Poland, a small but significant EU economy, ranks 22nd worldwide for overall GDP. Poland also has one of the largest concentrations of independent contractors and freelancers in Europe.
When you hire contractors in Poland, you’ll need to understand how to:
Manage contractor payments
Hire and recruit
In this guide, we will distinguish the difference between full-time employees and contractors in Poland, and give you a breakdown of how to pay and manage contractors compliantly.
If you’re planning on hiring in Poland, you’ll need to make the distinction between a full-time employee and contractor.
Some general guidelines:
Employees are on payroll while contractors are paid per project or job
Contractors file and deduct their own taxes
Employees are entitled to benefits, while contractors are not
Contractors are not entitled to notice or severance
Contractors set their own hours and completion of projects, while employees have a set schedule
However, there are two further general distinctions in Poland by the Polish Supreme Court and in the Polish Civil Code in article 734:
According to the Polish Supreme Court, full-time employees in Poland include:
Employees who are voluntarily coming to work for their employer each day
Those continuously employed with no delegations to another person
Those whose employment is in subordination to the employer (the employer manages and decides what work and the way it is to be performed)
Those performing work for the employer (the effects of an employee’s work and the profits thereof should belong to the employer)
According to the Polish Civil Code, contractors in Poland:
Do not meet any the above mentioned criteria for full-time employment
Have freedom to choose how, when, and where to perform tasks
Have autonomy and independence in the performance of duties (company can make recommendations, but the final decision is the contractors)
Are allowed to subcontract tasks
In Poland, the Polish Labour Code protects full-time employees and regulates pay & the benefits they are entitled to.
Employers are required to register their employees for accident insurance, provide initial medical checkups, and pay any preventative healthcare costs.
Employers must register employees with ZFŚS (Zakładowy Fundusz Świadczeń Socjalnych), Poland’s social security system. This system helps with child care and education. The ZFŚS allowance is calculated based on the average number of employees, and employer contributions are usually around 22.4%.
Employers must also register for Employee Capital Plans (PPK), which are mandatory retirement plans financed by the employee and employer. The employer pays 1.5% of their gross remuneration and the employee contributes a flat 2%.
All employees in Poland must receive 20-26 days of paid vacation per year, depending on the length of their employment.
Distinguishing between contractors and full-time employees in Poland can be a little tricky, especially compared to other countries. In Poland, contractor laws are more nuanced and many workers actually prefer being hired on as contractors.
Companies and contractors do not have to enter into a fixed agreement for the amount of time the contractor will perform service. However, consecutive fixed-term contracts between both parties are restricted to a minimum of 3 months and a maximum duration of 33 months.
In general, contractors are required to calculate and pay their own taxes, register for health insurance, and set up a retirement fund.
There are two types of contracts that contractors can work under in Poland: Commissioned Contracts and Contracts of mandate
A commissioned contractor are contractors who work under a Commissioned Contract, where social security and health aren’t deducted from a worker’s expenses. These types of agreements are only in the cases when there is no company or branch of the employer located in Poland.
A contractor who works under a Contract of Mandate already has their health insurance and social security automatically deducted by the Polish social security system.
These contractors usually work for a business that has an established presence in the country.
Poland’s tax system is progressive. So, employed contractors would be subject to tax rates that range from 17% to 32%, depending on their income.
Refugees and those in Poland on a visa are required to pay taxes if you are considered a Polish resident (you live in Poland for more than 183 days).
Contractors in Poland have two options for tax forms when filing: Form PIT-36 and Form PIT-37. Make sure to always file the correct tax form in order to maintain compliance.
This form is for those who are self-employed and who may occasionally work as a freelancer or subcontract for another employer.
These forms are geared towards individuals who generate most of their income from their own business or are entrepreneurial.
Form PIT-37 is for contractors whose incomes are generated by mandated or commissioned employment.
Contractors who generate most of their income by working for other businesses as subcontractors will need to file this form because their taxes should already be automatically taken out by the Polish government.
Misclassifications in Poland are generally determined on a case-by-case basis if a complaint is brought against an employer.
Misclassification is penalized with a fine of $1,000 PLN (approximately $228 USD or $220 EUR).
After you’ve onboarded and hired your Polish contractor, you’ll need to know exactly how to pay them.
You should avoid putting your contractors on your payroll in Poland unless you’re wanting to hire them on as full-time employees.
You have a few different options to legally pay independent contractors in Poland:
Use a third-party payroll service or EOR. You can, however, use a third-party payroll processing service or hire a global employer-of-record service like Via that can help you properly manage and pay your independent contractors.
Set up a bank account. You can set up a Polish bank account to pay your contractors. However, you’ll normally need to set up an entity within the country and register with the proper bureaucratic organizations (which can take months).
International money order. One of the common ways to pay a Polish contractor without an entity is to set up an international money order. They can take awhile to process, and the contractor will have to physically deposit them. This is a good option when you’re only paying someone one time.
Digital wallets. You can set up a digital wallet through multinational peer-to-peer lending companies like PayPal, which help you deposit and transfer money into your contractors accounts. This is one of the quickest ways to pay contractors without partnering with an EOR service like Via. Most of these services do charge fees for digital wallets, so be aware of that before choosing this option.
Money transfer services. Another popular option for companies looking to send large amounts of money across borders is using a money transfer service like Payoneer. This option has a high transfer limit, quick transfer time, and different options for sending money. These transfers can occur relatively fast and usually ensure a prompt payment. But, if you transfer money in a different currency other than Polish Zloty, there is a conversion fee. Payoneer, for example, charges $1.50 for domestic transfers and a 2% fee for non-currency transfers.
Unlike other European and Latin American countries, the IT-sector in Poland is predominantly composed of contractors who prefer to have B2B arrangements for tax reasons rather than be hired as FTEs.
However, some challenges involving IP ownership have undermined B2B arrangements. While market demand for IT talent is so strong that B2B seems to be the arrangement for the foreseeable future, US companies prefer FTEs for Poland for IP protection
In 2022, it was reported that there were over 500,000 freelancers and independent contractors operating in Poland. Following the war in Ukraine and Russia's invasion of the country, there were over 6.8 million refugees who fled to Poland because of its close proximity to the other former Soviet state.
This huge influx of refugees in a matter of months could point to why there is currently such a large number of registered contractors in Poland. Refugees in Poland are able to work as both employees and contractors if they crossed the border legally–with or without a visa.
For Ukrainians, operating as a contractor could be an easier choice than applying for full-time work because of the uncertainty of the duration of the war.