UJBL February 2009
Against the backdrop of a global financial crisis, major companies in Ukraine are looking for optimal solutions to mitigate the expenses and production costs to allow their business to stay afloat. For a wonder the collective bargaining agreement being intentionally omitted by employers in most instances can provide such effective solution to be taken into consideration. At the same time, the collective agreement is one of few instruments securing the labor rights of employees who need the protection especially under new challenges facing the worldwide economics, including Ukraine.
The present article provides the general overview of the collective agreement regulations in Ukraine focusing on all the above-mentioned solutions and instruments set out by means of a collective bargaining agreement as well as on number of standard issues of huge interest to both employers and employees.
Legal framework
Ukrainian legal regulation of the collective bargaining agreements is set out by the Code of Labor Laws of Ukraine (CLLU), the On Collective Agreements and Contracts Act of Ukraine (CAA), the On Remuneration of Labor Act of Ukraine (Labor Remuneration Act), the On Settlement of Collective Labor Disputes (Conflicts) Act of Ukraine and other national laws and by-laws.
Furthermore, as far as Ukraine is a member state of the International Labor Organization (ILO), the following international instruments apply to regulation of collective bargaining agreements in Ukraine: the Right to Organise and Collective Bargaining Convention No.98 (Convention 98) , the Collective Bargaining Convention No.154 (Convention 154) and the Collective Agreements Recommendation No. 91 (Recommendation 91) .
Collective bargaining
The conclusion of a collective agreement is preceded by collective bargaining which constitutes one of the core instruments for employees and trade unions. Article 4 of the ILO Convention No.98 defines it as “voluntary negotiation between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements”.
The term collective bargaining extends to all negotiations between an employer and one or more employees' organizations, for:
(a) determining working conditions and terms of employment; and/or
(b) regulating relations between employers and employees; and/or
(c) regulating relations between employers or their organizations and an employee organization (s) .
Parties to collective bargaining/collective agreement
Employees are often represented in bargaining by a trade union or other labor organization (council). Namely, an employer (its authorized body) and one or several trade unions of employees are parties to the collective agreement resulted out of the said collective bargaining.
At the same time, if no trade union exists, a labor collective shall elect and authorize a respective body (labor council) or representatives to represent the interests of employees, and negotiate, draft and sign a collective agreement with an employer. As a rule, such election and authorization shall be conducted by means of the respective minutes of the meeting of the labor (employees) collective.
Social partnership
It is also worth mentioning that trade unions may also use collective bargaining in order to manage the economic and social challenges by consensual solutions resulting from the negotiation process as employees and employers share the power of decision-making in this process that is also called “social partnership” under the ILO terminology. One of the main principles of such social partnership is mutual control over further performance of collective agreements and/or arrangements agreed between the employer and employees’ organization.
Liabilities
In order to protect the abovesaid right to collective bargaining and collective agreement Ukrainian legislation envisages liabilities for avoidance of participation in a collective bargaining. Thus, the representatives of employer or trade union (labor collective) avoiding participation in the collective bargaining (negotiations) as to drafting, changing, or amending of a collective agreement or violating the terms and procedures set out by the parties to the collective bargaining shall be liable to a penalty amounting to 10 untaxed citizens’ minimum incomes and are subject to disciplinary responsibilities, including dismissal .
Collective agreement
Collective (labor) agreements are concluded at all companies (legal entities) employing labor with trade unions or other employees’ organizations in order to regulate production, labor, and social and economic relations and to coordinate the interests of employees and employers.
Upon conclusion of a collective agreement, its provisions shall be binding on the employer and apply to any and all employees of the company, irrespective of his or her membership of a trade union or other labor organization representing the employees.
Obligation to conclude collective agreement
There are some contraventions as to the issue whether it is obligatory to conclude the collective agreement under Ukrainian legislation, which are based on Article 65 of the Commercial Code of Ukraine obliging all the companies to conclude a collective agreement.
However, according to Paragraph 1 Article 4 of the said Commercial Code of Ukraine the latter does not regulate labor relations. Then, the provisions of the CLLU and the CAA mentioned above do not contain an obligation towards the employers to enter into the collective agreement, but rather providing the right and rules for it.
