Outstaffing: our experience and alternatives in Ukraine

Outstaffing is a rather effective tool for personnel management, which is successfully used in many foreign countries. As for Ukraine, in our country such activity has not yet spread and is not properly regulated at the legislative level.

Despite this, there are certain areas in which outstaffing is beginning to gain momentum in Ukraine. Today we will tell you about our experience in this area and offer alternatives to outstaffing in Ukraine.

We will also answer the question: How can a foreign company get an employee hiredin Ukraine without the participation of an outstaffing firm, but on the same terms?

First case: classic outstaffing

In January 2019, we were approached by a Сlient from UK who was planning to hire IT specialists from our country. The employees were supposed to work for a foreign company, while staying in Ukraine.

What we did

First of all, we helped to establish and register a company in Ukraine for the Client. As practice shows, the most optimal organizational and legal form for this is a limited liability company (LLC), as it can be established by an individual personally (non-resident or resident), and a legal entity (including foreign).

After registration of the LLC and completion of all the necessary formalities, employees will be hired by the newly established company. It is this company, as an employer, that will pay salaries to employees in the future as well as pay all taxes and duties provided for by law to the budget.

Related article: Receiving the temporary residence permit (TRP) by LLC registration: procedure and benefits

As our company provides full legal support of the registration of companies in Ukraine (including the provision of a legal address, assistance in the selection of the head, etc.), as well as further legal and accounting support of their activities, we signed an agreement on the provision of relevant services with the Client .

Moreover, the power of attorney given to us by the Client helped to complete all procedures without him visiting Ukraine.

Currently, the newly established company is on full legal and accounting service in our company.

Second case: the alternative

Due to the existing contradiction and lack of regulation, the activity of "outstaffing", if it is carried out, is quite often the subject of attention of fiscal authorities. We have seen cases of tax notification-decision from fiscal authorities for both the outstaffer and the provider.

Possible negative consequences:

• additional imposing by fiscal authorities of taxes and penalties based on the assumption that there are no real economic relations;
• lowering of the value added tax by a significant amount of money for the absence of the fact of the reality of economic operations.

However, today we will talk about the case from our practice, which demonstrates how it is possible to legally use the "lease" not only of employees, but also of companies for business needs. 

In winter of 2019, we were approached by a foreign Client who wanted to use hired labour in Ukraine.

The Client decided that the classical outstaffing option was not suitable for him, as he did not want to have any obligations to manage the Ukrainian company. Moreover, he did not want to create a company, to get additional permissions or to have other bureaucratic obligations.

It was important for him to have his man perform specific works in Ukraine and be officially employed.

What we proposed 

Having discussed all possible variants on the Clients case, we have decided to register the company in Ukraine, with our founder and the director. After that, we have employed a person the Client wanted to work with to this company.

How did our solution meet the Client's needs?

• The Client does not have any obligations in Ukraine, both for the company in which the person works, and in relation to the person who works in this company;
• The Client did not need to worry about tax and other obligations of the company and personally be present in Ukraine;
• Given that the founder and director of the company was a citizen of Ukraine, there was no need to receive additional IN, work and residence permit, which saved the Client not only money, but also a lot of time. Usually, the receipt of IN, work and residence permit takes at least two months.

Related article: Employment permit for foreigners in Ukraine: common issues and our practical experience

As a result, in the shortest time possible, we were able to employ the Client's person in the created company, and he (the Client) only pays for the services under the contract with the created company, having no relation to the company itself, as well as to its employees.

Our firm has provided further support in the legal and financial sphere of the organization of this process.

If you are interested in the organization of doing business in Ukraine, including outstaffing, it is desirable to find here a reliable partner who will be able to advise you professionally or provide full legal and accounting support for your case.