The latest data provided by the State Service of Ukraine suggests that half of working Ukrainians receive undeclared cash wages. This fact was pointed out with a reference to an International Labour Organization study.

Segognya figured out the shadiest spheres in Ukraine and discovered reasons why Ukrainians prefer to give up ‘white’ wages.

IT and freelance lead the pack of workers on undeclared wages

Approximately 50% of employed Ukrainians work without formal contracts and don’t pay the taxes on the money earned. This equals to about 5 million people out of 10-12 million. This was stated by the head of the State Service of Ukraine on Labor Roman Chernega, who also described the results of the ILO research as disappointing.

Previously, the minister of social policy Andrei Reva stated that last year the share of people who worked without an official employment contract went down by 8%, from 4 million to 3.7 million. Reva also said the government was successful in moving a large number of employees out of “the shadows”, so they now have proper contracts.

At the same time, experts emphasize that the real picture is closer to the data of the ILO than of the Ministry of Social Policy.

The highest number of employers who hire staff informally is in the spheres of services, retail, and freelance. According to Rabota.ua expert Tatyana Pashkina, these spheres are the easiest to hide income and the real number of employees. You can always say that a copywriter wrote an article for free just to get a credit to his name.

Among IT specialists, many are getting cash in envelopes. Payments are made through the blockchain system, where the transfers are flying under the radar of the government.

Shadow wages are beneficial not only for employers but also for the workers. Ukrainians are not too eager to be officially employed. Shadow employment combined with the unemployment allowance and subsidy for electricity and water gives people more cash in the pocket than a legal wage minus taxes on top of pay the full price for power and other communal services.

There is also another reason behind people’s unwillingness to be officially employed. People do not understand where their taxes go and therefore have no desire to pay them. Considering the current situation, Ukrainians prefer to save money in a jar under the bed, without having to do with the pension fund.

Some employers complained it is nearly impossible to find workers who are willing to be officially employed. One of the biggest reasons was the fact that they pay white salaries. If a person is getting enough money though employment, he won’t be eligible for the subsidy.

This year the government increased the size of the fine for illegal workers along with raising the minimum wage to 3723 hryvnia (USD 143) from 1 January 2018. The fine for hiring an illegal worker is now 112,000 UAH (USD $4,260) or 30 minimum wages.

Andrei Zablovsky, the head of the Secretariat of the Council of entrepreneurs under the Cabinet of Ministers, insists that taking business out of shadows should be done not only by punishments but also by offering some benefits. He believes that relations between businesses and government should be improved. This can be done by introducing benefits, reducing tax pressures, softening demands and helping with moving workers towards legal employment.

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