Furthermore, under provisions of the ILO Convention 98 and Recommendation 91 collective bargaining as well as collective agreements shall be conducted on a voluntary basis. And, in the event of any discrepancies between provisions of an international treaty (agreement) ratified by Ukraine and norms of Ukrainian labor legislation, the provisions of such an international agreement shall prevail.
At the same time, it shall be also noted that no liabilities for an employer are established by Ukrainian legislation in the event of absence of a collective agreement at the enterprise.
Content of collective agreement
Collective agreements shall provide the main terms and conditions of employment and mutual obligations of the parties in respect of regulation of production, labor, social and economic relations, in particular:
(i) changes in the production and labor organization;
(ii) measures securing effective employment;
(iii) rate and wage setting the form, system and volume of the payroll and other labor payments (bonuses, benefits, premiums, etc.);
(iv) guarantees, compensations, benefits;
(v) participation of the labor collective in the formation, allocation, and utilization of revenues (if so provided by the charter);
(vi) operating mode, working hours, lunch time, days-off, etc.;
(vii) working conditions and labor protection;
(viii) housing, consumer, cultural facilities, healthcare, rest and recreation;
(ix) guarantees of trade union performance or activities of other organizations representing the employees;
(x) conditions for the regulation of the payroll fund and qualification/position wage ratios;
(xi) ensuring equal rights and opportunities for men and women.
The above list is not exhaustive and in addition thereto a collective agreement may also provide for any additional guarantees, social and communal benefits as appropriate. At the same time, the terms and conditions of a collective agreement worsening the condition of employees, compared to valid Ukrainian legislation are invalid.
Effect and registration of collective agreement
A collective agreement shall come into force on the date of signing by the representatives of the contracting parties or on the date set out therein. Once signed such a collective agreement is subject to be filed with district state administrations, executive committee of village, town and city councils . A collective agreement remains in force until the date (term) provided therein, irrespective of the date of registration of such a collective agreement.
The collective agreement filed for registration shall:
(a) comply with current legislation and the agreements of higher level binding upon both contracting parties;
(b) have information regarding the sources for financing of additional (compared to valid legislation) social benefits and guarantees;
(c) meet the requirements of Ukrainian legislation regarding the languages and rules of orthography.
As practice shows two annexes to a collective agreement are usually required by the registration authority: Internal Labor Rules and Remuneration Regulation unless those provisions are not reflected in the text of collective agreement.
The aim of the abovesaid registration is (a) to certify of collective agreements’ authenticity and (b) to ensure the possibility to consider the terms and conditions of such collective agreements during the court proceedings in respect of labor individual or collective disputes arising out of application of such collective agreements.
Liabilities
Pursuant to Article 41-2 of the On Administrative Violations Code of Ukraine the representatives of the employer or trade union or other bodies appointed by the labor collective violating or failing to perform the term and conditions of the collective agreement, shall be liable to a penalty - from 50 to 100 untaxed citizens’ minimum incomes .
Tax and account benefits
Proceeding from the above it is obvious that a collective agreement is an important instrument regulating the relations between employers and employees in terms of protection of employees’ rights and interests as well as application of additional guarantees, social benefits and bonuses which are not provided under Ukrainian labor laws.
And at the same time there are many tax and accounting provisions under Ukrainian legislation which can be used by employers only if such provisions are set out in the respective collective agreements. Some of the abovesaid provisions regarded as tax and accounting benefits for employers are provided below.
Tax
Employer (a taxpayer) is entitled to charge with the account of gross expenditures all the expenses related to maintenance and operation of the employees’ medical inspection centres in the event that the latter is provided under collective agreements.
Furthermore, the specific unique of Ukrainian tax legislation is to read the laws between the lines and to infer analogy based on different and unrelated documents.
In particular, Section 5.6.1 of the abovementioned On Income Taxation Act provides that an employer can account as gross expenditures all the expenses related to remuneration of labor of employees, including payment of main and additional salaries, and other benefits be means of premiums, incentives, or any other payment to employees in monetary or non-monetary form which shall be established by an agreement between employers and employees. Pursuant to the opinion of the majority of Ukrainian tax inspectors the abovesaid agreement between an employer and employees can be only proved by the collective agreement registered according to the requirements of Ukrainian legislation.
