Gig Contract: 5 Traps in a Contract with a Gig Specialist

Information

14 Apr 2026

Date of publication

IT contracts

Let’s Start from the Beginning

On August 14, 2021, the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine” (hereinafter — the “Law”) entered into force. In December 2021, a law was adopted amending the Tax Code of Ukraine as part of the preparation of the tax foundation for the law’s operation.

And on February 8, 2022, Diia.City (or “Diia City”) was officially launched. From that moment, a special legal regime developed for the growth of the IT industry began operating in Ukraine.

Diia City is a unified economic and legal space for IT. Companies that join this legal regime become Diia City residents.

Diia City is a special legal regime designed to create favorable conditions for the development of IT businesses in Ukraine. The key goal of Diia City is to increase the investment attractiveness of Ukraine’s IT sector.

This will be achieved primarily through the creation of favorable tax conditions, with taxes only slightly higher than those payable when working with a sole proprietor (FOP). At the same time, such arrangements will be entirely legal, and Diia City residents will be able to breathe easy without fear that their relationships will be reclassified as employment.

A distinctive feature of the regime is that not only companies operating within Ukraine can become residents. Instead, one of the requirements for a Diia City resident is registration in Ukraine, while the location and place of business activity do not necessarily have to be Ukraine.

Only legal entities can become residents, while sole proprietors (FOPs) do not have this option.

Other requirements for a Diia City resident are:

having IT-related KVED codes (carrying out one or more types of activity defined by the Law);
the average monthly remuneration paid to engaged employees and gig specialists must be at least the equivalent of €1,200;
the average headcount of employees and gig specialists of the legal entity must be at least 9 persons;
the amount of qualified income must be at least 90% of its total income (for the first 3 months and for the year);
absence of “negative” criteria.

So What Is a Gig Contract?

As of now, the most common form of cooperation with IT specialists — whether developers, testers, or designers — is formalizing contractual relationships with such specialists as sole proprietors (FOPs). The new Diia City legal regime has every chance of radically changing this.

A Diia City resident may cooperate with:

employees on the basis of employment agreements (contracts);
gig specialists on the basis of gig contracts;
contractors and service providers, including FOPs, on the basis of civil law and commercial law agreements.

That is, a gig contract is not the only basis for cooperation with a Diia City resident. The FOP model or formal employment relationships remain as options. Companies, in turn, have the right to choose one cooperation model or to combine several.

However, it is reasonable to expect that companies that become Diia City residents will seek to take full advantage of that status — and will most likely enter into gig contracts. That is therefore what we will focus on below.

Legal Nature

The Law defines a gig contract as a civil law agreement under which a gig specialist undertakes to perform work and/or provide services in accordance with the tasks of a Diia City resident as the client. The Diia City resident, in turn, undertakes to pay for the work performed and/or services provided and to ensure proper conditions for the gig specialist to perform the work and/or provide the services, as well as the social guarantees provided for by the Law.

Simply put, a gig contract is in fact a kind of hybrid between an employment contract and a civil law agreement.

Parties

A gig contract is a bilateral agreement, the parties to which are:

the gig specialist; and
the Diia City resident.

A gig specialist is an individual who, under such a gig contract, acts as a contractor and/or service provider. They have a distinct status — not that of a FOP or an employee, but specifically that of a gig specialist.

In addition, a gig specialist may still remain a FOP (if they had that status prior to entering into the gig contract) or register as a FOP, since the Law contains no restrictions in this regard.

Form of the Agreement

In 2025, a gig contract is concluded in written or electronic form. That is, the Law does not provide for the possibility of concluding a gig contract orally.

One more nuance: the agreement will not be considered a gig contract if it does not expressly state so! Thus, not only the content matters — use of the name “gig contract” is simply mandatory when concluding it.

Key Terms of a Gig Contract

So what should be written in a gig contract?

Any agreement must contain essential terms. Since a gig contract is a civil law agreement, the starting point is the essential terms defined as such by the Civil Code of Ukraine.

These include:

subject matter;
term;
price.

