Ukraine’s New Labor Code: How the State Is Changing Employment Rules
Ukraine’s labor market is entering 2026 in a state of complex balance. The war has not ended, but the economy is no longer living solely in survival mode. Business has adapted, some companies have resumed hiring, wages are gradually increasing, and at the same time the state is trying to change the very framework within which labor relations exist. It is in this context that the government approved the draft of a new Labor Code, which is intended to become the foundation of labor market reform and replace the Labor Code of 1971. The key word here is draft. The document is not yet law, but its approval by the Cabinet of Ministers means a transition from discussion to political procedure. The next stage is consideration in parliament at first reading and work between readings. And it is precisely at this parliamentary stage that it will be decided whether the code becomes a real tool of modernization or turns into a compromise document with contradictory provisions.
The government presents the code as a response to the gap between a 21st-century economy and rules written for a different state, a different employment structure, and a different model of relations between employer and employee. Over these decades, almost everything has changed: remote formats, hybrid work, non-fixed schedules, multi-contracting have appeared; the real needs of business have changed; and the share of people working unofficially or semi-officially has increased in order to retain flexibility and avoid tax costs. It is precisely this gray zone that has become one of the reasons why the state now speaks of de-shadowing as a strategic financial resource. The draft of the new code proposes to clearly define eight indicators of labor relations in order to reduce legal uncertainty, when the same work can be formalized as an employment contract, as “services,” or as a civil law agreement. The declared logic is simple: if the rules are clear, it will be harder to hide real employment in the shadows. Preliminary estimates speak of potential de-shadowing of 43 billion UAH per year, but here it is important not to substitute a forecast for a fact. This is a benchmark, not a guarantee, and it will depend on how the norms are applied and whether the state has real control instruments without turning control into pressure.
The second major change is flexible labor contracts. The number of types of contracts increases from six to nine, and the code directly regulates modern work formats: remote, home-based, and with non-fixed working hours. Separately, the possibility of concluding several types of contracts simultaneously with one employer is embedded. For some employees, this may mean the legalization of what already happens in practice: people combine several roles, take additional hours, work project-based. For business, this means more legal certainty. But flexibility always comes with a risk that flexibility will be used as a way to reduce guarantees. That is why it will be critically important for the market how limitations and employee protections are written into these models. The third block is digitalization of labor relations. Electronic documents are equated with paper ones, simplifying formalization and accounting. For a country at war, where businesses relocate, people change places of residence, and document circulation is often torn between cities and reality, this looks not like a “fashionable reform,” but like a necessity. But digitalization requires not only a norm in the law, but also technical readiness: transparent registries, data protection, and clear procedures for employers and employees.
A separate, politically most sensitive point is the mechanism for determining the minimum wage. The government declares that both monthly and hourly minimum wages will be aligned with EU standards and determined as a percentage of the average wage, which the government will set. This could become a systemic step toward predictability, but at the same time it preserves the main risk: if indexation of the minimum wage remains a political decision without realistic linkage to economic dynamics, it may either lag behind real needs or create additional pressure on business in difficult periods. Everything here depends on whether this mechanism becomes truly transparent or remains a formula that can be “adjusted” to the budget. The draft also outlines social changes. For parents, the right to remote work or work from home is закреплено, and childcare leave options are expanded: both parents will be able to take two months each. This is an important detail for a country where the demographic situation is complicated and the war has sharply changed family structures, mobility, and access to care. In theory, this should make the labor market more humane and practical. In practice, the question will be how employers adapt and whether this becomes a factor of discrimination in hiring young parents, especially women. Another knot is reform of the labor inspectorate. A risk-oriented approach to inspections is introduced to make control more effective and reduce excessive pressure on business. This thesis always sounds good, but works only when risks are assessed transparently and inspections do not turn into an instrument of selective influence. For the state, this is a chance to reduce chaotic control; for business, a chance to obtain clear rules of the game.
For youth, an apprenticeship labor contract is introduced, which should allow safer combination of education with first employment. This is a targeted but important norm for a market where young people often enter employment not through official instruments, but through informal side jobs. If the mechanism is well designed, it can reduce the risk of exploitation and give young people their first official experience without loss of rights. The government also emphasizes the European integration dimension: the document provides for the implementation of more than 30 EU directives, regulations, and ILO conventions. This is important not as a symbol, but as a framework: the rules should be closer to European ones so that the labor market becomes compatible with partners’ standards.
Time for Action has examined all confirmed information and factual parameters of the reform and sees the main thing: the new Labor Code is presented as “modernization,” but in fact it is an attempt to solve several different tasks at once to legalize flexible employment, reduce the shadow sector, move closer to the EU, and involve in economic activity groups that often remain outside the labor market. That is why the document is tied to the Employment Strategy until 2030 and to the goal of making the labor market more inclusive for women, youth, veterans, and people with disabilities.
In parallel with reforming the rules, the state also demonstrates a picture of “actual work” through the results of the State Employment Service for 2025. During the year, over 640 thousand people used the services of the agency, of whom 358 thousand had official unemployment status. With the assistance of the service, employment was provided for 394 thousand people, including 315 thousand who were employed. At the end of December, 192 thousand job offers were available on the unified vacancy portal, with the greatest demand concentrated in industry, logistics, trade, and IT. Unemployment benefits were received by over 257 thousand people, and the average benefit amount was about 5 thousand UAH. These figures show reality: a support system exists, but the level of payments cannot compensate for full income. At the same time, an important indicator is that employment of those registered reached half of the total number of job seekers, which under wartime conditions looks like a sign that the labor market is moving rather than frozen. The state also actively used incentives for business. In 2025, 20 thousand unemployed people were employed with compensation to employers for SSC or wage costs, and over 540 million UAH was directed to compensation. A separate emphasis was placed on professional training and retraining: 93 thousand people completed it, and the employment rate after training reached 88%. This is one of the most indicative signals: when training is tied to real demand, it delivers results even in a wartime economy.
Grant programs for business remained another lever of employment support. Under “eRobota,” in 2025 over 10.6 thousand microgrants were approved totaling 2.7 billion UAH. For veterans and their families, 1.6 thousand positive decisions were approved under a dedicated program. This is not just about “supporting entrepreneurship,” but about an attempt to create jobs where classic hiring and large investments do not work. Separately, temporary employment instruments were used: 116 thousand referrals to socially useful works and another 35 thousand people who joined public works. This is a mechanism often underestimated, but under wartime conditions it works as a temporary bridge between unemployment and a return to stable employment. Against this backdrop, the government sends another forward-looking signal: in 2026, more than half of employers plan to increase wages by 10–20%. This is not a guarantee, but an indicator of expectations: business sees the need to retain people and compete for personnel.
In sum, labor law reform and employment service statistics form a single picture. Ukraine is trying to move from “firefighting management” of the labor market to a systemic framework where rules are clear, employment is less shadowed, work formats are modern, and state programs reinforce employment and retraining. But the main test is still ahead: not in how the draft is written, but in what remains after parliamentary amendments and how it works in real relations between employers and employees during the war and after it. And here the key criterion will be simple. If the new Labor Code provides more transparency, reduces shadow employment, and allows people to work flexibly and legally without losing basic guarantees, it will become one of the most tangible reforms in the socio-economic sphere. If flexibility becomes a cover for reducing employer responsibility and control remains selective, the reform will turn into yet another document that exists on paper but does not change reality.
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