Vacations
The On Vacations Act of Ukraine stipulates that the following provisions (if applicable) shall be established in a collective agreement:
(i) duration of annual additional leaves due to hazardous working conditions;
(ii) unpaid leave provided its duration does not exceed 15 days a year .
Remuneration
The following provisions of the Remuneration Act shall be taken into account while considering whether it is worth to enter into a collective agreement:
• Standards of collective agreements allowing remuneration of labor below the standards specified by general, branch or regional agreements, but not lower than state standards and guarantees, may be temporarily used for overcoming enterprises' financial difficulties for a period not exceeding six months.
• Forms and patterns of remuneration of labor, standards of work, rates, tariff scales, outlines of official salaries, conditions of introduction and amounts of additional payments, bonuses, rewards and other incentives, compensatory and guarantee payments shall be established by the companies in collective agreements in accordance with standards and guarantees set out in Ukrainian legislation.
• As an exception, a collective agreement may provide for the partial disbursement of the salary in kind (non-monetary form) in the amount not exceeding 30% of the monthly salary, in case such payment is usual or desirable for employees.
Above are listed only the main benefits/provisions that can be reflected in collective agreements, if applicable. Other provisions of Ukrainian legislation requiring the particular bonuses/benefits/etc to be reflected in a collective agreement shall be additionally analyzed depending on the particular need of a company.
* * *
Almost all the companies and organizations in Ukraine face the realty of the financial crisis forcing them to take every possible action to minimize expenses and spare financial resources. The said problems are solved by different approaches depending on a particular company starting from reducing the salaries to dismissal of employees and closure of business.
Even in the terms of unfavourable financial conditions, the collective agreement concluded in compliance with Ukrainian legislation and with regard to actual manufacturability of a company and its needs, can be an effective instrument enhancing the stability, high-productivity and proficient accounting of a company as well as ensuring labor rights and protecting the social guarantees of employees. Peer social partnership based on a collective agreement provides a dialog producing a fair solution in any crisis situation and helping to avoid labor disputes and conflicts at an enterprise.
Against the backdrop of a global financial crisis, major companies in Ukraine are looking for optimal solutions to mitigate the expenses and production costs to allow their business to stay afloat. For a wonder the collective bargaining agreement being intentionally omitted by employers in most instances can provide such effective solution to be taken into consideration. At the same time, the collective agreement is one of few instruments securing the labor rights of employees who need the protection especially under new challenges facing the worldwide economics, including Ukraine.
The present article provides the general overview of the collective agreement regulations in Ukraine focusing on all the above-mentioned solutions and instruments set out by means of a collective bargaining agreement as well as on number of standard issues of huge interest to both employers and employees.
Legal framework
Ukrainian legal regulation of the collective bargaining agreements is set out by the Code of Labor Laws of Ukraine (CLLU), the On Collective Agreements and Contracts Act of Ukraine (CAA), the On Remuneration of Labor Act of Ukraine (Labor Remuneration Act), the On Settlement of Collective Labor Disputes (Conflicts) Act of Ukraine and other national laws and by-laws.
Furthermore, as far as Ukraine is a member state of the International Labor Organization (ILO), the following international instruments apply to regulation of collective bargaining agreements in Ukraine: the Right to Organise and Collective Bargaining Convention No.98 (Convention 98) , the Collective Bargaining Convention No.154 (Convention 154) and the Collective Agreements Recommendation No. 91 (Recommendation 91) .
Collective bargaining
The conclusion of a collective agreement is preceded by collective bargaining which constitutes one of the core instruments for employees and trade unions. Article 4 of the ILO Convention No.98 defines it as “voluntary negotiation between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements”.
The term collective bargaining extends to all negotiations between an employer and one or more employees' organizations, for:
(a) determining working conditions and terms of employment; and/or
(b) regulating relations between employers and employees; and/or
(c) regulating relations between employers or their organizations and an employee organization (s) .
Parties to collective bargaining/collective agreement
Employees are often represented in bargaining by a trade union or other labor organization (council). Namely, an employer (its authorized body) and one or several trade unions of employees are parties to the collective agreement resulted out of the said collective bargaining.
