In order to move on from the Soviet past, Ukraine should take the path of economic liberalization. Since the launch of my column in the Kyiv Post, I have provided an overview of multiple policy areas that need urgent reform. Although all of them are equally important, the scope of work that needs to be done is significantly more extensive and includes many more branches of societal and government relations. Labor relations are one of them.
Core Ukraine’s labor regulations are outdated – they were passed in 1971 – and fail to effectively meet the needs of the modern labor market. The Soviet approach rooted in the idea of one-sided dependence between employers and workers resulted in the imbalance of rights and responsibilities. In free-market economies, employment is seen as a voluntary exchange based on self-interest. Hence the state’s intervention should be limited so that the two parties can get the most out of their interaction.
Hiring and dismissing workers should be easy and simple. The bureaucracy that comes in the way blocks access to jobs, and, therefore, puts breaks on our propensity aspirations. In Ukraine, businesses and potential employees need to sign a standardized employment agreement or employment contract.
In the United States, on the other hand, most employees do not have any employment contracts, written or otherwise. However, high-level executives and managers typically put together written employment agreements to address issues such as obligations, compensation, restrictive agreements, and any post-termination dismissal obligations.
A backward-looking system of remuneration, granting vacations, standardization of working days, vacations, hiring at night and on weekends, which often do not take into account business particularities and, conversely, fail to meet the interests of employers and employees. Such an approach tramples on their freedom to choose.
The Office of Simple Solutions and Results has identified the black holes in the current labor code, and we have drafted an innovative reform that is based on the principles of a free society such as openness, voluntary exchange and transparency. The essence of the policies reflects the best world practices and is consistent with the European Union-Ukraine Association agreement.
At the initial stage of the reform, we propose to introduce a simplified procedure for regulating labor relations for small businesses with up to 250 employees and relations between employers and highly paid employees (with a salary of over Hr 50,000 monthly). The change would imply a significant reduction in bureaucratic procedures and personnel documentation and, as a result, simple and clear hiring and dismissal procedures. After the reform, it will also be possible to recruit employees to work at night, weekends and holidays given they consent to the suggested conditions. Involvement of an employee in overtime work should be carried out without the permission of the elected body of the primary trade union organization (trade union representative). This would bring more flexibility into labor relations in Ukraine and make the labor market more open, transparent, and progressive.
In addition, it is also essential to provide both employers and employees with more freedom to self-regulate. There has to be a choice between indefinite or fixed employment contracts, and it should be only up to the parties involved to decide on the preferred arrangement. Employers and employees should be free to choose their communication tools by mutual agreement, and the exchange can happen both through online channels or in writing. Overall, all crucial details of the workflow such as the time of the beginning and end of daily work, the duration of daily work, annual leave duration should be set in the employment contract and can only be determined by the organization’s internal labor regulations. However, at the same, the protection of the rights of the workers such as the maximum weekly working time, salary payments, maternity leave and more will be guaranteed.
The dismissal of workers is currently overregulated in Ukraine, and that slows down labor relations and the economy as such. After the proposed reform, employers will get the right to terminate the employment relations unilaterally provided that goes in line with the contract. In order to enforce the decision to dismiss workers, employers will only need to sign an additional agreement in accordance with the initially agreed terms and conditions. The goal of the reform is to reduce the government’s role in labor relations in Ukraine, and the outlined policies will significantly cut the red tape.
I would like to thank the members of the National Reforms Council and President Volodymyr Zelensky, in particular, for endorsing the concept during our latest meeting on March 19. I hope that members of the Ukrainian parliament will put their differences aside and work together with our office and member of parliament Halyna Tretyakova to bring the reform to life.
Mikheil Saakashvili has been the chair of the executive committee of the National Reforms Council since May 7, 2020. He served as governor of Odesa Oblast from May 30, 2015, to Nov. 9, 2016. He was president of Georgia from Jan. 25, 2004, to Nov. 17, 2013.
