Labor Market in Poland. Hiring a Workforce in Poland

If you carry out business activity, you are required to make numerous important decisions: from choosing a legal form of business to determining matters related to hiring employees. When you begin to cooperate with new people, you need to select a legal form of your cooperation. In Poland parties to a contract have discretion in determining their contractual relationship, which means that they have the right to decide about a legal relationship on condition that its terms and purpose are not at odds with the nature of a legal relationship, relevant legislation and the principles of community life.

Polish law provides for various types of employment relationship, based on contracts regulated by the Labor Code and by the Civil Code. In recent years, civil law contracts have been used increasingly, largely because of the lower level of obligations placed on the employer. Amendments made to the Labor Code in 2002 have sought to prohibit the widespread practice of replacing contracts of employment with civil law contracts. Changes in labor relations and the organization of the economy in Poland have proved conducive to the development of new forms of employment. Although the contract of employment remains the most widespread form of employment in Poland, other more flexible forms of employment are also attracting considerable interest. The form of employment is regulated by two legal acts: the Labor Code and the Civil Code.

Employment based on the Labor Code.

Contracts of employment are the most common form of employment. They give tangible benefits to the employer and the employee, in comparison with contracts based on the Civil Code (such as the 'contract of mandate' or contract to perform a specified task or work - see below). By signing a contract of employment, the employer gains a permanent employee and can be certain that the employee will arrive at the workplace at a specified time every day and will observe instructions. The employee, on the other hand, enjoys many benefits which those on Civil Code contracts lack, such as paid holidays, maternity and childcare leave, and severance pay in the event of collective redundancies. 

The Labor Code lists four kinds of contracts of employment, these being those: 

  • for a trial period; 

  • for a fixed period;

  • for the time of completion of a specified task; and

  • for an indefinite period. 

The last type of contract is a so-called 'unlimited' contract, while the first three types are 'limited'. 

One of the parties to a contract of employment is the employer, which is obliged to pay remuneration for the work performed by the employee. The employer may be an organizational unit or a natural person. It is not necessary that the employees be employed for profit-oriented activities; they may also be employed for other purposes (eg as a domestic servant or a babysitter). The other party is the employee. In general, any person who is aged 18 years or older may be an employee. In exceptional cases, an adolescent (a person aged at least 15 years but less than 18 years) may also be an employee. There are many restrictions concerning the employment of adolescents, including that they must: be at least 15 years of age; have completed primary education; and have a medical certificate stating that the particular kind of work to be performed does not endanger the employee’s health. 

The employment relationship is characterized by the following: 

  • the employee is subordinated to the employer - the employee should observe instructions concerning the performance of duties;

  • the employee is obliged to perform his or her work in the place specified by the employer; and

  • the employee is obliged to observe the working time. The contract of employment specifies whether the work is full or part time. In the case of full-time work, the employee may not earn less than the minimum monthly remuneration. If, however, the contract specifies a lower remuneration, the employer is obliged to pay a compensatory allowance, which is the difference between the minimum monthly remuneration and the remuneration specified in the contract. 

Contract of employment for a trial period.

A contract of employment for a trial period may precede any other kind of contract of employment and may be concluded only once between a given employee and employer. Its purpose is to test the employee’s suitability to perform his or her duties for an extended period of time. If the candidate passes the test, a contract of employment for an indefinite period is usually concluded. The trial period may not exceed three months. 

Contract of employment for a fixed period. 

A contract of employment for a fixed period is a limited contract. The contract terminates at a specified date. The law does not specify the maximum duration of such a contract, but the term of contract should be reasonable. It is assumed that a contract for a fixed period may last from three months to three years and, in justified cases, even five years. Regulations, however, limit the number of such contracts concluded with one employee. Pursuant to the law, a contract for an indefinite period must follow after two consecutive contracts for a fixed period. In general, a contract for a fixed period cannot be terminated with notice, but there are exceptions to this rule. 

Termination with notice is admissible in the following cases:

  •  if the parties have signed a clause providing for the possibility of terminating the contract on two weeks’ notice; 

  • if the employer goes into bankruptcy or liquidation; or  

  • if the workforce is reduced for organizational or economic reasons on the part of the employer.

If the termination of a contract for a fixed period by the employer is defective, the employee is entitled only to compensation equivalent to the amount of remuneration for the outstanding period of contract, but not more than three months.

Civil law contracts in Poland

Apart from the employment relationship regulated by the Labor Code, there are other forms of employment based on the Civil Code – known as civil law contracts.

The Civil Code distinguishes between: 

  • 'contracts of mandate'; 

  • contracts to perform a specified task or work; and 

  • 'contracts of management' (pupular form of contract but not specified in Civil Code)

Selected advantages and disadvantages of particular forms of employment from the perspective of an employer are as follows:

Form of employment & cooperation

Advantages

Disadvantages

Employment contract

 

1. Permanent character of a relationship: possibility of creating long-term work plans including employees (a due diligence contract). 
2. Employee’s subordination in terms of the place, time and method in which work is to be performed.

 

1. Very developed system of rights, guarantees and privileges which an employee is entitled to (e.g. minimum wage, paid holiday, working hours regulations, regulations related to maternity, particular procedures of terminating a contract). 
2. Small flexibility. 
3. Highest labor costs (compulsory old-age pension, disability pension, health, work accident, sickness insurance contributions).

Order contracts (provision services)

 

 

1. Due diligence contract. 
2. Discretion in deciding about the character of a legal relationship. 
3. Flexibility. 
4. Labor costs are lower than in the case of an employment contract.

 

1. No subordination relationship. 
2. Compulsory old-age pension, disability pension, health insurance contributions. 
3. No or limited liability for the result which has been ordered in a contract.

 

Contracts with a specified task

 

1. Contract of a result. 
2. Discretion in deciding about the character of a legal relationship. 
3. Risk of achieving the result is assumed by a commissioned party. 
4. Low labor costs – no compulsory contributions unless an employer concludes a contract for a specified task with their own employee. 
5. Flexibility.

 

 

1. No subordination relationship.

 

Sole proprietorship
(sole trader)

 

1. Lowest labor costs. 
2. Discretion in deciding about the character of a legal relationship. 
3. Flexibility. 
4. Possibility of deducting the VAT.

 

1. No subordination relationship.

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