (like Siemens or Samsung), who probably won’t work otherwise. They officially enter the market and pay the official White taxes, but because of them, these companies do not affect the market.
For the customer this means the preservation of information, transfer of rights for the product and employee loyalty. Businesses lose nothing, mostly they even win.
Companies tied salaries to the wage interbank market rate or the rate of NBU.
Now the trend is uphill. So the expectation is the growth this year. The reasons are simple demand is there, the workers are. The growth of high-quality workers is growing at a slower pace.