Analytic Survey Report: Wartime Condition and Needs of Social Enterprises of Public Associations of People with Disabilities in Ukraine (Short version)

11 Березня 2023 by Olga Zhurbenko

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Research Goal:

gather information on the current economic state of social enterprises founded and owned by exclusively public associations of people with disabilities and employing more than 50% of persons with disabilities on their staff list;
identify the reasons and circumstances causing the reduction in the number of enterprises operated by public associations of people with disabilities and the number of persons with disabilities working in such enterprises.

Brief contextual analysis

The legislation of Ukraine sets the goal to promote employment of people with disabilities.

Social enterprises, founded and owned exclusively by public associations of people with disabilities and employing persons with disabilities as more than 50% of their staff, play an important role in implementing the state policy for employment of people with disabilities.

The development and operation of social enterprises of public associations of people with disabilities are related to addressing not only economic but also social issues. The latter include creation of new jobs and preservation of existing ones, including jobs for persons with disabilities, as well as financial support for statutory activities fulfilled by the founder of public associations of people with disabilities.

Organizing the activities of enterprises of public associations of people with disabilities involves the use of labour of persons with disabilities, which puts these enterprises into unequal conditions compared with other economic entities. Therefore, in compliance with certain articles of the Law of Ukraine “On the Fundamentals of Social Protection of Persons with Disabilities in Ukraine,” to create the conditions ensuring equal employment opportunities for employees with disabilities and necessary economic conditions for the operation of such enterprises, the latter are entitled to state support in the form of tax benefits, financial refundable and non-refundable assistance from the Fund for Social Protection of Persons with Disabilities, etc.

Respondents

2023_NAIU_AnaliticalReport_v04 (1) According to the results of the 2^nd half of 2022, Ukraine had a total of 179 social enterprises of public associations of people with disabilities.

Many of the enterprises that are still operating today were founded before World War II and survived the collapse of the Soviet Union and numerous reforms that took place in the period of Ukraine’s independence. These are the enterprises of the Ukrainian Society of the Deaf (“UTOH”) and the Ukrainian Society of the Blind (“UTOS”).

Social enterprises operate in various sectors. These include light industry, production of furniture, electrical goods, plastic products, printing and typography services, agriculture, forestry and fisheries, trade and processing, etc.

Sixty-one (61) enterprises founded by public associations of people with disabilities took part in this survey.

These enterprises can be tentatively classified into micro-companies – 21% of those surveyed, small companies – 70%, medium-sized companies – 6%, and large companies – 3%. Thus, most of the enterprises are small companies having an income of up to UAH 50 million per year.

In recent years, the number of enterprises owned by public associations of people with disabilities has been significantly decreasing, which led to a drop in the average number of employees, including persons with disabilities. In particular, between 2020 – the 1^st half of 2022, the number of such enterprises decreased by 31%, and the average number of employees fell by 35%, including a 36% decrease in the number of employees with disabilities.

The reasons for this situation include COVID-19 coronavirus pandemic and russia’s military aggression.

Key findings of the survey

Economic section

The majority (80%) of the 61f surveyed companies suffered economic losses. Businesses were run amidst the loss of resources, goods, fixed assets, forced overpayments, destructions of supply chains, unpredictable development of the situation in the domestic market, and relocation costs due to the full-scale aggression by russia.

More than 2/3 of respondents stated that the number of customer orders had decreased. As a result, downward trends in the production volume of goods / works / services were observed.

One-third of the surveyed companies (39%) forecast their profits to decrease by 20 to 50% compared to the previous year, while 23% of the respondents predict a 5-fold decrease in profits (20% compared to 2021).

The enterprises that primarily worked in Kyiv, Kharkiv, Kherson, and Donetsk regions have stopped or almost stopped their operations.

At the same time, some companies managed to adapt to the needs caused by the war: 10% of those who were surveyed stated that their production of goods/works/services increased, and 7% respondents described it as a significant growth. The growth in production is observed at enterprises located in the regions which suffered the least losses during the war: Chernivtsi, Ivano-Frankivsk, Kirovohrad, and Odesa regions.

