The Supreme Court of Ukraine – Salary can now be denoted with an equivalent in foreign currency

The Supreme Court of Ukraine composed of the Panel of Judges of the Third Court Chamber of the Civil Court of Cassation determined that parties to a labour contract can denote the size of employee’s salary in hryvnia with an equivalent in foreign currency. The rendered Judgment does not contradict Articles 192 and 533 of the Civil Code of Ukraine. As explained, the law envisages making all payments in hryvnias on a mandatory basis. However, there is no restriction on the use of foreign currency in different settlements.

The salary of employees shall be paid in the currency, which is of legal circulation on the territory of Ukraine (Article 23 of the Law of Ukraine “On Wages and salaries”).

This requirement shall be unconditionally applied to all employees - residents of Ukraine.
In the case that now set a precedent for judgement in such matters, the labour contract in the original version specifies that the payroll amount shall be paid in hryvnia and for its calculation the euro exchange rate as at the payment date shall be applied. As this algorithm is preserved by the supplementary agreement, the company is not forced to violate the provisions of the Tax Code of Ukraine. Therefore, according to the Supreme Court the arguments of the cassation appeal are groundless.

Still, employers should note that according to the Labour Code of Ukraine, labour contracts that worsen the employees’ conditions are invalid. That is what may happen when the salary is calculated in foreign currency, as the currency exchange rate may vary significantly. Therefore, when signing a labour contract, it should be specified that the salary is set out in foreign currency and paid in hryvnias according to the NBU exchange rate established for the last day of the month; yet, it shall not be lower than the rate at which the salary was paid for the previous month.