Advantages of gig-contracts in IT

The legal and tax regime of Diia City is gaining popularity every day, and a lot of companies – residents of Diia City already conclude not only employment contracts, but also gig-contracts with their specialists.

However, currently, based on our experience of working with both gig-contracts and employment contracts, it is quite difficult to clearly give preference to any particular form of contract.

We have highlighted the following main advantages of gig-contracts, which, in our opinion, significantly reduce tax risks and the risks of imposing fines for labour law violations, optimize the workload of accountants of the companies, and provide employees with a special gig-specialist status:

1. Payment for “work” (although formally a gig-specialist is not an employee, but provides services): the amount of remuneration can be set for a period, for work performed or for the number of hours, etc. The procedure and terms of payment of remuneration are also established (twice a month, once a month, according to the results of the work performed, etc.). In addition, the reward can be determined in a foreign currency (be tied to the exchange rate, so to speak);
2. Employment of foreigners: a resident of Diia City can receive work (services) performed (provided) by foreigners and stateless persons under gig-contracts, without obtaining any special permission (as is the case with the employment of foreigners).
3. Determination of the scope of work and the order of their execution: taking into account the fact that the remuneration of a gig-specialist can be tied to the period (time of performance of work), the scope of work does not necessarily need to be determined separately. The gig-specialist’s place of work can be fixed in the gig contract (it can be a company office or regular telecommuting), but it can be changed unilaterally, while the gig-specialist independently ensures safety at the workplace. The-gig specialist can use both the company’s equipment and his own, the conditions of such use are defined in detail in the gig-contract.
4. Vacation: the minimum period of a paid break in the performance of work (this is legally called vacation of a gig-specialist) is 17 working days. This term can be extended and leave can be granted in any parts and at any time. In addition, it is not carried over to future periods, and when the gig contract is terminated, compensation for unused days will not be paid.
5. Social guarantees: gig-specialists, similar to employees, have the right to paid sick leave and maternity leave.
6. Benefits: A gig-specialist is entitled to the similar benefits as an employee. The procedure and terms of their provision are stipulated in the gig-contract or separately in the company’s internal acts. However, there are some tax nuances when providing benefits to gig-specialists.
7. The terms of termination of the gig-contract are specified in the contract itself, the parties are not limited by the requirements of labour legislation.

Taking everything into consideration, a gig-contract is a fairly flexible tool with the help of which a company and a gig-specialist can agree on almost any terms of cooperation, which favourably distinguishes gig-contracts from employment contracts. However, taking into account the fact that the mechanism is quite new, there are some gaps in the legislation that slightly limit the scope of gig-contracts (this, in particular, concerns some tax aspects).

To choose the form of cooperation correctly, it is necessary to take into account the structure of the company, its internal administrative processes and the nature of relations with employees. It is quite possible and rational to use both employment contracts and gig-contracts in the company to optimize interaction with one or another category of specialists.