Before hiring an employee, the employer should carefully select the appropriate contract under which the employee will perform work for the employer. There are two main forms of employment in Poland:
- Employment relationship (employment contract, appointment, nomination, election)
- Civil law contracts (contract of mandate, contract of specific work, agency agreement).
The difference between them lies primarily in the regulation in the law: the first form is regulated by the Labour Code, the second one - by the Civil Code, therefore these contracts are intended to different types of work, give another rights and obligations.
The most beneficial for the employee is establishing cooperation on the basis of an employment relationship - the employee has the right to receive the minimum wage, annual and maternity leave, etc., free health care, paid medical leave and protection against termination of the contract. In turn, the employer receives a loyal and stable employee.
The appointment and an employment relationship on the basis of election cover employees of public services, so in this article we will focus on other employment relationships which are in interest of the employer.
An employment contract (pol. umowa o pracę) is the best form of employment for the employee and at the same time the most expensive form for the employer. The employer, in addition to gross remuneration, will suffer additional burden of approx. 20% of gross salary. All contributions and advances on personal income tax are deducted from this agreement. In a situation where an enterprise employs an employee on the basis of a full-time employment contract, and his gross salary is PLN 2,800 (minimum salary for work in 2021), then the total cost of employment is PLN 3,373.44 (net salary plus contributions and advances).
It is the most protected contract for an employee. The employer may terminate it (dismiss the employee) in strictly defined cases - for example, leaving work without any excuse, theft, committing a crime during the term of the contract, the loss of the employee's rights to work, inability to work due to illness, etc. If the employer terminated the employment contract with an immediate effect in violation of the provisions, the employee has the right to apply to the labor court within 21 days from the date of delivery of the notice of termination.
The Labour Code distinguishes four types of employment contracts:
- for a trial period of (up to 3 months). Such an agreement can be concluded only once. During the probationary period, the employee shall be entitled to annual leave, sick leave entitlement, health care, remuneration and a notice period.
- fixed-term contract (may not exceed 33 months). Fixed-term contracts may be concluded only three times. The conclusion of consecutive fixed-term employment contract by one employer or if the total period of employment under fixed-term contracts is more than 33 months will automatically mean the conclusion of an indefinite contract.
- for replacement - may be contracted to provide replacement for an employee absent for justifiable reasons, e.g. due to illness, parental leave or unpaid leave, etc. The replacement contract should specify the same type of work (position) as the contract of employment of the replaced employee. It may, however, specify a different working time and remuneration.
- indefinite duration contract - is a permanent contract concluded without marking the end date of the employment relationship. This is the most advantageous form of employment for the employee.
The employment relationship on the basis of appointment is the also popular, and is characterized by a lack of employment stability, since the appointing authority can dismiss the employee at any time (e.g. members of the management board). Dismissal shall be tantamount to termination of the employment contract. Such an agreement does not constitute a title to compulsory social and health insurance in ZUS. Thus, the person exercising such a function does not report to these insurance. The appointment, which takes the form of a resolution of shareholders, means that no contract is concluded with a member of the management board, on the basis of which the scope of activities and remuneration would be determined. Therefore, only an advance on personal income tax of 17% (or 32% - at the request of the taxpayer) should be collected, and the income minus only the costs of obtaining it. These costs are 250 PLN per month, and not more than 3000 PLN for the whole tax year.
In addition to the employment relationship, civil contracts can also be concluded. The most popular among them are the contract of mandate and the contract of specific work. Such contracts entail lower costs and the possibility of a quick termination of the contract.
A contract of mandate (pol. umowa zlecenie) is cheaper than an employment contract for an employer (the Principal) and is not subject to an sickness insurance contribution, and if the employee has a full-time employment contact and at least a minimum remuneration from another employer, then such a contract of assignment is subject only to a mandatory health insurance contribution of about PLN 380 per month.
A contract of specific work (pol. umowa o dzieło) is a type of reciprocal agreement - under this contract the performer of work undertakes to perform a specific work to achieve a given individualized result, and the Ordering Party to pay remuneration.
The performing of a work usually takes the form of creating a thing both material (for example, painting a picture) and non-material (for example, conducting a course, training); it can also consist in making changes to an existing thing, repairing it, reworking or supplementing it, or expanding, combining it with other things, adding component parts or belonging. The customer is responsible for any physical or legal defects in the work performed.
Currently, the contract of specific work is the cheapest form of employment, since only the PIT income tax advance, corresponding to 17% of income, is deducted from the gross amount. The contract of specific work is not lined. However, from 1 January 2021, each contributor and each natural person commissioning the work shall be obliged to inform the ZUS thereof within 7 days from the date of conclusion of the contract. Only 'own' contracts, i.e. contracts concluded with one's own employee or performed on behalf of one's employer, are excluded from this obligation.