Contract for Fröken Bock: Reforms in the Field of Domestic Work

Domestic work encompasses many responsibilities, from cooking, cleaning, and laundry to caring for elderly individuals or children. Since this type of work takes place in households rather than at businesses or institutions, it often remains in the informal sector. According to estimates from the International Labor Organization (ILO), over 80% of domestic workers worldwide work informally, with 76% being women. 

According to the job search service Work.ua, the average monthly salaries for domestic workers are as follows: UAH 19,000 for female and male houseworkers, UAH 25,000 for nannies, and UAH 15,000 for cooks.

One of the key reasons for informal employment in this sector is the desire to avoid paying taxes. By working informally, people can evade financial obligations to the state and earn higher incomes. However, such practices create problems for the workers themselves. They remain outside the scope of social protection and legal guarantees (e.g., in the case of illness or workplace injuries), and the risks of exploitation are higher. Additionally, the stability of their employment relationships is lower.

It is essential to create clear incentives for tax compliance and adapt legislation to the specific nature of domestic work to formalize domestic workers and bring them into the legal framework. Establishing transparent rules that regulate working hours, ensure confidentiality, and address other aspects of this sector can encourage the formalization of labor relationships and promote the broader implementation of social and legal protection for domestic workers.

Such rules are proposed to be introduced by Bill No. 5695, which has been approved in its first reading and recommended by the Verkhovna Rada Committee on Social Policy and Veterans’ Rights for further consideration and approval on the second reading and as a whole.

The bill proposes amendments to the Labor Code laws and defines the concept of housework and domestic workers, creating legal regulations for their work. It also establishes mandatory conditions for labor contracts with domestic workers. Specifically, the bill defines: 

• Domestic work is activities related to household servicing, performed under a labor contract, regular in nature, and totaling more than 40 hours per month.
• A domestic worker is a person engaged in domestic work within an employment relationship with an employer. Individuals under the age of 16 are not allowed to perform this work.
• The employer can only be someone from the members of the household (family).

The bill provides that a written employment contract must be concluded with domestic workers.

The employment contract should specify:

1. The number of working hours (not exceeding 40 hours per week) and rest periods for domestic workers.
2. The timekeeping system for tracking working hours (agreed upon by both the employee and the employer).
3. Guarantees regarding overtime work (according to labor laws, overtime should not exceed four hours per day and 120 hours per year for each worker).
4. Guarantees when domestic workers are engaged in on-call duty or accompanying household members on vacations (e.g., the employment contract may specify waiting periods that are considered working hours during which the domestic worker cannot use their time at their discretion because they must be ready to perform the contractual duties as directed by the employer; the contract should also specify compensation or time off for such waiting periods).
5. The possibility of working on weekends, holidays, and non-working days.

The employment contract with a domestic worker may stipulate that the employer can provide housing to the worker, either for a fee or free. If the accommodation is provided for a fee, the employer does not have the right to deduct the cost of housing from the worker’s salary without the worker’s consent.

The proposed legislation introduces additional grounds for terminating the employment contract with a domestic worker. Specifically, it allows for termination in cases where the worker’s actions could or have caused harm to the life or health of a household member. On the other hand, it also grants the domestic worker the right to terminate the employment contract immediately if someone in the household violates the worker’s honor or dignity or interferes with their personal life.  

The employer must inform the State Tax Service about the hiring and termination of a domestic worker. Additionally, upon request from the State Labor Service, the employer (household member) must provide information about the work performed by individuals as domestic workers in their household. The State Labor Service may also conduct confidential interviews with domestic workers if there are suspicions that a particular household is employing domestic workers without proper formalization and tax reporting.

Whether to maintain a labor book for a domestic worker can be decided through an agreement between the worker and the employer. 

For the worker, one advantage of this form of employment compared to being a self-employed individual entrepreneur is the exemption from paying income or profit taxes. 

Domestic work is often subject to taxation in other countries around the world. For example, in EU countries, the employer is typically responsible for paying taxes on domestic workers. However, in Spain, if a worker provides services to a family for less than 60 hours per month, they are responsible for paying taxes. In most European countries, various incentives such as tax credits and reductions in income tax are provided to employers to encourage them to register domestic workers officially.

Additionally, domestic workers may choose not to pay a single social contribution (SSC). However, in doing so, they would not be covered by accident insurance, and their income from such work would not be counted when calculating their pension. However, suppose a domestic worker wants to receive more state guarantees or a higher pension in the future. In that case, they can make social security contributions at any amount, but at least the minimum contribution (22% of the minimum wage).

Starting from January 1, 2024, the minimum wage will be UAH 7,100, so the minimum SSC will be UAH 1,562 (7,100*22%). From April, the minimum wage will increase to UAH 8,000, and the minimum SSC will be UAH 1,760 monthly (8,000*22%).

Conclusions

Bill No. 5695 aims to bring domestic workers and their incomes out of the shadow economy. 

Adopting the bill will enhance the protection of the rights of domestic workers, a significant portion of whom are women. It will allow them, at their discretion, to participate in the social insurance system (earn social security pensionable service and receive benefits in case of accidents, provided that they pay the required social security contributions). It also enables them to enter into employment contracts that specify in advance the working hours, scope of work, and other mutual rights and responsibilities. 

The bills registered in Parliament related to family declarations and special taxation regimes for certain service providers, such as hairdressers, cleaners, caregivers, etc., also aim to formalize and bring transparency to citizens’ incomes.

In our opinion, it is necessary to regulate further the situation where a person performs domestic work for fewer than 40 hours per month or when they provide domestic services to multiple households (e.g., several families may hire a cleaner who will clean the hallway on the floor – in such cases, for simplification, it could be possible to select one family as the employer).