At the same time, if no trade union exists, a labor collective shall elect and authorize a respective body (labor council) or representatives to represent the interests of employees, and negotiate, draft and sign a collective agreement with an employer. As a rule, such election and authorization shall be conducted by means of the respective minutes of the meeting of the labor (employees) collective.
Social partnership
It is also worth mentioning that trade unions may also use collective bargaining in order to manage the economic and social challenges by consensual solutions resulting from the negotiation process as employees and employers share the power of decision-making in this process that is also called “social partnership” under the ILO terminology. One of the main principles of such social partnership is mutual control over further performance of collective agreements and/or arrangements agreed between the employer and employees’ organization.
Liabilities
In order to protect the abovesaid right to collective bargaining and collective agreement Ukrainian legislation envisages liabilities for avoidance of participation in a collective bargaining. Thus, the representatives of employer or trade union (labor collective) avoiding participation in the collective bargaining (negotiations) as to drafting, changing, or amending of a collective agreement or violating the terms and procedures set out by the parties to the collective bargaining shall be liable to a penalty amounting to 10 untaxed citizens’ minimum incomes and are subject to disciplinary responsibilities, including dismissal .
Collective agreement
Collective (labor) agreements are concluded at all companies (legal entities) employing labor with trade unions or other employees’ organizations in order to regulate production, labor, and social and economic relations and to coordinate the interests of employees and employers.
Upon conclusion of a collective agreement, its provisions shall be binding on the employer and apply to any and all employees of the company, irrespective of his or her membership of a trade union or other labor organization representing the employees.
Obligation to conclude collective agreement
There are some contraventions as to the issue whether it is obligatory to conclude the collective agreement under Ukrainian legislation, which are based on Article 65 of the Commercial Code of Ukraine obliging all the companies to conclude a collective agreement.
However, according to Paragraph 1 Article 4 of the said Commercial Code of Ukraine the latter does not regulate labor relations. Then, the provisions of the CLLU and the CAA mentioned above do not contain an obligation towards the employers to enter into the collective agreement, but rather providing the right and rules for it.
Furthermore, under provisions of the ILO Convention 98 and Recommendation 91 collective bargaining as well as collective agreements shall be conducted on a voluntary basis. And, in the event of any discrepancies between provisions of an international treaty (agreement) ratified by Ukraine and norms of Ukrainian labor legislation, the provisions of such an international agreement shall prevail.
At the same time, it shall be also noted that no liabilities for an employer are established by Ukrainian legislation in the event of absence of a collective agreement at the enterprise.
Content of collective agreement
Collective agreements shall provide the main terms and conditions of employment and mutual obligations of the parties in respect of regulation of production, labor, social and economic relations, in particular:
(i) changes in the production and labor organization;
(ii) measures securing effective employment;
(iii) rate and wage setting the form, system and volume of the payroll and other labor payments (bonuses, benefits, premiums, etc.);
(iv) guarantees, compensations, benefits;
(v) participation of the labor collective in the formation, allocation, and utilization of revenues (if so provided by the charter);
(vi) operating mode, working hours, lunch time, days-off, etc.;
(vii) working conditions and labor protection;
(viii) housing, consumer, cultural facilities, healthcare, rest and recreation;
(ix) guarantees of trade union performance or activities of other organizations representing the employees;
(x) conditions for the regulation of the payroll fund and qualification/position wage ratios;
(xi) ensuring equal rights and opportunities for men and women.
The above list is not exhaustive and in addition thereto a collective agreement may also provide for any additional guarantees, social and communal benefits as appropriate. At the same time, the terms and conditions of a collective agreement worsening the condition of employees, compared to valid Ukrainian legislation are invalid.
Effect and registration of collective agreement
A collective agreement shall come into force on the date of signing by the representatives of the contracting parties or on the date set out therein. Once signed such a collective agreement is subject to be filed with district state administrations, executive committee of village, town and city councils . A collective agreement remains in force until the date (term) provided therein, irrespective of the date of registration of such a collective agreement.
The collective agreement filed for registration shall:
(a) comply with current legislation and the agreements of higher level binding upon both contracting parties;
(b) have information regarding the sources for financing of additional (compared to valid legislation) social benefits and guarantees;
(c) meet the requirements of Ukrainian legislation regarding the languages and rules of orthography.
