Military levy at 5%. ESV 22% employer-only. Ukraine payroll, solved.
Ukraine’s payroll is not a configuration exercise. It demands a live PIT · military levy · ESV engine, military-levy logic that jumped from 1.5% to 5% in December 2024, ESV minimum and maximum base tracking against the minimum wage, FOP single-tax misclassification controls, and in-country people who track martial-law changes in real time. Most providers deliver two of these. Mercans delivers all of them – on a single proprietary stack with no intermediaries.
native payroll
vs nearest peer
since inception
- Income Tax (PDFO)
- 18% flat on salary
- Military Levy
- 5% on salaries (since 1 Dec 2024)
- Corporate Tax
- 18%
- Unified Social Contribution
- 22% employer only
- Employee ESV
- None (employer-borne)
- Min ESV Base
- UAH 8,000 → UAH 1,760/mo
- Max ESV Base
- 20× MW · UAH 160,000/mo
- Minimum Wage 2025
- UAH 8,000/month
- Working Week
- 40 hours standard
- Annual Leave
- Min 24 calendar days
- Sick Pay · Employer
- First 5 days, then PFU
- ESV Payment
- By 20th of next month
- Unified Return
- Quarterly · +40 days
- FOP Group 3
- 5% turnover + 1% levy
Payroll compliance: the details that can’t be missed
Ukraine’s regulators don’t grade on a curve. The DPS (State Tax Service) audits PIT and military-levy withholding against the rates in force. The Pension Fund reconciles ESV against the minimum and maximum bases. Labour authorities reclassify FOP single-tax contractors as employees retroactively. And martial-law amendments change rates mid-year – the military levy alone tripled from 1.5% to 5%. None of these failures announce themselves – they accumulate silently until an audit makes them very visible.
Legacy 1.5% military-levy logic under-withholds
The military levy rose from 1.5% to 5% on salaries effective 1 December 2024 (Law 4015-IX). Any system still applying 1.5% under-withholds on every employee. The shortfall plus penalties and late-payment interest fall on the employer as withholding agent.
ESV maximum base mis-tracking
ESV is capped at 20× the minimum wage – UAH 160,000/month in 2025. Charging 22% on uncapped gross over-pays for high earners; ignoring the cap update on a minimum-wage change under-pays. Both trigger Pension Fund reconciliation adjustments and penalties.
FOP single-tax misclassification
Engaging FOP single-tax entrepreneurs (Group 3, 5% of turnover) for what is de facto employment is the #1 audit trigger. Reclassification recovers PIT 18% + military levy 5% + ESV 22% on the full engagement period, plus fines and penalty interest.
Martial-law reporting & payment continuity
Under martial law, filing and payment deadlines, currency controls, and levy rates remain subject to rapid amendment. Missed remittances or stale rate tables create cascading liability. UAH currency-control limits further complicate cross-border funding of net pay.
The three types of providers who struggle with Ukraine
Global Aggregator Platforms
Platforms like Deel, Remote, and Rippling operate through a partner network in Ukraine – they don’t own the entity, don’t directly file with the DPS, and don’t control the compliance relationship. When martial-law rules change, the instruction travels: platform → partner → your payroll. Each handoff introduces delay and interpretation risk.
- ×No direct DPS filing – third-party intermediary handles the unified return
- ×Military-levy 5% rate change often lagged or partner-dependent
- ×ESV min/max base tracking against minimum wage unsupported
- ×Regulatory updates filtered through partner SLAs, not live
Large Global Payroll Incumbents
ADP, Ceridian, and similar incumbents have Ukraine coverage – in name. In practice, their CEE coverage is often delivered through regional partners or legacy systems that weren’t built for Ukraine’s employer-only ESV architecture, the 5% military levy, or minimum-wage-anchored contribution bases under martial law.
