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published: 25 Jun 2024 in Labour law

Contract of employment and B2B in Poland – 7 key differences

Kamila Brzezińska
Kamila Brzezińska

Editor

When deciding on an employment type model, what differences between an employment and a B2B contract should we be aware of?
Photo by Mari Helin, Unsplash

Photo by Mari Helin, Unsplash

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If you are looking for a job in Poland, you might have encountered two distinctive terms that seem to appear in every job advert: contract of employment (umowa o pracę) and Business-to-Business (B2B) contract (umowa B2B).

In this piece, we will look into unique characteristics, rights, and obligations relating to each of these contractual forms. Understanding the legal implications and practical aspects of each contract type can help you choose a working model that will be right for you and your goals.


Contract of employment in Poland – what is it?

An employment contract in Poland is a legal agreement between an employer and an employee, regulated by the Polish Labour Code. This contract establishes a formal employment relationship, where the employee works under the employer's direction and control.


What is a B2B contract in Poland?

A B2B contract in Poland is a business-to-business agreement between two independent entities, typically involving a self-employed individual (contractor) providing services to another business (client). This contract is governed by the Polish Civil Code and offers greater flexibility but fewer worker protections. Conversion to a B2B contract requires setting up our own business, which includes registering a company, choosing a form of taxation, bookkeeping, and paying regular social security dues.


What are the differences between a contract of employment and a B2B in Poland?

1. Legal basis and framework

Contract of Employment:

The contract of employment in Poland is regulated by the Polish Labour Code (Kodeks pracy). This comprehensive legal framework outlines the rights and duties of both employees and employers, ensuring substantial protections for workers. Key provisions cover aspects like working hours, remuneration, leave entitlements, workplace safety, and termination procedures.

B2B Contract:

B2B contracts fall under the purview of the Civil Code (Kodeks cywilny). These contracts are used when an individual operates as a self-employed person (sole proprietor or freelancer) providing services to another business. The Civil Code offers flexibility but does not provide the same level of worker protection as the Labour Code, reflecting the nature of the business-to-business relationship.


2. Employment relationship

Contract of Employment:

An employment contract establishes a hierarchical relationship where the employee works under the employer's direction and control. The employer determines the tasks, working hours, and the manner in which work is performed. This form of contract implies a degree of subordination and dependency.

B2B Contract:

In a B2B arrangement, the relationship is more of a partnership between two independent entities. The contractor typically has greater autonomy over how, when, and where the work is performed. This setup is characterized by mutual agreements rather than directives from one party to another.


3. Social Security and benefits

Contract of Employment:

Employees under an employment contract are entitled to a range of social security benefits. Employers are obligated to contribute to the employee’s social security, health insurance, and other state-mandated benefits such as pension schemes. Employees also receive paid annual leave, sick leave, and maternity/paternity leave.

B2B Contract:

Contractors under a B2B arrangement are responsible for their own social security contributions and health insurance. They must register with the Social Insurance Institution (ZUS) and manage their own tax affairs. While this offers flexibility, it also means that contractors do not automatically receive benefits like paid leave or sick pay.


4. Taxation

Contract of Employment:

For employees, the employer handles income tax withholdings and social security contributions, simplifying the process for the employee. The tax rates and contributions are predefined, with limited opportunities for deductions beyond standard allowances.

B2B Contract:

Contractors have more control over their tax affairs. They can benefit from various deductions related to their business expenses, potentially lowering their taxable income. However, this requires meticulous record-keeping and a good understanding of tax laws. The tax regime for self-employed individuals can be more advantageous, but are also more complex.


5. Termination and job security

Contract of Employment:

Employees enjoy significant job security under the Labour Code. Termination procedures are clearly defined, with mandatory notice periods and even severance pay in certain circumstances. Therefore, unjust termination can lead to legal consequences for the employer, including the possibility of reinstating the employee or compensating them for wrongful dismissal.

B2B Contract:

Termination terms in a B2B contract are governed by the Civil Code and are typically outlined within the contract itself.. There is generally no obligation for notice periods or severance pay unless specified in the contract, making it easier for either party to end the relationship. This can provide flexibility, but also less job security


6. Working hours and flexibility

Contract of Employment:

The Labour Code regulates working hours, including limits on overtime and requirements for rest periods. Employees usually work fixed hours and have less flexibility to determine their own schedules. This structure is designed to protect workers from exploitation and ensure a work-life balance.

B2B Contract:

Contractors often enjoy greater flexibility in managing their working hours. They can choose when and how much they work, as long as they meet their contractual obligations. This autonomy can be attractive but also requires self-discipline and effective time management.


7. Earning potential and financial stability

Contract of Employment:

Employees receive a fixed salary, providing financial stability and predictability. Salary adjustments, bonuses, and raises are subject to company policies and performance reviews. The fixed nature of income can limit financial growth but ensures a steady stream of earnings.

B2B Contract:

Income for contractors can vary significantly based on the volume and value of the contracts they secure. This variability can lead to higher earnings potential but also financial uncertainty. Contractors must actively seek out business opportunities to maintain a steady income stream.


In summary

Aspect

Contract of Employment

B2B Contract

Legal basis

The Polish Labour Code

The Polish Civil Code

Employment relationship

Employer and employee (hierarchy)

Two independent entities (partnership)

Flexibility

Set working hours and conditions

Autonomy over how and when work is performed

Responsibility for taxes and social security

Contributions are handled by employer

Responsibility for one's own taxes and social security contributions, and (optional) sickness insurance

Social benefits

Rights to benefits such as paid leave, sick leave, and social security

Contractors do not automatically receive benefits like paid leave (but those can be negotiated)

Job security and termination

Job security with defined procedures for termination and notice periods

There is generally no obligation for notice periods or severance pay unless specified in the contract

Earning potential

Salary set in the contract

Income on a B2B contract often exceeds the net salary of an employee on an employment contract, thanks to lower Social Security costs and tax benefits.

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