Remote Work: A Guide for Entrepreneurs
The coronavirus epidemic, which taught businesses a new remote mode of work, is making a comeback. And although the total
quarantine is definitely not going to happen, the need to take ad hoc decisions may arise. Apart from that, remote work is often the only possible format due to war risks. So, let’s remind you of the arrangements you can put in place to get started with remote work of various types along with some important details to keep in mind.
What is the difference between home-based work and remote work?
Two concepts are clearly differentiated in the Ukrainian legislation: home-based work and remote work.
Home-based work is work performed at an employee’s permanent place of residence stipulated in the employment agreement. It may not be changed without an employer’s permission. This format is more typical of “manufacturing” work (assembling spare parts, sewing, packing, etc.) An employer provides an employee with means of production, materials and instruments. An employee usually works during the company’s standard hours. The reporting on the volume of output is in place. Home-based work is regulated by the provisions of article 60-1 of the Labor Code.
Remote work means work performed at any location that the employee chooses outside the employer’s working premises, using information and communication technologies. An employee manages his working time at his discretion and is not required to comply with the internal work schedule. This format is focused on white-collar work (accounts, management, marketing, sales, design, IT). The supervision is carried out via electronic communication. Remote work is clearly regulated by article 60-2 of the Labour Code. In short, an employee working remotely has the same rights as legislatively stipulated for a full-time employee. This concerns, among other things, payment for work, annual vacation, sick pay, social insurance and occupational safety.
Regardless of the work format chosen, the provisions on work time duration must be met: up to 40 hours per week or reduced working hours, as stipulated in article 51 of the Labor Code.
What formal arrangements are needed to switch to remote work?
If the change is initiated by the employer, the employer must issue an order on the implementation of remote mode, obtain the employees’ consent and enter into a written agreement with the employees who will work remotely. Different forms of agreements can be used depending on the form of work involved (home-based work or remote work). Such forms are approved by the Order of the Ministry of Economy No. 913-21 of May 05, 2021
If the change is initiated by the employee, he must file the respective application. Based on that, an order for the employee’s switching to remote work is issued or a respective agreement is executed subject to the employer’s consent.
If an employee is new to the company, then a written employment agreement of an established form is mandatory. A notice of hiring a new employee must be also sent.
IMPORTANT. An order for home-based or remote work is sufficient for the period of a threatened epidemic or force majeure. Although switching to such format is considered a change in working conditions, a two-week notice to employees is not required under martial law. However, employees must read and sign the order within two days of issuance and before starting remote work. The tax inspectorate does not need to be notified of the employees’ transfer to remote work. However, the respective reporting must be provided later.
The list of the documents necessary
The following documents are required for the employees’ switching to remote work:
1. An employee’s application for switching to remote work (if an employee initiates the changes)
This should be in a free form, as an approved application form is not available.
2. Order for transfer to remote work
Such order is usually issued for every employee individually, as types of work, equipment, working conditions, etc. may vary. The period of remote work and the working conditions must be indicated in the order. Thus, the order must specify whether the employee will work via email, Skype, Zoom, etc, and the employee’s responsibilities and functions. An employee must read and sign the order, which confirms his consent to the new format of work. The order may be signed in a paper-based form or using a qualified electronic signature if electronic document flow is in place.
3. Annex to an employment agreement (unless the respective conditions are specified in the agreement itself)
If the employment agreement does not stipulate a remote work option, an annex to the agreement must be executed and the new conditions specified in it. The employer may also execute a separate agreement for a specific type of remote work. Those documents or the order must stipulate: the responsibilities, the job functions to be performed, the subject and the method of work; reporting deadlines; working hours; working schedule; compensation; timeframes for fulfilment of tasks; communication means; occupational safety conditions.
Documenting the transfer of equipment
In certain cases, employers execute an agreement for gratuitous use of property, if the devices or the equipment, which the employee will use to perform work, is the employer’s property. The employee’s obligation to use the property solely for working for its company should be stipulated. However, this is not mandatory, while the acceptance and transfer certificate is. The certificate should indicate:
· transferee of the equipment;
· name of the equipment in full;
· model, serial numbers and technical specifications;
· initial condition (new, used, with defects);
· value of the equipment transferred.
The certificate must be signed by both parties. A full financial liability agreement should be concluded for additional protection of the employer’s interests, defining the employee’s obligation to pay the compensation for the damaged or lost equipment. Keeping a register of the equipment issued is also recommended, and the condition of the equipment should be checked from time to time.
