The employment status challenge: Key considerations for employers in Poland

When engaging the workforce how does the law distinguish between different categories of employment status?

• Employment relationship – it is as an obligation of the employee to perform a certain type of work under the supervision of the employer at a location and time defined by the employer for remuneration paid by the employer. Regardless of the name of the contract concluded between the parties, performance of work on the terms and conditions specified above is always considered employment.
• Mandate contract (concluded with a person not conducting business activity) – it is as an obligation of the contractor (the mandatary) to perform activities using due care, usually for remuneration paid by the mandator. Unlike in the employment relationship, the contractor is independent - he decides on his own about the place, time and manner of performing activities and he is not supervised by the mandator.
• Project contract – it is as an obligation of the contractor to perform a specific work (project) for remuneration paid by the orderer. As in the contract of mandate, the contractor is independent - he decides on his own about the place and time of performing activities and he is not supervised by the orderer. However, the subject of a contract is a specific work - effect, the realisation of which can be objectively verified.
• Service contract (concluded with a person conducting business activity – self-employed) – it is a B2B obligation of the contractor to perform services using due care, for remuneration paid by the mandator. The contractor issues VAT invoices for the services provided. Contractor is independent - he decides on his own about the place and time of performing activities and he is not supervised by the mandator.

What are the different rights and protections for each employment status?

Employment relationship – as a rule, every employee employed under a contract of employment has full benefits under the Polish Labour Code. The most important of them are:

1. right to an annual, uninterrupted paid holiday leave;
2. right to an allowance for overtime work;
3. right to an uninterrupted rest period (restrictions on the employee's working time)
4. right to make an appeal to a labour court against the termination of a contract (if it is found unjustified or illegal, the labour court may order that the employee be reinstated under the previous terms and conditions or that compensation be awarded to that employee).

There is also a limitation on the number of subsequent fixed-term employment contracts. Polish labour law provides for special protection of employment for a variety of groups of employees (e.g. trade union activists, employees in the pre-retirement period, pregnant women, employees on parental or child-care leave, and employees on sick leave).

Employers are also obligated to ensure safe and healthy working conditions.

Remuneration must not be lower than the amount of the statutory minimum wage (3010 PLN)

• Mandate contract (concluded with a person not conducting business activity) and service contract (concluded with a person conducting business activity – self-employed) – as a rule, the contractor is not entitled to employee benefits. There is also no limitation on the number of subsequent civil law contracts concluded. However, in market practice, the parties introduce certain benefits to the contract, e.g. holiday leave (called a break in the provision of services).
  • If the work or services are performed at the place designated by the mandator, it is obliged to ensure safe and healthy working conditions.
  • Remuneration for contractors rendering work or services to entrepreneurs under mandate or service agreements must not be lower than the amount of the statutory minimum wage (19,70 PLN per hour).
• Project contract - the contractor is not entitled to employee benefits. There is also no limitation on the number of subsequent project contracts concluded. There is no statutory minimum wage for a project contract. If the project is performed at the place designated by the orderer, it is obliged to ensure safe and healthy working conditions.

What are the current themes with regard to employment status?

It is a common case in Poland that persons employed under civil law contracts, perform their tasks on the terms and conditions characteristic of an employment relationship. In such case there is a risk of reclassification (civil law contracts are deemed an employment relationship). In the event of reclassification, the employer is obligated to pay outstanding social security contributions and outstanding advance income tax payments. There has been a recent dispute as to whether, if they are paid, the employer may claim them back from the employee in any part. According to the latest regulations (so called "Polish Deal"), this is excluded, which means that the full risk of reclassification is borne by the employer.