Non-profit organisations often ask: can the director work as a sole proprietor, or for no pay at all? We break down where the line runs between volunteering, civil-law contracts and disguised employment — and how not to lose non-profit status.
Why this is a problem
The key risks: disguised employment, minimum-wage guarantees, a conflict of interest in “contracting with oneself”, and a threat to non-profit status from improper use of funds.
The regulatory basis
Four basic principles: an employment relationship is “work ↔ wages”; an employee is entitled to the minimum wage (the 2026 minimum wage is UAH 8,647); and the non-profit criteria are non-distribution of income and use of funds solely for statutory purposes.
Where the line runs between volunteering and employment
Signs of an employment relationship that inspectors look for:
- Subordination to rules and instructions
- Regular operational management of the organisation
- A schedule, a workplace and reporting like an employee’s
- Systematic, long-term performance of functions
- Regular payments on fixed dates, resembling a salary
A sole-proprietor contract with one’s own NGO: when it is acceptable and when it is a risk
It is acceptable if the services do not duplicate the director’s functions, the prices are at market and justified, there is a clear result, the decision is approved by the governing body following the conflict-of-interest procedure, and everything is transparently documented. The risk is high when the contract effectively pays for managing the organisation, there are signs of subordination, regular monthly payments without documented results, and no internal conflict-of-interest procedures.
Liability and penalties (2026)
Financial penalties under Article 265 of the Labour Code are multiples of the minimum wage: 2 minimum wages — UAH 17,294; 10 — UAH 86,470; 30 — UAH 259,410. Administrative liability under Article 41 of the Code of Administrative Offences: 30–100 tax-free minimums for general violations, 500–1,000 for admitting someone to work without an employment contract, and 1,000–2,000 for a repeat offence. In wartime, penalties may not be applied if the organisation complied with the orders on time.
Which documents and decisions to prepare
- A governing-body decision on the director’s employment model and pay
- An employment contract with transparent terms
- A conflict-of-interest policy and procedures for related-party transactions
- A sole-proprietor contract whose scope excludes director’s functions
- A market-price rationale with commercial comparisons
Describe your task
We will suggest a cooperation format and come back with a specific proposal.