As practice shows two annexes to a collective agreement are usually required by the registration authority: Internal Labor Rules and Remuneration Regulation unless those provisions are not reflected in the text of collective agreement.
The aim of the abovesaid registration is (a) to certify of collective agreements’ authenticity and (b) to ensure the possibility to consider the terms and conditions of such collective agreements during the court proceedings in respect of labor individual or collective disputes arising out of application of such collective agreements.
Liabilities
Pursuant to Article 41-2 of the On Administrative Violations Code of Ukraine the representatives of the employer or trade union or other bodies appointed by the labor collective violating or failing to perform the term and conditions of the collective agreement, shall be liable to a penalty - from 50 to 100 untaxed citizens’ minimum incomes .
Tax and account benefits
Proceeding from the above it is obvious that a collective agreement is an important instrument regulating the relations between employers and employees in terms of protection of employees’ rights and interests as well as application of additional guarantees, social benefits and bonuses which are not provided under Ukrainian labor laws.
And at the same time there are many tax and accounting provisions under Ukrainian legislation which can be used by employers only if such provisions are set out in the respective collective agreements. Some of the abovesaid provisions regarded as tax and accounting benefits for employers are provided below.
Tax
Employer (a taxpayer) is entitled to charge with the account of gross expenditures all the expenses related to maintenance and operation of the employees’ medical inspection centres in the event that the latter is provided under collective agreements.
Furthermore, the specific unique of Ukrainian tax legislation is to read the laws between the lines and to infer analogy based on different and unrelated documents.
In particular, Section 5.6.1 of the abovementioned On Income Taxation Act provides that an employer can account as gross expenditures all the expenses related to remuneration of labor of employees, including payment of main and additional salaries, and other benefits be means of premiums, incentives, or any other payment to employees in monetary or non-monetary form which shall be established by an agreement between employers and employees. Pursuant to the opinion of the majority of Ukrainian tax inspectors the abovesaid agreement between an employer and employees can be only proved by the collective agreement registered according to the requirements of Ukrainian legislation.
Vacations
The On Vacations Act of Ukraine stipulates that the following provisions (if applicable) shall be established in a collective agreement:
(i) duration of annual additional leaves due to hazardous working conditions;
(ii) unpaid leave provided its duration does not exceed 15 days a year .
Remuneration
The following provisions of the Remuneration Act shall be taken into account while considering whether it is worth to enter into a collective agreement:
• Standards of collective agreements allowing remuneration of labor below the standards specified by general, branch or regional agreements, but not lower than state standards and guarantees, may be temporarily used for overcoming enterprises' financial difficulties for a period not exceeding six months.
• Forms and patterns of remuneration of labor, standards of work, rates, tariff scales, outlines of official salaries, conditions of introduction and amounts of additional payments, bonuses, rewards and other incentives, compensatory and guarantee payments shall be established by the companies in collective agreements in accordance with standards and guarantees set out in Ukrainian legislation.
• As an exception, a collective agreement may provide for the partial disbursement of the salary in kind (non-monetary form) in the amount not exceeding 30% of the monthly salary, in case such payment is usual or desirable for employees.
Above are listed only the main benefits/provisions that can be reflected in collective agreements, if applicable. Other provisions of Ukrainian legislation requiring the particular bonuses/benefits/etc to be reflected in a collective agreement shall be additionally analyzed depending on the particular need of a company.
* * *
Almost all the companies and organizations in Ukraine face the realty of the financial crisis forcing them to take every possible action to minimize expenses and spare financial resources. The said problems are solved by different approaches depending on a particular company starting from reducing the salaries to dismissal of employees and closure of business.
Even in the terms of unfavourable financial conditions, the collective agreement concluded in compliance with Ukrainian legislation and with regard to actual manufacturability of a company and its needs, can be an effective instrument enhancing the stability, high-productivity and proficient accounting of a company as well as ensuring labor rights and protecting the social guarantees of employees. Peer social partnership based on a collective agreement provides a dialog producing a fair solution in any crisis situation and helping to avoid labor disputes and conflicts at an enterprise.