Up to 15% of business loans may lose their deferment: key factors
1 June 15:18
The Ministry of Economy, Environment, and Agriculture has announced changes to the reservation system. Specifically, the minimum salary threshold required for an employee to be eligible for a reservation is being raised, and companies must once again demonstrate their critical importance. Additionally, deferrals will only be available for an employee’s primary place of employment, according to "Komersant Ukrainian".
What is changing
The government is introducing three major changes to the reservation system. The first is the minimum salary threshold for employees who can be reserved. It will be increased from 2.5 times the minimum wage to three times the minimum wage, and this amount will now be 25,941 hryvnia. However, this change will not apply to frontline territories. In addition, after the changes are implemented, employees with multiple jobs will only be eligible for deferment at their primary place of employment. Currently, some businesses use the option of holding multiple jobs to increase the actual limit on the number of employees, says Minister of Economy, Environment, and Agriculture Oleksiy Sobolev.
“How does the system work now?” he explains. “A person who has a deferment and a second job is counted toward the military-age quota at all the companies where they work. We are changing the rules: from now on, a person will be counted toward the military-eligible quota only at the enterprise where they have their primary place of employment. This will make the system fairer and more equitable. Because we see that companies are currently using this method to reserve military-eligible personnel above the quota.”
Employers will have two months to adjust salaries to the minimum required for reserving personnel. The timeframe for resolving issues related to part-time work is significantly shorter—10 days. All these deadlines begin from the moment the government adopts the relevant resolution. However, at the time of publication, the Cabinet of Ministers had not yet adopted such a decision.
According to Sobolev, the government will also review the criteria for determining which enterprises are critical. There is no clear list of these, as regional administrations and ministries define them based on the specific characteristics of each region. This, according to Sobolev, will help prevent abuses and inconsistencies.
“We are currently conducting an audit to determine which criteria apply to companies that are critical to the economy,” the minister explained.
The government has allocated three months to review the criticality criteria. According to the draft resolution published by MP Yaroslav Zheleznyak, the process is to be completed by September 1. During this time, the deferral for previously reserved employees will not be canceled. The government is expected to approve the criticality requirements in June.
How business is reacting to the changes
For business representatives, the criticality assessment system remains the most confusing. Its parameters vary by region. For example, for companies in the Kyiv region, there is no minimum annual revenue requirement, but the company must pay at least 4 million hryvnias in taxes. In Volyn, there is no tax revenue requirement, but the company must have at least 10 million hryvnias in revenue over 12 months.
The current review of criticality is not the first since the start of the full-scale invasion. However, according to representatives of the European Business Association (EBA), the speed of this review depended on where exactly the company was to obtain confirmation of criticality.
“Obtaining this confirmation was often accompanied by long delays. After all, the administrative capacity to process requests from companies and document packages did not match the volume of requests. This created a ‘state of limbo’ for company employees and had a negative impact on operational stability,” the association told Suspilne.
The issue of raising the minimum wage is less of a concern for businesses, according to Kateryna Glazkova, executive director of the Union of Ukrainian Entrepreneurs (SUP). In fact, the amount of nearly 22,000 hryvnias is increasing by 4,000. However, the EBA believes this could also become a problem for certain businesses.
“In the middle of the year, this could pose a serious challenge for certain industries and regions, particularly for the agricultural sector, where seasonal forms of remuneration are widely used,” the association reported. “There are concerns that unpredictable changes of this nature could stimulate an increase in the shadow economy.”
As for the elimination of the option to reserve part-time workers, business associations have taken this rule in stride.
Will the number of reserved workers decrease?
Currently, according to Economy Minister Sobolev, there are over 1.3 million reserved workers in Ukraine. However, the ministry does not expect the number of people with deferred payments to decrease significantly as a result of the changes to the reservation conditions. The total number may fluctuate between 1.1 and 1.3 million.
We asked the Ministry of Economy how many of those currently on the waiting list might lose their deferrals. They reported that they do not have the relevant calculations.
However, such calculations were conducted by a relevant industry association. According to Kateryna Glazkova, at companies that are members of the Union of Ukrainian Entrepreneurs, between 5% and 15% of employees may lose their deferrals.
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