In addition to these general essential terms, the Law also defines a number of conditions that must be specified in the gig contract:

the term of the gig contract;
the rights, obligations, and liability of the parties to the gig contract;
the gig specialist’s remuneration;
the conditions for termination of the gig contract.

So does a gig contract differ from a standard FOP agreement?

Yes, a gig contract differs from a standard FOP agreement primarily in that it also provides for social guarantees. It has characteristics of both an employment contract and a civil law agreement.

A gig contract is a combination of the flexibility of freelancing and basic social protection.

In addition, gig specialists may entirely legally and without the risk of their relationship being reclassified as employment work on the client’s equipment. This will significantly simplify the process of formalizing equipment handover.

Contracts are the foundation of cooperation and the key to successful interaction for an IT company — a Diia City resident — both with clients and with the gig team. Here are the key points of such agreements for a company engaged in IT outsourcing/outstaffing, in brief.

By Default

A gig contract leaves sufficient room for the parties to agree on individually negotiated terms. But what happens if important matters are left unresolved?

The Law already has an answer to this. The legislator has defined a number of matters that will by default be considered agreed upon by the parties to the gig contract in the manner set out below, unless the parties agree otherwise or unless otherwise established by law.

Some of these are listed below:

Indefinite term of the gig contract. A gig contract is concluded for an indefinite term.
Auto-renewal. If the parties continue to perform the gig contract after its expiry, it is deemed renewed for the same term and on the same conditions.
Working hours. The gig specialist performs work (provides services) for 40 hours per week.
Form of assigning tasks to the gig specialist. The proper form is electronic messages sent by the Diia City resident and its representatives (in particular, email, computer programs, online services).
Provision of equipment. The Diia City resident provides the gig specialist with equipment and other means necessary to perform the work (provide services).
Intellectual property rights. The Diia City resident acquires the property rights of intellectual property to a work created in connection with the performance of the gig contract at the moment immediately following the creation of such work.

Social Guarantees

The key advantage of entering into a gig contract for freelancers accustomed to providing services as a FOP is the presence of basic social guarantees, unlike a standard service agreement.

A gig contract establishes basic guaranteed rights. For example, the Law provides for an analog of annual leave for a gig specialist, similar to that which exists in employment relationships.

Specifically, a gig specialist has the right to:

an annual paid break from performing work (providing services) of at least 17 working days;
temporary disability benefits;
a break from performing work (providing services) in connection with pregnancy and childbirth;
and other guarantees provided for by the Law.

Traps of a Gig Contract

And yet, panic about the terms of gig contracts continues to spread online. Sometimes you can come across comments describing them as almost akin to slavery.

Indeed, one should not look at a gig contract through rose-colored glasses, as alongside the attractive social guarantees there are also some restrictive obligations.

1. NDA or Non-Disclosure Agreement

The Law provides for the possibility of concluding a non-disclosure agreement with a specialist (i.e., both with a gig specialist and with an employee within the framework of an employment relationship).

Under a non-disclosure agreement, the specialist or another person undertakes not to disclose the trade secret and/or other confidential information of the Diia City resident or relating to the Diia City resident.

Are there penalties?

Such an agreement may be gratuitous and provide for compensation in the event of its breach. This compensation is effectively the equivalent of a penalty.

The Law does not define any limits on the amount of such compensation, and therefore determining its size is left to the discretion of the Diia City resident. This is the point to which one should pay particular attention, so as not to agree to an exorbitant compensation amount in the event of a breach.

Such provisions may also be included in an employment contract with a Diia City resident — that is, not only in a gig contract. In that case, the provisions of labor legislation will not apply to such a contract.

2. Non-Competition

We have finally reached the point that provoked the greatest wave of outrage in the IT community.

Within the Diia City framework, it is possible to conclude a non-competition agreement with a specialist.

Such an agreement must be compensatory and concluded in written form. That is, the specialist receives a certain compensation for performing under such an agreement. At the same time, the Law does not set any requirements as to the amount of such compensation — meaning there is room for manipulation by companies that may set a nominal compensation amount in order to formally comply with the Law.

