The company introduces the following remuneration scheme for top management: 50% of the salary is fixed in UAH, 50% — in EUR with payment at the NBU foreign exchange rate on the last business date of the month in case of an increase in the foreign exchange rate. For example, the salary as of March 1, 2021, is UAH 100 thousand. UAH 50 thousand are fixed in the corresponding parts — in EUR at the foreign exchange rate as of March 1, 2021.
If the foreign exchange rate decreases or does not change, the employee will receive UAH 100 thousand, and if the foreign exchange rate at the end of the billing month increases, then the corresponding amount is paid, taking into account the increased foreign exchange rate. What documents must be issued when switching to such a scheme? What information must such documents contain? And whether it is necessary to issue monthly orders for salary payments according to the foreign exchange rate.
Article 1 of the Law on Labour Remuneration stipulates that “a salary is a reward calculated, as a rule, in monetary terms, which is determined by an employment contract and paid to the employee by the employer for the work performed”. Its amount depends on the complexity and conditions of the work performed, the professional and business qualities of the employee, the results of their work and the economic activity of the company.
The employee shall have the right to pay for their work according to legislative acts and the collective agreement based on the concluded employment contract (Part 1 of Article 21 of the Law on Labour Remuneration).
The employment contract is an agreement between the employee and the employer, under which:
- the employee undertakes to perform the work specified in this agreement;
- the employer undertakes to pay the employee salaryand ensure the working conditions necessary for the performance of work provided for by the labour legislation, collective agreement and agreement of the parties (Article 21 of the Labor Code).
The Law on Labour Remuneration stipulates that the salaries of employees of companies on the territory of Ukraine shall be paid in banknotes that have legal circulation on the territory of Ukraine (Part 1 of Article 23). The legal tender on the entire territory of Ukraine shall be the currency of Ukraine — UAH. However, foreign currency can also be used in Ukraine in cases and according to the procedure established by law (Article 192 of the Civil Code of Ukraine).
Part 1, Article 533 of the Civil Code of Ukraine stipulates that the monetary obligation must be fulfilled in UAH. Simultaneously in Part 2 of this Article, it is stipulated that the parties can determine the monetary equivalent in a foreign currency in a monetary obligation. Thus, UAH as the national currency is the only legal tender on the territory of Ukraine. However, obligations can be defined in a foreign currency.
Therefore, the parties to the employment contract can determine the amount of the employee’s salary in UAH, indicating the equivalent amount in foreign currency, which does not contradict Article 192, Article 533 of the Civil Code of Ukraine (see Supreme Court judgment No. 761/21776/16-ц, No. 61-14745св18 dated June 26, 2019). In other words, determining the amount of salary in foreign currency in an employment contract is legitimate, provided that the salary is paid only in the national currency.
The collective agreement (if any) must provide for the possibility of determining the amount of salary in the equivalent of foreign currency. A similar provision must be provided for in the employment contract. For example, in an employment contract, you can specify:
“The official minimum salary shall be UAH 100,000.00.
The official salary shall include:
- fixed part in the amount of UAH 50,000.00;
- the settlement part in the amount of EUR 1,477.54, which is converted into the national currency at the corresponding NBU foreign exchange rate. The NBU foreign exchange rate shall be determined in the amount of at least UAH 33.84/EUR, determined as of January 1, 2021. In case of a decrease in the foreign exchange rate as of the last day of the billing month, the salary shall be calculated at the rate of 33.84 UAH/EUR. In case of an increase in the foreign exchange rate on the last day of the billing period, the salary shall be calculated at the NBU foreign exchange rate, which is actually set on the last day of the billing period”.
In addition, it is essential to specify the mechanism for calculating salary in such cases in the regulations on labour remuneration. In particular, it is necessary to determine at what foreign exchange rate of foreign currency salary will be calculated in UAH if its amount is specified in the contract in foreign currency. It is also appropriate to note the options for possible calculations of salary accrual, the amount of which is determined in the equivalent of foreign currency.
Please note. If all 100% of the official salary is defined in the employment contract in the equivalent of foreign currency, it is advisable to provide for the application of the foreign exchange rate as of the first day of the month of the billing month or at the time of accrual, to avoid problems when calculating the advance payment. After all, when calculating salary for the first part of the month, the foreign exchange rate on the last day of the billing month is still unknown.
Meanwhile, in the staffing table, you also need to specify the amount of salary provided for this position. Since there is no fixed salary for such a position (there is only a minimum one), it is necessary to detail information in the staffing table. Despite the fact that the company has the right to independently determine the form of the staffing table, in the case under consideration, the column on the amount of the official salary for the corresponding position can be divided into 3 separate columns, in which, for example, indicate the following information:
— in the first column — total amount of the official salary — UAH 100,000* and make a note:
“*The minimum amount of official salary shall be indicated, taking into account the NBU foreign exchange rate as of January 1, 2021, in the amount of UAH 33.84/EUR”;
— in the second column — part of the official salary, which is paid in UAH: UAH 50,000;
— in the third column — part of the official salary in the equivalent of foreign currency — EUR 1,477.54**, stating in the note the following:
“**Salary accrual in this part shall be carried out at the NBU foreign exchange rate as of January 1, 2021 in the amount of UAH 33.84/EUR. In case of a decrease in the foreign exchange rate as of the last day of the billing month, the salary in this part shall be calculated at the rate of 33.84 UAH/EUR. In case of an increase in the foreign exchange rate on the last day of the billing period, salary in this part shall be calculated at the NBU foreign exchange rate, which is actually set on the last day of the billing period”.
This is just one of the likely options. You cannot specify the specific amount of the foreign currency exchange rate in the notes but make a reference to the foreign exchange rate determined by the terms of the employment contract.
For such cases, it is necessary to develop a particular form of settlement and payroll, taking as a basis Standard Form No. P-6 approved by Order of the State Statistics Committee No. 489 dated December 5, 2008. This opportunity is stipulated in Article 9 of the Law on Accounting. The independently developed form of the statement must be approved by the order (decree) of the manager.
In the form of a payroll statement, it is necessary to provide separate columns for displaying:
- fixed part of the official salary in UAH;
- fixed part of the salary in EUR;
- the foreign exchange rate, which is determined according to the terms of the employment contract;
- part of the salary in EUR converted into UAH at the specified foreign exchange rate;
- the total amount of accrued salary.
If you have such a form of settlement and payroll, which will be filled out according to the terms of the employment contract, and the staffing table, you do not need to issue a separate order (decree) to the management regarding the actual amount of accrued salary for the billing month.