- ×Military-levy rate hardcoded – not dynamically updated to 5%
- ×ESV 20× minimum-wage cap handled manually
- ×No FOP single-tax classification controls for contractor engagements
- ×Long implementation timelines – Ukraine not a core market
Local Ukrainian Firms
Local Ukrainian accounting and bookkeeping firms know the market – but they can’t scale with you. No payroll technology platform, no HRIS integration, no multi-country consolidation, and no data security certifications that multinationals require. Fine for 10 employees. Inadequate at 100.
- ×No proprietary payroll technology – manual spreadsheet-based processing
- ×No HCM connector – Workday, SAP, Oracle feeds require custom work
- ×No data security certifications (SOC 1/2, ISO 27701, BCR)
- ×No CEE consolidation – cannot report across Ukraine + other entities
The only provider that closes every gap
Mercans is the only Ukraine payroll provider that combines a proprietary payroll technology stack, full-time in-country compliance teams, direct DPS and Pension Fund relationships, and enterprise-grade data security – simultaneously, on one contract, with no intermediaries.
The only engine built for Ukraine’s actual payroll architecture
G2N Nova™ is the world’s only API-first gross-to-net payroll engine. It natively models Ukraine’s PIT, military levy, and ESV as distinct calculation layers, applies the 5% military-levy rate in force since December 2024, enforces ESV minimum and maximum base logic against the minimum wage, and auto-generates the unified PIT+military-levy+ESV tax return. This isn’t configuration. It’s engineering.
Full-time Ukraine team – not a partner you phone when things break
Mercans employs full-time payroll and compliance professionals in Ukraine. They maintain active relationships with the DPS (State Tax Service), the Pension Fund of Ukraine, and the ESV administration – not through a contact directory, but through ongoing regulatory engagement. When a martial-law decree changes the military levy, when the minimum wage shifts the ESV cap, when the unified return format updates – we know before it reaches your inbox.
The security posture multinationals require – and Ukraine’s data law mandates
Ukraine’s personal-data protection regime requires payroll processors handling employee personal data to maintain documented privacy controls and data residency frameworks. Mercans holds BCR approval, ISO 27701 certification, SOC 1 & 2 certifications, and ISO 27017/27018 – the only payroll provider in the region with this complete certification stack. Zero security breaches since inception.
Where Mercans wins on every Ukraine-specific capability
Each row is a Ukraine-specific capability. Each cell shows native coverage as a fill bar – full = native in-platform, half = partial / manual workaround, empty = gap.
Ukraine Capability Coverage · 10 dimensions
raised from 1.5%
UAH 8,000 floor
UAH 160,000 ceiling
Every rate. Every cap. Every obligation.
Ukraine payroll operates on exact numbers with hard deadlines – several of which moved under martial law. Mercans builds every figure below into G2N Nova™ and monitors them proactively – so you’re never discovering a rate change from a penalty notice.
Ukraine · Rate & Compliance Dashboard
Live 2025–26Military Levy Rate Changed Mid-Cycle – Not a Static Figure
The military levy rose from 1.5% to 5% on salaries effective 1 December 2024 under Law 4015-IX, temporary until martial law ends. Military personnel stay at 1.5%. Any payroll still applying the old 1.5% rate under-withholds on every run. Mercans’ G2N Nova™ applies the current 5% rate – not a hardcoded legacy value.
→ Live military-levy rate tracking in G2N Nova™ESV Min/Max Base Is Anchored to the Minimum Wage
ESV at 22% is charged on at least the minimum wage (UAH 8,000 → min ESV UAH 1,760) and stops at 20× the minimum wage (UAH 160,000 → max ESV UAH 35,200). The 15× / UAH 120,000 cap applies only to military and police from August 2025 – not ordinary payroll. Both bands move with the minimum wage.
→ Dynamic min/max ESV base logic in G2N Nova™FOP Single-Tax Engagements Are an Audit Frontline
FOP Group 3 entrepreneurs pay 5% of turnover plus a 1% military levy and fixed ESV. Engaging a FOP for de facto employment triggers reclassification: back PIT 18% + military levy 5% + ESV 22% across the engagement, plus fines and penalty interest. Classification must be defensible from day one.
