Observation (CEACR) - adopted 2023, published 112nd ILC session (2024)

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)

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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 31 August 2023.

The Committee notes the extremely difficult situation in the country since 24 February 2022.

Legislative developments. The Committee notes that the Government refers in its report 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. The Government indicates that the consideration of draft laws on the settlement of problems in the field of remuneration has been suspended due to the difficult situation in the country. In its observations, the KVPU indicates that several provisions of draft laws regulating wage matters are not in compliance with the Convention. It also indicates that the draft Law on Labour did not take into consideration the technical recommendations provided previously by the Office. While acknowledging the difficult situation in the country, the Committee requests the Government to provide its comments in this respect. The Committee reiterates its hope 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 the observations of the KVPU and the FPU expressing their concern that in setting the minimum wage the Government does not take into account a series of factors. In this respect the Committee requested the Government to take the necessary measures to ensure that both the needs of workers and their families as well as economic factors are taken into consideration in determining the level of minimum wage. The Government has not replied to the Committee’s previous request and reiterates that it has prepared a draft Law” on Amendments to Certain Legislative Acts of Ukraine on Remuneration”, which aims at improving the procedure for determining the minimum wage. The Government provides information on the minimum wage that was set for 2022 and 2023 and its adjustments in relation to the State Budget for these years, pointing to the impact of the martial law regime on these decisions. It indicates that the State Budget for 2023 instructed the Cabinet of Ministers to reassess the issue of increasing expenditures, including the minimum wage for 2023, after the termination of martial law. In its observations, the KVPU indicates that Draft Law No. 3515 “On Amendments to Certain Legislative Acts of Ukraine Regarding the Settlement of the Issues of Formation of the Subsistence Minimum and Creation of Prerequisites for Its Increase” is not in compliance with Article 3 of the Convention, as it eliminates the requirement that the minimum wage should not fall below the subsistence minimum for able-bodied individuals, removes existing safeguards for determining the minimum wage of employees in entities financed by the State Budget and considers the “financial capabilities of the state budget” as a criterion for setting the minimum wage. While noting the information provided by the Government concerning the impact of the martial law, the Committee nonetheless requests the Government to provide its comments in this respect.The Committee reiterates its request that the Government takes 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. It requests the Government to provide information in this respect, including on the progress made on the adoption of the draft legislation.

Article 4(2). Full consultation with employers’ and workers’ organizations. The Committee notes that the Government has not provided information on tripartite consultations held in the framework of setting the minimum wage for 2022 and 2023. The Government indicates that in May 2023, the Ministry of Economy of Ukraine held a meeting of the joint working commission to prepare proposals to establish the minimum wage for 2024. According to the Government, the employers, the Trade Union Party and the Executive Committee expressed divergent perspectives and proposals at that meeting, pointing to different economic, political, and martial law-related factors. The Committee notes that the Government has not provided information about whether the participants reached a final result or agreement regarding the minimum wage for 2024. 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 revisions of the minimum wage for 2022 and 2023 mentioned by the Government, as well as in the framework of future revisions. With regards to the minimum wage for 2024, the Committee requests the Government to provide information on the outcome of the consultations referred to by the Government.

Article 5. Enforcement. In its previous comments, the Committee took note of the KVPU observations concerning the lack of proper inspections and the complicated procedure to authorize them. It requested the Government to take appropriate measures to ensure the effective application of all provisions relating to minimum wage. The Committee notes that the Government does not provide information in this respect. It indicates that the work of the State Labour Service on monitoring the provision of the minimum wage by employers has been affected by the current situation in the country since 24 February 2022. In this respect, the Committee notes that the martial law regime has imposed a series of restrictions on labour inspection activities, which are examined, together with the relevant KVPU observations, under its comments on the Labour Inspection Convention, 1947 (No. 81), and the Labour Inspection (Agriculture) Convention, 1969 (No. 129). Therefore, the Committee requests the Government to refer to its comments adopted in 2023 on the application of Convention No. 81 and Convention 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 and previously noted with deep concern the increasing amounts of wage arrears. In this regard, the Government indicates that the elimination of wage arrears remains one of its main priorities. It reports on a series of relevant initiatives. However, the Committee notes with deep concern that, according to the statistics provided by the Government, the amount of wage arrears in the country continued to increase between 2021 and 2023. The Government indicates that the main reason for the increase is the difficult economic situation and military actions taking place in the territory of Ukraine, which influence, inter alia, the functioning of enterprises. In this respect, the KVPU also continues to refer to long-standing problems with regards to settling wage arrears, indicating that this remains one of the most acute social and labour problems, which has been further exacerbated by the current situation. It refers to draft Law No. 9510 “On Amendments to Certain Laws of Ukraine Regarding Strengthening the Protection of Workers’ Claims payment of salary arrears, including in case of insolvency of the employer”, which aims to ensure the rights of employees to receive wages in full and in a timely manner. It indicates however that the draft Law is proposed to enter into force only on 1 January 2025, which would prolong the uncertainty for employees until that date. The Committee requests the Government to provide its comments in this respect and provide information on any relevant legislative developments.

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 delayed payment (see the 2003 General Survey on the protection of wages, paragraph 368).