Financial liability
If an employee receives equipment for work, agreements on full financial liability must be executed, making an employee liable for the compensation of the equipment cost if it is damaged or lost. The employee is under an obligation to compensate the cost to the company, if such equipment is in place. A package of documents is executed to document damages caused in such a case, including a statement on the damaged property, the property inspection report, photo materials, etc. Based on the documents provided, the company’s head issues an order on the damage inflicted on the company, the amount and the procedure of compensation.
IMPORTANT! Even if an agreement on full financial liability is not executed, employees who work remotely and received the respective equipment based on the CERTIFICATE are financially liable in full if damage is caused to the employer under clause 10 of article 134 of the Labor Code.
Compensation of Costs
If an employee performs work using his own means (a PC, internet, telephone, charging stations, etc.), a certificate of compensation of costs or an Additional Agreement should be executed. The list of costs to be compensated, the amount of such costs and the procedure of settlement must be clearly specified in the document. The compensation may cover electricity costs, payment for the internet, the use of a generator and fuel, amortization of personal equipment. The timeframes for the payment of compensation (monthly, quarterly) should also be determined, as well as the proofs of costs (the receipts, invoices, certificates) and the method of funds transfer. This will be helpful to avoid disputes and will be the proof of proper performance of the employer’s obligations.
We would like to note that the compensation of the employee’s costs if such employee works remotely is not considered the employee’s income. Therefore, it is not subject to individual income tax and war levy. Then the supporting documents must be provided proving the costs and the connection thereof with the employer’s business operations.
Occupational Health and Safety
Unlike for remote employees, it is important to have Occupational Safety Guidelines issued for regulation of remote workplace safety for home-based workers. It must provide the directions on the workplace organization (lighting, location and use of equipment). An employer must hold systematic briefings (trainings) on occupational and fire safety, which may be held remotely. However, it should be noted that a home-based employee determines his workplace at his discretion and is responsible for ensuring that his working conditions are safe and not harmful.
Worktime accounting and timesheets
For an employee working remotely, a working schedule (the number of working hours per day, free time for recreation – period of inactivity, and days off) must be specified in the agreement, availability and communication rules. However, it should be noted that the Workplace Regulations shall not be applicable to such an employee, unless otherwise stipulated in the employment agreement. Despite this, an HR manager must keep timesheets for a remote employee.
The timesheets of remote employees should contain two rows, as for a normal working day:
- the first row should contain the time worked under the terms of an employment agreement;
- the second row should contain the mark “P”, or “PC” if an employee works reduced working hours.
Unlike in the case of remote employees, the Workplace Regulations are applicable to home-based employees, and their timesheets should be kept based on usual rules. The standard form No. П-5 may be used for this purpose, in which:
- in the first row the hours worked should be specified;
- in the second row “Р” (or “01”) should be marked, or “РС” (or “02”) for a reduced working day/week.
IMPORTANT! A timesheet should be kept on an ongoing basis if a home-based employee is paid per hour. If the payment for his work depends on the actual output and he has the right to manage his working time at his discretion, the timesheet for such an employee does not have to be kept.
Key details to keep in mind when dismissing remote employees
Remote employees require extra attention during dismissal compared to in-house staff, as all the actions must be documented (such as the receipts proving that the letters were sent, and extracts from email).
Notice of resignation. If an employee submits his resignation, his notice of resignation should be obtained. As an employee cannot file a document in person sometimes, he can send it by registered mail, instruct a representative to hand the document, or use courier services of the companies like Nova Poshta with a delivery from the sender’s address to the recipient’s address. The application can also be sent by email or via messengers (Viber, Telegram). However, the signing of such a document with a qualified electronic signature (QES) is preferred.
Order. If an employer initiates dismissal, the order on dismissal is required, with a reference to the employer’s grounds for dismissal. The document must be signed by the company’s head. A copy of the order must be sent to the employee for information, and acknowledgement must be obtained (e.g. via email). If an employee resigns at his own initiative, the order is also necessary. It is based on the employee’s notice that was obtained.
Settlement. Carry out final settlement with the employee and provide a statement of amounts due and paid out at termination of employment. Hand the employment record book to the employee in person or have it sent to the specified address. If an employee did not specify the mailing address, send him a reminder that he must receive the employment record book.
Employees abroad
If employment of a remote employee staying abroad must be terminated, the employer must send an order, a notice of termination of employment relations and other documents by international mail with the description of contents. An email with a qualified electronic signature (QES) and the signature report can be an option subject to obtaining the employee’s confirmation. After the termination of an employment agreement, the employment record book must be mailed to the employee’s foreign address by registered international mail.
Nataliia Shcherbak, accounting and tax consultant