Observation (CEACR) - adopted 2021, published 110th ILC session (2022)

Ukraine

Protection of Wages Convention, 1949 (No. 95) (Ratification: 1961)
Minimum Wage Fixing Convention, 1970 (No. 131) (Ratification: 2006)
Protection of Workers' Claims (Employer's Insolvency) Convention, 1992 (No. 173) (Ratification: 2006)

In order to provide a comprehensive view of the issues relating to the application of the ratified Conventions on wages, the Committee considers it appropriate to examine Convention No. 131 (minimum wage) and Conventions Nos 95 and 173 (protection of wages) together.

The Committee notes the observations of the Confederation of Free Trade Unions of Ukraine (KVPU), received on 25 August 2021 and the observations of the Federation of Trade Unions of Ukraine (FPU), received on 2 September 2021, on the application of the Conventions. The Committee also notes the response of the Government to the 2020 observations of the KVPU and FPU on the application of Convention No. 95, received in 2020.

Legislative developments. Following its previous comments, the Committee observes an absence of information on the adoption of a new Labour Code but notes that the Government’s reports refer to several draft laws introducing amendments to existing legislation in the field of labour that could have an impact on the application of the wages Conventions. In this respect, the Committee welcomes the Government’s indication that it is preparing legislative amendments to strengthen the protection of workers’ claims concerning the payment of wage arrears in the event of an employer’s insolvency, as well as a draft law introducing protection of workers’ claims with the assistance of a guarantor institution. The Committee also notes that, according to the KVPU, a number of recent legislative initiatives threaten to erode most workers’ rights, including on wage matters. The Committee requests the Government to provide its comments in this respect. The Committee hopes that in the framework of the revision process regarding the existing legislation on wages, its comments will be considered and that the requirements of the wages Conventions will be fully met. The Committee reminds the Government of the possibility to avail itself of ILO technical assistance in this regard. The Committee requests the Government to continue to provide information on the developments in its labour law reform, including by providing a copy of any amendments to labour legislation regulating wage issues, once adopted.

Article 3 of Convention No. 131. Criteria for determining the level of the minimum wage. In its previous comments, the Committee noted that in their 2019 observations, the ITUC and the KVPU indicated that the minimum wage does not adequately take into account the needs of workers and their families and the cost of living. It also noted that the KVPU added that: (i) the Government has not considered the trade unions’ suggestion to introduce a system of indexation to ensure that the minimum wage would not lose its value due to the rising inflation during the year; and (ii) in setting the minimum wage, the Government does not consider the overall wage level in the country, leading to a significant gap between the minimum wage and the average wage. The Committee notes that the Government indicates in its report that national legislation provides for criteria to determine the minimum wage complying with the Convention, and includes the possibility to review the minimum wage based on inflation. The Committee also notes that the KVPU largely reiterates its previous observations. Similarly, the FPU indicates that: (i) in establishing the minimum subsistence level in the state budget, used to determine costs of living, only budgetary feasibility has been taken into consideration; (ii) the minimum wages should be higher, according to trade union calculations taking into account education, medical care, and housing costs, as well as the family component; and (iii) a number of legislative proposals to change how the minimum subsistence level is calculated may lead to a fall in growth rates or a freezing of the minimum wage. The Committee requests the Government to take the necessary measures to ensure that, so far as possible and appropriate in relation to national practice and conditions, both the needs of workers and their families and economic factors are taken into consideration in determining the level of minimum wage, as provided in Article 3 of the Convention.

Article 4(2). Full consultation with employers’ and workers’ organizations. In its previous comments, the Committee noted that the KVPU indicated that: (i) the negotiations on the determination of the minimum wage were not conducted in accordance with the procedure established by the applicable General Agreement; and (ii) neither the Government nor the Parliament formally heard the position of the trade unions and that consequently the minimum wage resulted from a unilateral decision of the Government. The Committee notes that, in the framework of the joint working commission’s meetings to prepare proposals to establish the minimum wage for 2022, the parties could not reach a consensual proposal to be submitted to the Government for consideration. The Committee further notes that the KVPU reiterates its previous observations. The Committee requests the Government to provide specific and detailed information on the content and outcome of the tripartite consultations held in the framework of the next revision of the minimum wage.

Article 5. Enforcement. The Committee previously noted that the KVPU, in its observations, indicated that proper inspections are not carried out, due to the moratorium on inspections, and due to the lack of an appropriate number of inspectors. In this respect, the Committee notes the Government’s indication that both labour inspectors and specialists from the main departments for labour and social protection of the regional state administrations carry out monitoring of employers’ compliance with minimum wage requirements. The Committee observes that the KVPU reiterates its previous observations concerning the lack of proper inspections and refers to the complicated procedure to authorize them. The Committee requests the Government to take the appropriate measures, such as adequate inspection reinforced by other necessary measures, to ensure the effective application of all provisions relating to minimum wage. It also requests the Government to provide information on the measures taken in this respect. Regarding labour inspection, the Committee refers the Government to its comments adopted in 2021 on the application of the Labour Inspection Convention, 1947 (No. 81), and the Labour Inspection (Agriculture) Convention, 1969 (No. 129).