Under the Law, competitive actions include:

entering into employment agreements (contracts), gig contracts, or other civil law or commercial law agreements with other persons carrying out activities analogous to those of such a Diia City resident (competing activity);
carrying out competing activity as a FOP;
directly or indirectly holding a share in another legal entity that carries out competing activity;
holding the position of a member of a management body of another legal entity that carries out competing activity;
performing other competitive actions provided for in the agreement.

That is, such an agreement effectively prohibits the specialist from carrying out competing activity, including as a FOP.

Importantly, refusal to enter into a non-competition agreement cannot serve as grounds for terminating an employment agreement (contract) or a gig contract. That is, the specialist always retains the choice of whether to enter into such an agreement.

However, it is likely that companies will abuse this provision and still decline to commence cooperation without the signing of such a non-competition agreement.

It is no secret that non-competition provisions are currently also a common practice among IT companies. As a rule, they are “embedded” in confidentiality clauses — along the lines of: “you cannot work for anyone else, because you learned everything from us, and doing so would be a breach of our confidentiality.”

How well such provisions actually work is a separate question. But the popular argument about inconsistency with the Constitution is far from always sufficient. Courts resolve such cases inconsistently. We wrote in more detail about NCAs here.

That is, the prohibition on carrying out competing activity is not a novelty in IT contracts. In any case, it is necessary to read all the terms provided for in the agreements for your future cooperation carefully, and not to agree to excessively burdensome conditions.

3. Termination Period

By default, the party wishing to terminate the gig contract must notify the other party of its decision 30 calendar days in advance.

However, the Diia City resident has somewhat greater authority in this matter than the gig specialist. The Diia City resident has the right, at its own discretion, to reduce the notice period for the gig specialist regarding unilateral termination of the gig contract, replacing it with a compensation payment. The amount of such payment is determined by the gig contract, but may not be less than the gig specialist’s daily remuneration for each working day by which the notice period is reduced.

That is, there is a risk for the gig specialist that the contract will be terminated earlier than the agreed notice period. On the other hand, the gig specialist is protected by the mandatory nature of the compensation payment, the minimum amount of which is directly tied to that specialist’s remuneration.

4. Liability

Financial liability may be imposed on the gig specialist and deducted from their remuneration.

However, there is no cause for panic, as such liability may arise only in the event of damage to the property of the Diia City resident through the gig specialist’s fault.

For the protection of the gig specialist, a cap on such deductions has been established at 20% of monthly remuneration.

5. Smile, You’re on Camera!

Compared to the usual cooperation with FOPs, Diia City residents are granted expanded rights to monitor the quality of work performed, including through the use of video cameras.

Such video surveillance may be carried out in common areas, provided there is no interference with the gig specialist’s personal and family life.

Importantly, monitoring of the gig specialist’s use of equipment owned or operated by the Diia City resident is not considered interference with personal life. So one should be cautious about using computers and other equipment provided by the client, as the client has the full right to seize and check, for example, what resources were used.

As for video surveillance, cameras may be installed in any other company outside the Diia City legal regime as well — of course, subject to the restrictions established by law.

Conclusions

Diia City is a special legal regime that offers specific conditions for the comfortable functioning of the Ukrainian IT market.

A gig contract is a means of combining the flexibility of freelancing with the provision of basic social guarantees, such as the equivalent of annual leave or sick pay.

Given the recent launch of the Diia City regime, it is quite difficult to predict the realities of its operation. At this stage it is clear that a gig contract can both offer gig workers favorable terms and impose burdensome obligations.

To avoid falling into one of the traps of a gig contract, read the terms carefully before signing. Check the gig contract for exorbitant compensation amounts and obligations you will not be able to fulfill. Do not hesitate to negotiate them, building individual arrangements.

Legal IT Group provides businesses with the necessary tools for the effective use of gig contracts. We draft and adapt agreements, analyze their compliance with Ukrainian legislation, and conduct audits of internal processes.