On 1 January 2016, the Law of Ukraine No. 911-VIII "On Amendments to Certain Legislative Acts of Ukraine", dated 24 December 2015 (the "Law"), came into effect.  The Law (i) canceled compensation from the state budget of  the average monthly salary of their mobilized employees to employers  ; and (ii) increased the established threshold for change of the cost-of-living index required to trigger salary increases.

Compensation for the average monthly salary of mobilized employees

Under the Law,  employers, as before, is obliged to maintain the positions and average salary of employees who have been called up in the regular military draft; summoned to the army during mobilization; or joined the military on a contract until the end of the special period  or until the date of demobilization.  Also, these employees are entitled to receive a service pay from the state budget pursuant to the Law of Ukraine No. 2011-XII "On the Social and Legal Protection of Servicemen and Their Family Members" dated 20 December 1991.

The same guarantees are provided for the mobilized employees who were subject to demobilization but remained in the military on  contract (until expiry of the contract term).

However, pursuant to the Law, the provision whereby the employers were entitled to receive compensation from the state budget for such salary amounts  has been removed.

Previously employers were entitled to receive such compensation in accordance with the procedure  established by Resolution of the Cabinet of Ministers of Ukraine No. 105, dated 4 March 2015 (the "Resolution").  The Resolution is still effective.   However, taking into account the amendments stipulated above that were introduced by the Law, it will be impossible for any employer to receive compensation for any period after 1 January 2016.

Changes in rules on salary indexation

The Law have also amended the Law of Ukraine No. 1282-XII "On Indexation of the Monetary Income of the Population", dated 3 July 1991.  In accordance with the Law, indexation should occur when the cost-of-living index exceeds 103% of the established value.  Previously the threshold was 101%.

Additional notes

This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.