Article 12 of Convention No. 95. Wage arrears situation in the country. For several years, the Committee examined the situation of wage arrears in the country, which is particularly prevalent in state-owned coal-mining enterprises, and it previously noted with concern the increasing amounts of wage arrears in that industry. In this regard, the Committee notes the Government’s indication, in response to the KVPU and the FPU’s 2020 observations, that the wage arrears situation is an urgent issue, and that measures were taken to settle wage arrears in certain coal extraction companies. The Committee also notes with deep concern that, according to the statistics provided by the Government, the amount of wage arrears in the country has still increased between 2020 and 2021. The KVPU also continues to refer to long-standing and systematic failure to settle wage arrears, as well as persistent social unrest among the workforce and multiple protests concerning non-payment of wages. The Committee will examine the application of Article 12 in practice in relation to its three essential elements: (1) efficient control and supervision; (2) appropriate sanctions; and (3) the means to redress the injury caused, including fair compensation for the losses incurred by the delayed payment (see 2003 General Survey on the protection of wages, paragraph 368).

Regarding efficient control and supervision, the Committee notes the Government’s indication, in response to the KVPU and FPU’s 2020 observations, that labour inspectors monitored 451 businesses with wage debts between January and September 2020. With reference to its comments adopted under Conventions Nos 81 and 129, the Committee requests the Government to continue to take the necessary measures to ensure efficient control and supervision of the regular payment of wages in the country, and to provide information on the number of workers concerned, the extent of wage arrears, as well as the results of measures taken in this regard.

Regarding the imposition of appropriate sanctions, the Committee notes that the Government reiterates that it is preparing draft amendments to the existing legislation with a view to strengthening the protection of workers’ rights to timely payment of wages. The Committee also notes the KVPU’s indication that some initiatives for legislative amendments may increase the accountability of managers, increase fines threefold, and remove a loophole from current legislation which allows managers to avoid criminal liability if they manage to pay the wages prior to incurring a fine. The Committee requests the Government to pursue its efforts to strengthen the penalties in national legislation, including through the adoption of the abovementioned legislative amendments, to ensure full application of the requirements of the Convention. It also requests the Government to indicate the impact of the measures taken, including the amount of penalties imposed on violators, as well as whether there has been a reduction in the number of workers suffering from arrears in the payment of their wages.

Regarding means to redress the injury, the Committee notes the Government’s indication that schedules have been approved in 452 enterprises for the payment of wage arrears, of which 40 percent have been fully implemented. The Government further indicates that, since the beginning of 2021, as required by labour inspectors, 203 enterprises have paid wage arrears to 30,512 workers. The Government also refers to the work of temporary commissions on payment of wages, which includes the issuing of warnings to heads of enterprises regarding disciplinary punishments. The KVPU nevertheless reiterates that a large number of court rulings on the recovery of unpaid wages are not being implemented and that wage arrears are still increasing. In the view of the KVPU, the situation of wage arrears will worsen, following the entry into force of a Governmental decision, which transfers to coal-mining enterprises the responsibility of the Government to settle wage arrears for state miners. The FPU also refers to increasing levels of poverty, and alleges that the compensation mechanism provided for in the current legislation fails to compensate workers adequately for all losses in the event of wage arrears. The Committee requests the Government to provide its comments in this respect, and to pursue its efforts to remedy the persisting wage arrears situation. In addition, noting the Government’s reference to a coal sector reform, the Committee requests the Government to indicate the impact of such reforms on wage arrears in the coal industry and, in particular, on the possible impact on existing wage arrears of the transfer of Government responsibility for the settlement of wage arrears to the mining companies.

The practice of “envelope wages”. In the absence of a response from the Government on this issue, the Committee once again requests the Government to provide information on the progress made regarding the elimination of the practice of “envelope wages”, according to which workers are forced to agree to the undeclared payment of wages.

Articles 5–8 of Convention No. 173. Workers’ claims protected by a privilege. In previous comments, noting that section 2(4) of the Code of Bankruptcy Procedure excludes state-owned enterprises, the Committee requested the Government to indicate how workers’ claims are protected in the case of state-owned enterprises. In the absence of additional information on this issue, the Committee once again requests the Government to clarify how workers’ claims are protected in the case of state-owned enterprises, given that section 2(4) of the Code of Bankruptcy Procedure excludes state-owned enterprises from its application.

Moreover, the Committee notes that the FPU indicates that the national legislation does not adequately guarantee recovery of wage arrears from bankrupt enterprises, where the debtor’s assets are insufficient after settlement with the charge holder. In addition, the Committee notes the observations of the KVPU indicating that, in practice, the state bodies in the field of labour and the judicial authorities do not provide support for the full protection of workers’ privilege under Article 5 of the Convention. The Committee requests the Government to provide its comments in respect of these observations.

[The Government is asked to reply in full to the present comments in 2023.]