Expanding business operations into the Polish market, understanding the nuances of employment contracts is crucial for effective team building. In this article, we will examine the four most common types of contracts in Poland, shedding light on their advantages and considerations. This knowledge will enable you to make informed decisions and attract the right specialists to your growing company.
Employment Contract
The employment contract is the most commonly used form of employment in Poland, providing both employees and employers with legal protection. Regulated by the Labor Code, this contract guarantees a range of benefits such as minimum wage, paid leave, sick pay, regulated working conditions, and clear termination rules. Despite higher costs for the employer associated with additional contributions, it is the most favorable form of employment for employees with varying salary levels. An employment contract can be concluded for a trial period, for a fixed term, or indefinitely.
Advantages:
- The employment contract offers the company stable employment for the employee, translating into continuity of operations and greater employee loyalty.
- Employees on an employment contract benefit from full employment rights, such as paid leave, health benefits, and sick pay.
- Protection against potential termination of the contract.
- Employees with an employment contract are typically subject to greater control by the company, facilitating better management of processes and work outcomes.
Disadvantages:
- Employment contracts entail higher costs for the company, including mandatory contributions to social insurance and leave pay.
- There is no possibility of delegating the duties specified in the employment contract to another person by the employee.
- Rigidity in terms of specified working hours and location.
- Termination of the employment contract can be more complex and time-consuming.
- Employment contracts involve greater administrative burdens for the company, such as maintaining personnel documentation and fulfilling various formalities related to employment.
B2B Contract
B2B contracts (abbreviation of business-to-business), also known as self-employment agreements, sole proprietorship contracts, or contracts under civil law, are commonly used in the dynamic IT industry. They are characterized by exceptional flexibility, providing benefits to both companies and self-employed specialists. In a B2B contract, one party undertakes to provide specific services to the other party, and the other party agrees to pay the first party the appropriate remuneration. The precise definition of the contracting entity is the most crucial element. This helps to avoid doubts and misunderstandings during the course of cooperation.
Advantages:
- Lower costs for the employer, which can consequently translate into higher remuneration for the self-employed individual.
- This type of contract allows for greater flexibility compared to an employment contract (flexible working hours or locations for performing specific tasks).
- The company is not required to provide additional social benefits, such as leave or health insurance, resulting in limited obligations for the employer.
- Opportunity for collaboration with multiple entities.
Disadvantages:
- The self-employed individual must independently pay contributions and settle taxes.
- This agreement does not include certain privileges that apply to employees hired under an employment contract (e.g., protection of the employment relationship of pregnant women).
- Employees hired under a B2B contract often do not benefit from traditional social benefits, such as paid leave or health benefits.
- Due to the lack of job stability, employees with a B2B contract may be less loyal to the company, which in turn can affect the duration of professional relationships.
Assignment Contract
A Assignment Contract, also known as a civil law contract, is a legal contract in which one party (referred to as the principal) commissions another party (referred to as the contractor) to perform a specific task. This is a flexible form of collaboration, particularly popular for short-term tasks or projects that do not require permanent employment. Due to the established minimum hourly rate, the entrepreneur must keep a record of the time worked by the contractor. It is important to note that when hiring someone based on a service agreement, the entrepreneur is obligated to calculate and pay social security contributions, although sickness insurance is optional. Additionally, it should be noted that the contractor can terminate the cooperation abruptly, without prior notice. The service agreement has its advantages and disadvantages, which should be carefully considered before signing.
Advantages:
- The employer has the possibility to terminate the contract at any time (unless a notice period is specified in the agreement).
- It is a more economical way of employment.
- The service agreement provides flexibility in determining the place, time, and method of task execution.
- There is no specified hourly workload, including the absence of strict start and end times for work.
- Student contractors (up to the age of 26) are exempt from paying contributions (pl. ZUS).
Disadvantages:
- There is an obligation to maintain a minimum hourly wage.
- Lack of supervision over the employee.
- Lack of guarantee benefits, such as compensation for downtime, illness, or maternity leave.
Umowa o dzieło
Umowa o dzieło (a service agreement) is a form of contract in which the party accepting the order undertakes to perform a specific task, while the ordering party agrees to pay compensation. It is often referred to as a results-based contract, as its subject matter involves actions aimed at achieving a specific end result. The contractor bears full responsibility for the outcome of their work, including any potential defects in the completed task, for which they may be held accountable by the client. A service agreement is also characterized by lower employment costs compared to other forms of contracts.
Advantages:
- The company is not obliged to pay contributions for social insurance or other social benefits.
- Service agreements are legal relationships that do not require permanent employment, which is beneficial for short-term projects.
- It is the cheapest and least cumbersome method of employment.
Disadvantages:
- Service agreements do not provide permanent employment, which may lead to the continuous need to search for new specialists for short-term projects.
- Due to the contractor’s greater independence, the company may have less control over the work process and project implementation.
- Contractors under a service agreement do not enjoy full employment rights, which may lead to less commitment.
Understanding various types of employment contracts is crucial for effective personnel management in a company expanding its operations into the Polish market. In this article, we have discussed four of the most common types of contracts in Poland, analyzing their advantages and disadvantages. This knowledge enables informed decision-making during recruitment and helps in building strong relationships with employees and collaborators.
As an IT recruitment agency, we possess this knowledge and are ready to answer your questions. Remember that choosing the appropriate contract type depends on the nature of the company’s operations, its needs, and business goals. As you strive to develop your company, it’s also valuable to seek legal advice and consult with experts in labor law. By doing so, you’ll be able to effectively build a team and grow your business in the Polish market.