→ FOP classification controls in HR Blizz™Martial-Law Filing & Currency Controls Add Continuity Risk
Under martial law, deadlines, levy rates, and UAH currency controls remain subject to rapid amendment. PIT and military levy are due on payday (cash within 3 days; accrued-unpaid by the 20th), ESV by the 20th, and the unified return quarterly within 40 days. Mercans absorbs the cadence and tracks every change.
→ Continuity-monitored filing calendar in G2N Nova™Run a Ukraine payroll. Right here, right now.
Switch worker type. Move the slider. Every number you see is the same calculation G2N Nova™ runs in production – PIT 18%, military levy 5%, employer-only ESV at 22% with min/max base enforcement, and true cost of employment exposed live.
Ukraine Payroll Calculator · Live
G2N Nova™ engineEight things only Ukraine experts know to handle
These are the compliance details that don’t appear in standard payroll setup guides – but appear in every DPS audit, Pension Fund reconciliation, and labour reclassification case we’ve encountered in Ukraine, especially under martial law.
Military Levy Tripled to 5% in December 2024
The military levy (vijskovyj zbir) rose from 1.5% to 5% on salaries effective 1 December 2024 under Law 4015-IX, temporary until the end of martial law. Military personnel remain at 1.5% as a specific exception. Systems running legacy 1.5% logic under-withhold on every employee.
ESV Is 22% Employer-Only – Employees Pay Nothing
The Unified Social Contribution is 22% of payroll, borne entirely by the employer. Employees pay no ESV. This differs structurally from split-contribution countries and is a common source of error when systems copy an employee-deduction template onto Ukraine payroll.
ESV Minimum Base Equals the Minimum Wage
ESV is charged on at least the minimum wage – UAH 8,000/month in 2025 – even where actual pay is lower (e.g., part-time). Minimum monthly ESV is UAH 1,760. Employers must top up to the floor or trigger Pension Fund reconciliation shortfalls.
ESV Maximum Base = 20× Minimum Wage
ESV stops applying above 20× the minimum wage – UAH 160,000/month in 2025, capping ESV at UAH 35,200. The 15× / UAH 120,000 cap introduced from August 2025 applies only to military and police, not ordinary payroll. The ordinary cap moves whenever the minimum wage changes.
FOP Single-Tax Contractors Carry Misclassification Risk
FOP Group 3 entrepreneurs pay 5% of turnover (non-VAT) plus a 1% military levy on income and fixed ESV of at least UAH 1,760/month. Engaging a FOP for de facto employment is the #1 audit trigger – reclassification recovers full PIT, military levy, ESV, plus penalties.
Withholding Timing Splits by Payment Method
PIT and military levy are withheld and remitted on payday – within three days for cash payments, or by the 20th of the following month for accrued-but-unpaid salary. ESV is paid by the 20th of the following month. The consolidated unified return is filed quarterly within 40 days of quarter-end.
Employer Funds First 5 Sick Days, Then PFU
For temporary incapacity, the employer pays the first five calendar days of sick leave; from the sixth day, the Pension Fund of Ukraine (which absorbed social-insurance functions) funds the benefit. Correct day-split and benefit-rate logic is required for each absence.
Annual Leave Is Minimum 24 Calendar Days
Statutory annual leave is at least 24 calendar days – counted in calendar days, not working days, which changes accrual and payout math. Redundancy severance is a minimum of one average monthly wage. Both must be tracked alongside the standard 40-hour working week.
One workforce. Two entirely different compliance tracks.
Permanent employees on full PIT, military levy, and employer ESV vs. FOP single-tax contractors on a self-paid 5%-turnover model requires two distinct compliance frameworks, two sets of withholding rules, and two different misclassification exposures. Mercans runs both correctly – and keeps the line between them defensible.
Parallel Compliance Engines
Employer ESV of 22% applies from Day 1. Charged on at least the minimum wage (UAH 8,000) and capped at 20× the minimum wage (UAH 160,000). Employees pay no ESV – the full 22% is an employer cost.
PIT 18% + military levy 5% withheld from pay. Both are withheld by the employer and remitted on payday – cash within 3 days, accrued-unpaid by the 20th of the following month. Net pay is roughly 77% of gross.
