Despite its regional distress with Russia, starting a Ukraine business offers many benefits to US companies. Its highly educated workforce, low labor costs, and ample natural resources provide a wide array of opportunities for companies seeking international growth. If Ukraine is a target country for your business’ global expansion, you’ll benefit from our global strategy do’s and don’ts.
Ukraine Business: Do’s
DO have a global expansion strategy in place before you enter the market.
A solid global expansion strategy is the key to your company’s success overseas. When you have a clear plan in place with established goals and objectives, you’re better prepared to accept wins and face challenges in your new market.
An effective global expansion strategy should encompass all aspects of your Ukraine business, including everything from hiring strategies to the culture. It should include cultural items as well, such as appropriate greetings and how to recruit new team members.
DO use a flexible method for establishing a legal presence.
When entering Ukraine for your global business expansion, move into the market with a light footprint utilizing methods such as an Employer of Record. This agile service gives you a legal presence in-market, which allows you to hire compliant team members for less money and time commitment than establishing a permanent subsidiary.
DO understand your options for hiring.
As a Ukraine business, your company has options for employment types. In the Ukraine, employees fall into two categories: self-employed persons and employees.
Self-employed individuals, or contractors, perform their work based on a civil or commercial law contract and are responsible for accounting, reporting obligations and paying taxes. These workers do not receive benefits or tax withholdings and hold unique risks, which you can read more about in this post.
Employees are persons working under an employment contract with an employer. Normally, an employer acts as a tax agent for employees and is responsible for reporting and tax obligations.
We recommend using an Employer of Record (EOR) service. This solution reduces time to hire by establishing a legal presence quickly and compliantly without the hassle of setting up a foreign subsidiary. In addition, an Employer of Record helps your company manages all aspects of employment including payroll, benefits withholdings, taxes, permits, and termination.
Ukraine Business: Dont’s
DON’T misclassify independent contractor relationships.
Avoid hefty fines and penalties associated with contractor misclassification. In Ukraine, determining whether a worker is an employee or independent contractor under federal or state law is highly fact-specific.
Labor courts have specific tests for determining whether a worker falls under employee or independent contractor status. These include economic realities and autonomy tests.
In order to determine if your contractor is properly classified, consider these factors:
- Do they have authoritative control to perform the work? (Are they free from instruction on the process, discipline, work rules, your supervision, and control?)
- Do they set their schedule?
- Do they purchase their business supplies and pay for other expenses related to the work they’re performing?
- Do they only receive payment for work completed? For example, you do not provide them with holiday or vacation pay.
- Do they market their services to the public and work with other clients?
If the answer to the above questions is “yes,” then they are an independent contractor.
DON’T establish a permanent subsidiary unless it’s necessary.
For more than 90% of companies expanding overseas, at least when they first enter the market, establishing a permanent foreign subsidiary is not the best solution. There are many risks involved when companies set up permanent establishments.
Instead, use a lean option like an Employer of Record to obtain a legal presence in Ukraine and start hiring team members faster.
DON’T forget about your IP protection
Your intellectual property (IP) isn’t automatically protected for your Ukraine business. As a result, you need to ensure that you’re taking the proper steps to protect your intangible assets.
For example, if an employee creates IP while on the job, i.e. trade secrets or copyrighted material, the information technically belongs to the team member. However, you can establish clear language in your employment contracts to ensure that your company’s assets are protected. Work with an in-country expert to help you craft agreements overseas.
DON’T reinvent the wheel
Most importantly, seek help from experts. You’re not the first company to take your global operations into Ukraine. In fact, we help companies achieve their global expansion strategies every day.
Start today! Contact our international experts to plan your expansion to Ukraine.