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21 November 2022

Reservation of IT specialists during martial law: what to expect from upcoming new rules and requirements?

On 4 November 2022, the Ukrainian Parliament adopted a long-awaited Draft Law No. 7687[1] that introduces changes to the Law of Ukraine “On Mobilisation Preparation and Mobilisation” (the “Mobilisation Law“) concerning reservation of conscripts during the period of mobilisation and martial law (the “Draft Law“).

The Draft Law is not only focused on the IT industry of Ukraine, but the latter has taken an active position during the legislative process in connection with the Draft Law to ensure a transparent reservation procedure for IT business:

  • granting authority for the Ukrainian Government to develop a new reservation procedure. This procedure should include criteria for classifying companies as critically important;
  • allow reservations to be made without mobilisation tasks for companies classified as critically important for the functioning of the economy and ensuring the livelihood of the population in a special period (the “Critically Important Companies“).

Upcoming regulatory framework for reservation of conscripts

The Draft Law amends and restates Article 25 of the Mobilisation Law, expanding the list of companies whose employees can be reserved. The restated Article 25 does not specifically relate to IT, but it, among others, stipulates that those conscripts who are working at Critically Important Companies are subject to reservation.

Moreover, according to the restated Article 25 of the Mobilisation Law, the Ukrainian Government shall define and adopt criteria and procedures for classifying companies as Critically Important Companies.

According to Draft Law, the reservation will be carried out by the Ministry of Economy of Ukraine in accordance with the procedure adopted by the Ukrainian Government. In fact, on 3 March 2022, the Ukrainian Government adopted the reservation procedure under Resolution No. 194. As soon as Draft Law is signed into law, the existing reservation procedure will need to be aligned with the restated version of Article 25 of the Mobilisation Law.

Information on the reserved conscripts will be recorded with the State Registry of Reserved Conscripts. The Ukrainian Government shall also adopt a regulation on maintaining the Registry. The Ukrainian Government shall also ensure that the Registry is integrated with the Diia mobile app and web portal of e-government services (https://diia.gov.ua/) and e-Reservation service.

The Draft Law is not signed into law yet. To become effective, it must be signed by the President of Ukraine and officially published.

Opportunities for the IT industry

Ukraine’s IT industry believes that a vast majority of IT companies should qualify for the Critically Important Companies. The criteria for classifying companies as Critically Important Companies are not set yet.

The IT Ukraine Association (the “Association”) proposes the following criteria for classifying companies as the Critically Important Company:

  • an average monthly remuneration of IT specialists is not less than UAH 20,000 (approx. EUR 500);
  • the number of IT specialists is not less than ten; and
  • tax debt of the legal entity does not exceed ten minimum wages (based on the amount of the minimum wage established on 1 January of the current calendar year).

Moreover, the Association proposes to reserve conscripts either employed or engaged as independent contractors or gig-workers by IT/tech companies operating as Diia City residents under the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine.

Given the importance of the IT industry for the country’s economic front during martial law, we expect that the Ukrainian Government will closely consider the proposals of the Association. However, we expect that the criteria for the Critically Important Companies will be stringent at least in terms of the minimum number of IT specialists and tax debt tolerance.

Sayenko Kharenko’s team closely monitors further development of the regulations and will update the clients in due course.

 

Information contained in this overview is for general information purposes only, does not constitute legal or other professional advice, and should not be relied upon as a substitute for specific professional advice tailored to particular circumstances.

[1] This alert is prepared based upon the latest version of the law prepared for the second reading.

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