# NGO directors: unpaid work, FOP services and non-profit status

> Employment, unpaid roles and sole proprietor services for NGO directors in Ukraine. Key distinctions, conflicts of interest and non-profit status.

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Current as of October 14, 2026.

An unpaid role or a services contract with a sole proprietor for the director of a nongovernmental organization (NGO), such as a civic organization or charitable foundation in Ukraine, needs a separate assessment. The organization's legal form, its charter, the formal appointment and the actual nature of the work all matter. Calling the director a volunteer or a sole proprietor registered in Ukraine (FOP) doesn't by itself remove the risk of a disguised employment relationship.

## Unpaid work by an NGO director

You need to distinguish between exercising the powers of a governing body on a voluntary basis and holding a position under an employment contract. Whether these powers may be exercised without pay must be assessed under the law that governs the specific type of organization, its charter and the decisions of its governing bodies.

If the relationship is an employment relationship, it involves pay and labor guarantees. A statement by the director agreeing to work without a salary doesn't replace proper documentation. The State Labor Service of Ukraine stresses that an employment contract is characterized by the performance of job duties, adherence to internal rules and payment for the work process itself. [Guidance of the State Labor Service (in Ukrainian)](https://dsp.gov.ua/podolannia-nelehalnoi-zainiatosti/trudovyi-chy-tsyvilno-pravovyi-dohovir/).

## Volunteering and employment

The absence of pay doesn't by itself turn a director's duties into volunteering. The full set of circumstances must be assessed:

- performance of ongoing duties attached to the position;
- adherence to a set schedule and working rules;
- organization and control of the work process by the organization;
- regular payment for performing a job function.

No single indicator, such as monthly payment, determines the nature of the relationship automatically. What matters is the substance of the arrangement and how it's carried out in practice. [Indicators of employment and civil-law relations — State Labor Service (in Ukrainian)](https://pd.dsp.gov.ua/news/tsyvilno-pravovyi-ta-trudovyi-dohovory-osoblyvosti-zastosuvannia-ta-vidminnosti/).

## Services provided by a director as a sole proprietor

A contract with a FOP shouldn't be used as a formal substitute for an employment contract to pay for the same work the person does as director.

If the director is to provide separate services, check the following before signing the contract:

- whether the services are separate from the director's powers;
- whether the scope, price and the way the services are confirmed are clear;
- whether the price is justified;
- whether the requirements of the law, the charter and the donor on conflicts of interest are met;
- who has the authority to approve and sign the contract on behalf of the organization.

A certificate of services rendered isn't enough on its own if the person in fact works as an employee. Civil-law relations imply that the contractor organizes the performance of the agreed task independently. [Guidance of the State Labor Service (in Ukrainian)](https://pd.dsp.gov.ua/news/tsyvilno-pravovyi-ta-trudovyi-dohovory-osoblyvosti-zastosuvannia-ta-vidminnosti/).

## Director's salary and non-profit status

The director's salary isn't, by itself, a prohibited distribution of income. The Tax Code of Ukraine expressly allows paying employees and accruing the unified social contribution (USC, Ukraine's payroll social security contribution). The organization's income must be used for its upkeep and to pursue the purposes set out in its charter.

A labor law violation and a breach of the non-profit conditions are different matters. Not every mistake in formalizing the director's position automatically means loss of status. A tax risk arises, in particular, when payments conceal a distribution of income or funds are used outside the permitted purposes. [Clause 133.4 of the Tax Code of Ukraine — State Tax Service (in Ukrainian)](https://www.tax.gov.ua/nk/spisok3).

## Reviewing the documents and actual duties

First, compare the charter, the decision appointing the director and the director's actual duties. Then determine the appropriate model of relations and prepare the corresponding documents:

- a decision of the authorized body on the director's powers and working terms;
- an employment contract and pay documents, if the relationship is an employment relationship;
- for separate FOP services: a contract, a justification of the price and confirmation of performance;
- documents on managing conflicts of interest and approving the transaction.

The names of the documents must match the real relationship. Simply relabeling a salary as "payment for services" doesn't remove the risks.

## Related services

- [Accounting, Payroll and HR Administration for Non-profit Organizations](https://www.uhy-prostir.com/en/for-npos/index.html.md)

**[Hanna Matseva](https://www.uhy-prostir.com/en/about-us/hanna-matseva/index.html.md)** (CEO and Partner, Accounting Services, Payroll and HR Administration — UHY Prostir)

## Frequently asked questions

### Do we have to pay the director if there's no funding?

A lack of funding doesn't by itself cancel the employer's obligations under an employment relationship. You need to assess the current arrangements for the director's work and the lawful options for organizing it, rather than simply stopping salary accruals.

### Is a charter provision on unpaid work enough?

A single provision isn't enough for a definitive conclusion. The organization's legal form, the applicable legislation, the decisions of its bodies and the actual nature of the director's work must all be taken into account.

### Does a contract with a FOP director mean losing non-profit status?

Not automatically. What matters is whether the services are real, what the expenses are for and whether the non-profit conditions are met. Labor risks and conflicts of interest are assessed separately. [Clause 133.4 of the Tax Code of Ukraine (in Ukrainian)](https://www.tax.gov.ua/nk/spisok3).

## Related insights

- [What should NGOs take into account while working with Sole Proprietors (FOP) in Ukraine](https://www.uhy-prostir.com/en/blog-en/what-should-ngos-take-into-account-while-working-with-individual-entrepreneurs-flp-fop-in-ukraine/index.html.md): As we promised in the previous article, we keep on introducing NGO activities to you, their peculiarities in accounting, and in relations with other business entities on the market of Ukraine. Today we will speak about the cooperation of NGOs with sole proprietors - (FOP). (2023-10-02)
- [How to register the NGO in Ukraine: the procedure of registration and obtaining the taxpayer status](https://www.uhy-prostir.com/en/blog-en/how-to-register-the-ngo-in-ukraine-the-procedure-of-registration-and-obtaining-the-taxpayer-status/index.html.md): The previous article discussed a list of the main NGO registration forms. (2023-10-16)
- [What an NGO Leader Needs to Know About HR Record-Keeping During Martial Law](https://www.uhy-prostir.com/en/blog-en/what-the-head-of-the-ngo-has-to-know-about-keeping-personnel-records-during-martial-law/index.html.md): During martial law, HR record-keeping has its peculiarities for leaders of non-governmental organizations. (2023-11-09)
- [Avoiding Tax Issues for LLCs Contracting with Group 2 Simplified Tax Sole Proprietors](https://www.uhy-prostir.com/en/blog-en/avoiding-tax-issues-for-llcs-contracting-with-group-2-simplified-tax-sole-propri/index.html.md): Prostir Accounting Services Company provides accounting services for Ukrainian and international companies, representative offices, non-profit organizations and foundations, and sole proprietors (FOP). (2021-01-15)

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