Statutory leave and severance rights apply. Minimum 24 calendar days of annual leave, a 40-hour standard week, and redundancy severance of at least one average monthly wage. Employer funds the first 5 sick days.
Reported on the quarterly unified return. A consolidated PIT + military levy + ESV ‘Tax Calculation’ return is filed quarterly within 40 days of quarter-end, per employee.
Group 3 pays 5% of turnover, self-assessed. Non-VAT FOP Group 3 entrepreneurs pay 5% single tax on turnover. There is no employer withholding – the contractor remits their own obligations.
Plus a 1% military levy and fixed ESV. From 2025, FOP Group 3 pay a 1% military levy on income, alongside fixed ESV of at least 22% of the minimum wage (UAH 1,760/month). Self-paid – no employer ESV.
Common contractor model – and a top audit target. FOP engagement is widespread, especially in IT. But where the relationship is de facto employment, the DPS reclassifies it retroactively.
Reclassification recovers full employment taxes. A reclassified FOP triggers back PIT 18% + military levy 5% + ESV 22% across the whole engagement, plus fines and penalty interest on the employer.
Every obligation. Every authority. Mercans owns the calendar.
Ukraine compliance runs across the DPS (State Tax Service), the Pension Fund, and the ESV administration on payday, monthly, and quarterly cadences – with martial-law amendments layered on top. Mercans’ managed payroll absorbs every filing as standard scope – you don’t track deadlines. We do.
PIT & Military Levy Withholding
PIT 18% and military levy 5% are withheld at source and remitted on payday – within three days for cash payments. For accrued-but-unpaid salary, remittance is due by the 20th of the following month. Late remittance triggers penalty interest and fines on the employer.
ESV Payment
Unified Social Contribution at 22% (employer-only) is paid by the 20th of the following month, charged on at least the minimum wage and capped at 20× the minimum wage. Underpayment against the floor or cap triggers Pension Fund reconciliation adjustments.
Unified Tax Calculation Return
A consolidated PIT + military levy + ESV ‘Tax Calculation’ return is filed quarterly, within 40 days of quarter-end, with per-employee detail. It is the primary reconciliation baseline – discrepancies against monthly payments trigger DPS review.
Employee Hire / Termination Notification
Hires must be notified to the tax authority before the employee starts work; terminations are processed with final settlement. Engagements structured as FOP single-tax contracts carry reclassification risk if the relationship is de facto employment.
Sick-Pay Split · Employer / PFU
The employer funds the first five calendar days of temporary incapacity; from the sixth day, the Pension Fund of Ukraine funds the benefit. Continuous tracking of absence days and benefit rates is required for the handoff to the state fund.
Severance Calculation & Settlement
Final settlement applying statutory severance – a minimum of one average monthly wage on redundancy – plus payout of accrued annual leave (minimum 24 calendar days). PIT and military levy apply to the settlement components as relevant.
ESV Min/Max Base Tracking
ESV must be charged on at least the minimum wage (UAH 8,000) and stops at 20× the minimum wage (UAH 160,000). Both bands move whenever the minimum wage changes. Requires per-employee monthly base validation against the floor and the cap.
Rate & Deadline Change Monitoring
Under martial law, levy rates, deadlines, and UAH currency controls are subject to rapid amendment – the military levy itself jumped from 1.5% to 5%. Continuous monitoring keeps rate tables and remittance calendars current on every run.
Ukraine is one market. Mercans covers all of Central & Eastern Europe.
For companies running payroll across multiple CEE and Eastern European states, complexity multiplies – not adds. Each country runs its own tax authority, social contribution body, and filing mandate. Mercans covers all major markets on a single platform with country-specific compliance engines running in parallel.
covered
1 contract
consolidation
CEE / Eastern Europe
Every filing. Every format. Submission-ready.
Mercans generates the exact file types that the DPS, the Pension Fund, and the ESV administration expect to receive – not formatted summaries that need reformatting before you can submit them.
