“Gig contract”: what is it and what are its most striking features?

On July 15, 2021, the Verkhovna Rada of Ukraine adopted the Law “On stimulating the development of the digital economy in Ukraine” (hereinafter – the Law).  This Law provides for the introduction of new concepts into the legislation of Ukraine, including the introduction of such a concept as “gig contract”. Previously, we briefly analyzed the main changes to the Law, where we partially characterized gig contracts. You are welcome to familiarize yourself with this characteristic by following the link.

Some IT companies have been already the residents of Diya City, others are planning to become them, so the issue of regulating the work of employees under gig contracts remains relevant.

First of all, it should be mentioned that a gig contract is a “know-how” in the Ukrainian legislation. This is a special type of agreement between an employer and an employee, which contains elements of an employment contract and a civil law contract. To put it simply this is such a unique form of relationship that contains both elements of freelancing and elements of social guarantees that are usually provided by the employment contracts.

Nowadays it is a common practice for IT companies to regulate their labor relations with employees as with individual entrepreneurs. The concept of a gig contract was introduced by the legislator to avoid such practice among IT companies with a view to improving working conditions and providing social guarantees to employees with an individual entrepreneur status.

What are the main requirements established by law for concluding “gig contracts”?

• First of all, the employer must have the status of a resident of “Diya City”.
• An employee who will work under a gig contract will acquire the status of a “gig specialist”.
• The minimum remuneration of a gig specialist must be no less than the equivalent of 1,200 euros at the official hryvnia-euro exchange rate established by the National Bank of Ukraine as of the first day of the relevant calendar month.

Attention should be drawn that the Cabinet of Ministers of Ukraine Decision No. 382 dated March 29, 2022 cancels the requirement concerning the amount of the gig specialist’s remuneration. That is the gig specialist does not have to be paid a remuneration during the period of martial law which will amount to at least the equivalent of 1,200 euros.

• The term of validity of the gig contract, the rights, obligations and responsibilities of the parties under the gig contract, the terms of termination of the gig contract and other conditions can be determined by the parties in the gig contract itself at their sole discretion.
• The time for the work of a gig specialist under a gig contract is established by Article 21 of the Law, in particular:
• the total number of working hours of a gig specialist cannot exceed 8 hours per day, respectively, 40 hours per week.

However, if necessary, it is possible to go beyond the established work regime in the gig contract under one of the following conditions:

• it is impossible to determine the exact time for performing the work by a gig specialist;
• performance of work under a gig contract requires an increased level of initiative of the gig specialist, which involves the periodic performance of overtime work without separate instructions from the resident of “Diya City” (employer) about this (for example, if the gig specialist needs to urgently restore the site, identify errors, etc.);
• a gig specialist has the right to independently plan his time to perform the work under a gig contract.

Termination or suspension of the gig contract is possible if:

• the parties have agreed, therefore;
• the gig contract has expired and the parties do not wish to extend it;
• termination of the gig contract is provided under certain conditions in the gig contract itself, for example, if one of the parties fails to fulfill its obligations;
• the employer lost his Diya City resident status.

It is worth paying attention that not only citizens of Ukraine, but also foreign citizens can work under a gig contract. Employers (residents of “Diya City”) can employ foreign workers in their company based on a permit for the employment of foreigners and stateless persons. To receive it, you need to submit the appropriate package of documents to the Employment Center including a draft gig contract.

On the basis of this permit, a foreign citizen is entitled to obtain a temporary residence permit in Ukraine, in contrast to the individual entrepreneur status, which provides services under an economic contract.

For a better understanding of certain advantages and disadvantages regarding the establishment of relations with an IT specialist, below is a table comparing the taxes that must be paid for the services provided (work performed) through the establishment of relations with the individual entrepreneur, with concluding a gig contract or through regular employment with a resident of “Diya City” according to the employment contract.