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In the process of officially formalizing the relations between an individual who is hired to perform certain …
Employment contract or civil contract? The court put the dots over “Ї”?
In the process of officially formalizing the relationship between an individual who is hired to perform certain works and the employer, the latter has always addressed issues related to concluding a civil-law or employment contract. At least, in most cases, that is what employers thought.
In situations when, for example, the city branch of the Social Insurance Fund (FSS) comes to inspect an enterprise regarding the payment of insurance contributions and it is found in the process that contracts with some individuals were drawn up incorrectly (in the inspectors’ opinion they performed employment duties rather than civil-law ones), the FSS under VTP recalculates the amounts of unpaid insurance contributions, fines and penalties. In such cases, taking into account the payroll structure, the main point when attributing a payment to the payroll fund is the direct link between the terms of the employment contract and the volume of work performed. That is, the basis for calculating contributions to the Fund is considered to be actual expenses for the payment of wages to hired employees; they also include expenses for payment of main and additional salaries, as well as other incentives and compensatory payments, including in kind, and are determined in accordance with the Law of Ukraine on Remuneration and regulatory legal acts, and are also subject to personal income tax (PIT). In the situation described above, the FSS discovered an underpayment of insurance contributions based on the employment contracts held at the enterprise.
In this case, based on the clauses of the analyzed contracts, the decision of the VASU recognized the additional assessments as lawful.
How can an employer avoid such a situation?
Avoid terms that provide for: keeping accounting journal-orders and entries, correct and timely preparation of accounting documentation, and performing other assignments based on the chief accountant’s requirements.
Avoid clauses that oblige the worker to comply with the enterprise’s internal regulations.
Clauses that indicate bearing full material liability in the form of full compensation by the performer for damages caused to items entrusted for storage. Such a point is characteristic of employment contracts according to paragraph 6 of Article 134 of the Labor Code of Ukraine (KZoT).
The issue of wage payment is also important, because if under the terms of the contract the payment is made in a fixed amount monthly in the form of material assistance, and the enterprise keeps a timesheet for such persons, this is a sign of employment relations.
Thus, when concluding civil-law contracts (GPH), the employer should be guided by the norms of the Civil Code of Ukraine, which regulate issues of payment for work and acceptance of completed work.