The respondents pointed out the following as their priority decisions for 2023:

search for new customers – 78.7 %;
reduction of costs – 67.2 %; and
search for funding – 54.1 %.

At the same time, almost 2/3 of the surveyed enterprises (59%) need minor financial support – up to UAH 1 million.

Labour relations

The full-scale military aggression by russia has ruined normal operation at social enterprises of public associations of people with disabilities.

One third of the enterprises (36%) have their employees on vacation at their own expense.

The majority of the respondents (64%) said that the working hours in their companies had been cut.

There has been a considerable decrease in wages, as reported by 52% of the surveyed enterprises.

Six per cent (6 %) of the enterprises reduced the number of employees with disabilities. Thus, 10% of the respondents indicated that up to 10% of such employees were laid off; 6% respondents stated that they reduced from 10% to 30% of employees; 2% respondents reduced from 30% to 50% of employees, and 2% laid off more than 50% of employees.

Despite the economic situation, the decline in the production of goods / works / services, and negative expectations based on the results of the year, most companies (94%) have not reduced their staff. At 58% of enterprises, employees continue working.

As of November 01, 2022, the majority of respondents (80%), if compared to the number of their staff on February 23, 2022, pointed out that the number of persons with disabilities on their staff lists was preserved.

However, there are enterprises that demonstrate increased working hours, but unfortunately, their number is only 5%. Wages increased at 18% of enterprises.

Cooperation with authorities and local self-government bodies

The survey results confirmed that almost all the respondents had permits confirming their right to tax privileges, which is related to their social significance. In addition, the Government automatically prolonged the privileges for the period of war.

It is worth noting that the UTOH’s and UTOS’s enterprises, which account for 40% of the total number of all enterprises established by public associations of people with disabilities, provide employment to 78% of all employees with disabilities who are employed by enterprises run by public associations of persons with disabilities in Ukraine in total. At the same time, the share of value added tax exemptions for such enterprises is only 28%, income tax – 17%, and zero-rate value added tax – 23% of the total amount of the privileges that enterprises of public associations of persons with disabilities have respectively.

All enterprises of public associations of people with disabilities are tax and excise payers. It is estimated that the amount of such payments for 2022 will be between UAH 100,000 and UAH 1,000,000 for 44% of the surveyed enterprises and more than UAH 1 million for 13% of enterprises.

In addition, 92% of enterprises are contributing to Ukraine’s victory by fulfilling government orders, establishing temporary accommodation centres on the basis of their premises to host internally displaced people including persons with disabilities, and providing humanitarian aid.

One of the main factors not fostering the development of social enterprise businesses is the low level of collaboration with public authorities and/or local governments. For example, only 5% enterprises are regularly cooperating with representatives of regional state administrations (regional military administrations) and local communities regarding the development of entrepreneurship in the local community / region or have already received some practical results for their businesses and/or our cluster / sector(s) of the economy.

RECOMMENDATIONS

To save the existing social enterprises of public associations of people with disabilities and to improve the employment rate of people with disabilities, it is necessary to:

Prevent the adoption of legislative acts that would abolish the existing mechanisms of support for enterprises established by public associations of people with disabilities.
Develop a legislative framework to expand employment opportunities for people with disabilities in the open labour market.
Simplify the procedures of reporting on the employment of people with disabilities.
Create favourable conditions for the employment of people with high support needs (severe disabilities).
Develop mechanisms for the sale of products manufactured by social enterprises (in particular, through the placement of state orders or preferences in tender procurement procedures).
Provide financial support in the form of non-repayable and repayable assistance and loans to social enterprises in order to expand their capacity, increase their production potential in the wartime, and overcome the war-related consequences.
Preserve the system of preferential taxation of social enterprises.
Provide state support for reasonable accommodation in workplaces.
Ensure information transparency of public authorities and local self-government bodies, timely provision of information on any programs open to participation by public associations of people with disabilities.
Add the task of increasing the level of employment of people with disabilities when developing strategies and programs for post-war renovation of Ukraine.