Regarding efficient control and supervision, in reply to the Committee’s previous request, the Government provides detailed information on the situation of wage arrears, including their extent, their accumulation in specific regions and enterprises and the number of workers concerned. The Committee notes that the monitoring of wage arrears is carried out by the State Labour Service solely on the basis of operational information of regional military administrations and central executive authorities regarding the state of repayment of wage arrears at enterprises. In this context, the Government indicates that it adopted Resolution No. 1037 of 16 September 2022 “On the introduction of special monitoring of repayment by enterprises, institutions and organizations of wage arrears”. According to the Resolution, other central executive bodies as well as regional, Kyiv city and district state administrations, in addition to other entities responsible for the management of state property are obliged to ensure the special monitoring of the repayment of wage arrears at enterprises, institutions and organizations that belong to the sphere of their management or are located in their relevant territory. This is in addition to the work of temporary commissions on the repayment of wage arrears and the monitoring of information about wage arrears submitted in electronic form by enterprises, institutions and organizations. In its observations, the KVPU indicates that the State Statistics Service of Ukraine has stopped publishing statistical information on wage arrears since 24 February 2022. The Committee requests the Government to provide its comments in this respect.It requests the Government to continue to provide information on the number of workers concerned and the extent of wage arrears. The Committee requests the Government to refer to its comments under Conventions Nos 81 and 129 and continue to take the necessary measures to ensure efficient control and supervision of regular wage payment in the country and to indicate its results.

Regarding the imposition of appropriate sanctions, the Government reiterates that it is preparing draft amendments to the existing legislation with a view to strengthening the protection of workers’ rights to the timely payment of wages. In its observations, the KVPU indicates that the current draft Law on Labour has not reviewed the amount of penalties for delayed wage payments, as demanded by the KVPU. The Committee requests the Government to provide its comments in this respect and to refer to its related comments under Conventions Nos 81 and 129. It requests the Government to pursue its efforts to strengthen the penalties in national legislation to ensure full application of the requirements of the Convention, indicate the measures taken in this respect and the impact of these measures, including the amount of penalties imposed on violators, and whether there has been a reduction in the number of workers affected by arrears in the payment of their wages.

Regarding means to redress the injury caused, the Government has not provided information on the number of enterprises that have paid wage arrears to workers during the reporting period. In this respect, the Government indicates that the collection of operational information on the state of repayment of wage arrears, especially with respect to business entities of private ownership, has been complicated due to the martial law regime. It indicates that the Law “On the protection of the interests of reporting entities and other documents during the period of martial law or the state of war” provides for the possibility for business entities to submit information on the payment of wages within three months after the abolition of martial law or the termination of the state of war. The Government once again refers to the work of temporary commissions on wage payment, which includes the issuing of warnings to heads of enterprises regarding disciplinary punishments. The Committee notes that the Interdepartmental working group on the repayment of salary arrears (financial support), which was established in October 2020, was revived in May 2023 and meets on a weekly basis. Furthermore, the Committee notes the Government’s indication that it has prepared draft legislation aiming to increase the amount of compensation for a delay in wage payment. In its observations, the KVPU reiterates that the compensation mechanism provided for in the current legislation fails to compensate workers adequately for all losses in the event of wage arrears. It highlights the need to adopt changes to the legislation that would strengthen the employer’s responsibility for delayed wages, ensure adequate legal protection of the employee’s right to receive timely remuneration for work, and guarantee the priority receipt of owed wages by employees together with adequate monetary compensation for damages incurred as a result of the violation of the terms of payment, in addition to the satisfaction of any monetary claims of employees in the event of insolvency of the employer. The Committee requests the Government to provide its comments in this respect and to pursue its efforts to remedy the persisting wage arrears situation.

The practice of “envelope wages”. The Committee notes with regret that the Government once again does not provide relevant information. 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. For a few years the Committee has been noting that section 2(4) of the Code of Bankruptcy Procedure excludes state-owned enterprises and has been requesting the Government to indicate how workers’ claims are protected in the case of state-owned enterprises. The Committee notes with regret that the Government has not provided information in this respect. 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.

In its previous comments the Committee noted that the Government was 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. In this respect, the Committee takes note of the Government’s indication that there have been no further developments due to the martial law regime. The Government indicates that there is an increase in the share of bankrupt and liquidated enterprises whose employees do not receive payment due to the insufficiency of liquidation property. In its 2023 observations, the KVPU indicates that employees of bankrupt and liquidated enterprises are the most unprotected, despite the fact that the law provides for the protection of their wage claims. According to KVPU, the protection of employees by means of a privilege is not guaranteed in practice, since in the case of insufficient liquidation property, claims regarding wage arrears are recognized as repaid even if not actually paid. This results from section 64(7) of the Code of Bankruptcy, which indicates that claims that are not repaid due to the insufficiency of remaining property are considered to be extinguished. In this respect, the KVPU highlights the need to create a guarantor institution to meet the monetary claims of employees in the event of the employer’s insolvency. The Committee requests the Government to provide its comments in respect of these observations. It requests the Government to keep it informed of any legislative developments aimed to strengthen the protection of workers’ claims concerning the payment of wage arrears in the event of an employer’s insolvency, including through the creation of a guarantor institution.