Individual entrepreneur or official employment: new rules for business in Ukraine

Ukraine may change the rules for cooperation with individual entrepreneurs: a new draft law defines nine signs of an employment relationship. Find out how businesses can prepare for the new requirements, avoid risks, and why it is worth auditing contracts with the help of lawyers now

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On July 18, 2025, the Verkhovna Rada registered draft law No. 13507 on amendments to the Labor Code of Ukraine. Its main goal is to clearly define the characteristics of labor relations and stop the widespread practice of “individual entrepreneurship instead of employment.”

The document is based on the criteria for labor relations defined in Recommendation No. 198 on Labor Relations of the International Labor Organization (ILO). This means that Ukrainian legislation is gradually approaching European standards in the field of labor.

What draft law No. 13507 changes: 9 signs of an employment relationship

The draft law establishes nine key signs that courts will use to determine the real nature of the cooperation between a company and an individual entrepreneur. The formal name of the contract will no longer be decisive.

Among the main indicators are:

● receiving more than 80% of the individual entrepreneur's income from one customer within 24 months;

● personal performance of work under the control of the company;

● working according to the employer's schedule;

● integration into the team and production process;

● use of company equipment.

If the court finds seven or more of these signs, cooperation with an individual entrepreneur may be recognized as an employment relationship. This automatically entails all the consequences: the need to pay taxes, contributions to social funds, and compliance with the guarantees provided for by labor legislation.

When will the law come into force?

The draft law provides for a transition period. If the document is adopted and published, it will come into force in three months. The provisions relating to the signs of an employment relationship will come into force six months after publication.

This will give businesses several months to adapt and organize their documentation. This is important for minimizing risks and avoiding legal disputes in the future.

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What should businesses do now?

For companies that actively cooperate with individual entrepreneurs, this draft law is a signal to take action. First of all, it is necessary to audit all existing contracts and assess whether they comply with the new requirements. If there are obvious labor relations, it is better to formalize them.

For project or consulting cooperation, the terms should be formulated more clearly: define deliverables, work results, and time frames. This will help avoid claims from regulatory authorities and at the same time preserve business flexibility.

Incidentally, many companies are already turning to business lawyers to prepare for the new rules. The Visit Ukraine portal offers consulting and legal support for entrepreneurs who want to build the right relationships with sole proprietors and minimize risks.

What are the risks for companies?

If a contract with an individual entrepreneur is recognized as an employment contract, the company may face serious financial consequences. These include additional tax charges, fines, and mandatory reimbursement of social guarantees to the employee. This can be a significant blow to the budget of a business, especially a small or medium-sized one.

In addition, non-compliance with the rules can damage the employer's reputation. In today's environment, transparency and honesty in relations with employees are becoming an important competitive factor in the labor market.

In essence, the new law encourages businesses to move towards more civilized labor relations, which in the long term will contribute to the development of the labor market and increase its transparency.

We remind you! Ukraine has changed the list of countries with which it has double taxation agreements. Read about which countries the agreements remain in force, which have been excluded, and how this will affect businesses and citizens in our previous article.

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