Engaging contractors in Poland: what are the risks?

Self-employment is becoming increasingly popular in Poland. Service contracts with sole proprietors who provide a high level of skills and/or expert knowledge in a freelance capacity are already widespread. Job adverts recruiting in the IT sector, or for other jobs in the gig economy, often require performance of duties to be based on business-to-business contracts with candidates.

Crucially, it is the nature of the relationship, rather than the name given to that relationship, that establishes whether it will be a Labour Code based contract. Where the relationship is characterised by a) performance of work of a specified type for the benefit of an employer and under his supervision and b) in a place and time specified by the employer, there is a higher risk of the contract being reclassified into a Labour Code based employment relationship.

Where disputes arise with a contractor, especially regarding termination and/or parental leave, contractors may apply to the labour court for requalification of the relationship into a Labour Code based contract. It is worth noting however, that this is uncommon, as many contractors during the term of a service agreement make use of their entrepreneur status (for instance by deducting expenses to reduce income tax and/or VAT liability). If they subsequently claim for requalification of their status, they risk the Polish tax office demanding repayment in respect of the deducted amounts and misused tax preferences.

In recent years, the State Employment Inspectorate in Poland has sought to establish the scale of civil-law contracts being concluded where there is in fact an employment relationship. Few cases resulted in the establishment of an employment relationship (in 2017, there were just 187 claims for reclassification of 315 contractors, which is small given the size of the Polish job market). Statistics shows that reclassification mostly happens in the case of less skilled blue collar employees (eg facility services, construction workers). Where a contractor brings proceedings, if the relationship is of a mixed nature and does not fulfil all the statutory requirements of full employment (eg the contractor is free to choose the place and time of work, services are not directed in detail by a supervisor) the authorities and labour courts are generally cautious. This is especially true where both parties (employer and contractor) state that the relationship was a civil law based provision of services.

In 2017, the State Employment Inspectorate issued penalty fines in 435 cases, addressed 89 court applications for penalties to be higher than PLN 2,000 (approximately EUR 465) and imposed 480 educational measures on employers.

When an employment relationship is reclassified, businesses risk significant financial sanctions, including liability for up to five years of unpaid social insurance contributions and/or interest. Given this, it is important that companies are alert to the risks of misclassification, analyse each situation carefully and choose the right type of contract to suit each specific working relationship.

Uber in Poland

The most visible example of the gig economy in Poland is in the provision of passenger transport market services by Uber. Contracts are typically concluded with an independent contractor via a mobile platform (offering flexibility of work and the lack of need to register as an entrepreneur or obtain a taxi licence). These lower registration requirements have resulted in mass protests from Polish taxi drivers who oppose the lack of regulatory duties imposed on their competitors.

The Polish government is working on amendments to the Road Transport Act to address Uber related issues. These include requiring Uber drivers to register at the Central Register and Information on Business Activity, to include proof of no criminal record and psychological tests. Some of these requirements have already been implemented voluntarily by Uber. It is not yet clear when and to what extent the proposed changes will come into force. The respective draft of the bill of parliament which has been prepared by the government has already been changed and amended several times with no final result.