The employer says "we budget 36 600 ₴ for you", the job ad says "30 000 ₴", and 23 100 ₴ lands on the card. Those are three different numbers for one and the same salary, and the gap between them is not someone's greed - it is two withholdings and one contribution.
Three sums of one salary
Accrued - the figure in the contract. It carries 18 % income tax and the 5 % military levy.
On hand - what is left after those 23 %.
The cost of the employee - the accrued salary plus the 22 % social contribution, which the employer pays on top, out of their own money. The contribution never shows on a payslip, which is why nobody mentions it when they say "your salary".
| Where | Per month | Per year |
|---|---|---|
| To the employee | 23 100 ₴ | 277 200 ₴ |
| Income tax 18 % | 5 400 ₴ | 64 800 ₴ |
| Military levy 5 % | 1 500 ₴ | 18 000 ₴ |
| Contribution 22 % (employer) | 6 600 ₴ | 79 200 ₴ |
| Total cost | 36 600 ₴ | 439 200 ₴ |
Of every hryvnia an employee costs, 63.1 kopiykas reach them.
Why exactly 63.1 % - and why the amount makes no difference
All three rates are flat: 18 %, 5 % and 22 % do not depend on the size of the salary. The share is therefore the same on the minimum wage and on a hundred thousand - only the absolute figures move.
| Accrued | On hand | Contribution | Costs the employer | Reaches |
|---|---|---|---|---|
| 8 647 ₴ | 6 658.19 ₴ | 1 902.34 ₴ | 10 549.34 ₴ | 63.1 % |
| 20 000 ₴ | 15 400 ₴ | 4 400 ₴ | 24 400 ₴ | 63.1 % |
| 30 000 ₴ | 23 100 ₴ | 6 600 ₴ | 36 600 ₴ | 63.1 % |
| 50 000 ₴ | 38 500 ₴ | 11 000 ₴ | 61 000 ₴ | 63.1 % |
| 100 000 ₴ | 77 000 ₴ | 22 000 ₴ | 122 000 ₴ | 63.1 % |
Ukraine has no progressive scale, so "a bigger salary means a bigger tax rate" does not apply here. There is one exception - the tax relief on part-time pay: it takes 1 664 ₴ off the income-tax base, but only while the monthly salary stays under 4 660 ₴.
The same sum, but as a sole proprietor
Now take that same cost and run it through as the income of a sole proprietor on group 3, not registered for VAT: 5 % single tax, 1 % military levy and the minimum contribution for themselves - 1 902.34 ₴ a month.
| Costs the employer | Employee on hand | Sole proprietor on hand | Difference |
|---|---|---|---|
| 10 549.34 ₴ | 6 658.19 ₴ | 8 014.04 ₴ | +1 355.85 ₴ |
| 24 400 ₴ | 15 400 ₴ | 21 033.66 ₴ | +5 633.66 ₴ |
| 36 600 ₴ | 23 100 ₴ | 32 501.66 ₴ | +9 401.66 ₴ |
| 61 000 ₴ | 38 500 ₴ | 55 437.66 ₴ | +16 937.66 ₴ |
| 122 000 ₴ | 77 000 ₴ | 112 777.66 ₴ | +35 777.66 ₴ |
A sole proprietor keeps more even on the minimum wage. But the two columns differ in a way only percentages show: the employee's share is always 63.1 %, while the sole proprietor's grows - 76 % on the smallest sum, 88.8 % on 36 600 ₴ and 92.4 % on 122 000 ₴.
The reason is the contribution. For an employee it is proportional (22 % of whatever is accrued), while a sole proprietor pays a fixed minimum: 22 % of the minimum wage, the same 1 902.34 ₴ whether the income is 10 000 ₴ or 120 000 ₴. The larger the income, the less that fixed part weighs.
What the difference buys
Comparing the money alone compares incomplete sets. For 9 401.66 ₴ a month (in the 36 600 ₴ example) an employee gets what a sole proprietor does not have:
- Paid holiday. 24 calendar days is roughly a month of income. To have the same holiday, a sole proprietor has to set aside a twelfth of their earnings: 2 708.47 ₴ a month out of 32 501.66 ₴.
- Sick leave. The first five days are paid by the employer, the rest by the pension fund. A sole proprietor earns nothing while ill and still owes the contribution for that month.
- Severance pay and notice. A contract with a sole proprietor ends with a notice, and nothing is compensated.
- An insurance record built on the real salary. An employee's contribution is charged on everything accrued, while a sole proprietor usually pays the minimum - and the future pension will be counted from that minimum.
Add the bookkeeping, the quarterly filings, a separate account and the risk: if the relationship looks like employment (a workplace, a schedule, subordination, a single client), the labour inspectorate can rule it employment, and the fine under article 265 of the Labour Code falls on the employer, not on the sole proprietor.
Work out your own case
In the salary calculator enter your own figure - either the accrued salary or the amount you want on hand. Next to the result there is an "As a sole proprietor" card: it takes the same cost and shows what the simplified system would leave of it. Every number in this article came from there.