Can an employer reduce salary due to financial difficulties: what the law says

In the context of war and economic instability, many Ukrainian enterprises are faced with reduced income, staff shortages, and rising costs. Against this background, employers are increasingly trying to revise their remuneration conditions, but labor legislation clearly defines when a salary reduction is legal and when it violates the rights of the employee.

As stipulated by the Labor Code of Ukraine, financial difficulties alone do not give an enterprise the right to arbitrarily cut wages. The law allows for changes in essential working conditions only if there are real changes in the organization of production or work of the enterprise – for example, reorganization, reduction of production, optimization of the staff, or the introduction of a new work regime.

In this case, the employer must follow the established procedure. If the remuneration conditions change, the employee has the right to agree or refuse to work under the new conditions. In case of refusal, the employment contract may be terminated with severance pay.

Separately, the law prohibits setting a salary below the minimum if the employee has worked the full standard of working hours. From January 1, 2026, the minimum wage in Ukraine is 8,647 hryvnias.

Employees also have the right to challenge an illegal reduction in salary in court or to contact the State Labor Service of Ukraine. Case law shows that the employer must prove real changes in the organization of work, and not simply refer to a difficult financial situation.

The Supreme Court in case No. 757/22199/22-ц confirmed that changing the terms of payment for labor can be legal during martial law if it is due to objective reasons – the suspension of production, destruction of facilities or reduction of the enterprise’s activities.