25.11.2023 employer of record

Introducing changes to the regulations concerning specific-task agreements in 2024 could significantly impact the landscape of employment costs. These changes are of great importance to both employers and employees, introducing new challenges and potential benefits to the Polish labor market.

It’s worth taking a closer look at how these regulations have affected the total cost of employment and what consequences they bring for both parties involved.

For employers, changes in regulations mean the need to adapt to new conditions and increase investments in employee retention, which, in turn, can affect the company’s budget and its impact on developing new projects and tasks.

In this article, we will examine the details of these changes and the long-term consequences these changes may have for both companies and employees in the Polish labor market. We will analyze the necessary adjustments for companies to meet new challenges and the potential benefits that may arise from these changes.

The full cost of employment under a specific-task agreement

When considering hiring an employee in Poland, entrepreneurs often analyze future expenses. Nevertheless, the choice of the type of contract should not be based solely on financial aspects but also on the nature of the duties performed. Nonetheless, civil-law contracts continue to be popular due to their flexibility and lower costs compared to employment contracts. In this article, we will discuss the total costs associated with a specific-task agreement.

Diversity of costs in specific-task agreements

The specific-task agreement is regulated in the Civil Code. Although it is less restrictive than an employment contract, it only does not require reporting to the Social Insurance Institution (ZUS*) in one case. Despite being often preferred by employers, not all such agreements generate identical costs. The cost of a specific-task agreement depends on various factors, such as the contracting party, the rights of the contractor, their age, and other entitlements that affect ZUS contributions and, consequently, the overall cost of employment.

Important

For a specific-task agreement, there is a minimum hourly rate. In 2024, it will be:

• from January to June – 27.70 PLN/hour;
• from July to December – 28.10 PLN/hour.

The table below presents a list of contributions paid by the Employer and the Contractor:

The total cost of employment under a specific-task agreement is the result of several factors, including:

• Gross salary, which is the amount the contractor receives before deductions for taxes and contributions.
• Social Security contributions (ZUS), which are paid by the employer and funded by them.
• Contributions to the Employee Capital Plans (PPK), also funded by the employer. The basic contribution is 1.5% of the contractor’s remuneration, but the employer may also choose to make an additional contribution of up to 2.5% of the remuneration.

Some entrepreneurs conclude contracts in which they specify the employee’s remuneration in the net amount excluding gross costs. In such cases, the final pay-out to the employee is influenced by various factors. Crucial is whether the income exceeds the tax threshold, affecting the application of the income tax rate at 12% or 32%, and whether the employee retains entitlement to tax benefits, such as the youth employment tax relief. Changes in these circumstances can impact the overall contract cost. When an employee has agreed to a net salary, such changes will not affect their final compensation. In practice, this means the employer must adjust the gross amount in the contract to ensure the employee still receives the agreed net amount. However, increasing the gross amount automatically leads to an increase in the total cost of employment. Moreover, the costs of income acquisition may also change depending on the percentage of costs in the net amount.

It should be noted that starting from January 2023, contractors have the option to submit a PIT-2 document to their employer. This new law allows the employer to accurately settle the tax relief in full if applicable, partially, or not at all if the contractor chooses such an option. This means that the contractor’s remuneration may vary depending on the tax settlement actions taken.

Individuals who do not have other sources of social insurance besides a specific-task agreement, meaning they do not have income from another contract, are obligated to mandatory contributions for pension and disability insurance, as well as insurance against accidents at work. However, the contribution for sickness insurance remains optional. Employees operating under a specific-task agreement are subject to mandatory insurance from the date specified in the agreement as its start date until its termination or expiration. Costs related to employment in this case include gross salary and ZUS contributions paid by the employer, covering social insurance contributions, contributions to the Labor Fund (FP), and contributions to the Guaranteed Employee Benefits Fund (FGŚP).

If an individual performing specific-task agreements receives compensation from multiple contracts signed with various contractors, the obligation to pay social security contributions will depend on the total amount of remuneration from these contracts. In other words, social security contributions are required for all agreements if the combined income from these agreements in each month doesn’t exceed the minimum wage. Once this threshold is exceeded, only health insurance contributions will be collected from each subsequent specific-task agreement.

It is important to emphasize that determining the overall contribution assessment base to determine the obligation to pay contributions applies to the order of entering into agreements. Health insurance contributions are required for each specific-task agreement. However, if the total sum exceeds the minimum wage, then only health insurance contributions will be mandatory for subsequent specific-task agreements.

Specific-task agreement and employment contract

When a specific-task agreement is concluded with an employer who is also the employer of the person employed under that agreement, such a contractor automatically becomes subject to all mandatory social security contributions, on an equal footing with an employee employed under an employment contract. In the case of maternity or parental leave, only sickness insurance becomes optional. The basis for calculating contributions to social insurance is the total income earned under both the employment contract and the specific-task agreement.

An employer who has entered into a specific-task agreement with their own employee is not obligated to re-register them for social insurance. The income from the specific-task agreement should be included in the settlement declaration, along with the income from the employment contract. The total cost in such a case is the sum of the gross remuneration from both agreements and the ZUS contributions paid by the employer (including social insurance, the Labor Fund, and the Guaranteed Employee Benefits Fund).

Employment Contract with a Pensioner or Disability Pension Recipient

If the contractor is a pensioner or disability pension recipient, and the specific-task agreement is their sole title for social insurance, the employer is obliged to mandatory contributions for pension and disability insurance. Sickness insurance remains optional for such a contractor. The employer is exempt from paying contributions to the Labor Fund (FP) and the Guaranteed Employee Benefits Fund (FGŚP) if the contractor has reached the age of 55 (women) or 60 (men). Health insurance contributions remain mandatory in both cases. The total cost in this situation is the sum of gross remuneration and ZUS contributions, funded by the employer (including only social insurance).

If the specific-task agreement concerns a student who has not exceeded 26 years of age, they are not subject to mandatory social insurance related to this agreement. Employers are exempt from the obligation to pay ZUS contributions and income tax for this group of contractors. In this situation, the total cost is only the gross remuneration.

If the specific-task agreement is carried out as part of a business activity, ZUS does not treat it as a separate source of social insurance. Therefore, the contractor is not mandatory or voluntarily insured for social or health insurance. However, when the specific-task agreement and the business activity are conducted separately, the entrepreneur may be required to pay contributions for both, depending on the income from the business activity and the remuneration from the specific-task agreement.

The total cost of employment on a specific-task agreement can undergo significant changes, depending on various factors such as the age of the contractor, their insurance status, mandatory and voluntary insurance contributions, as well as other factors like participation in Employee Capital Plans (PPK) or tax benefits.

In summary, the total cost of employment on a specific-task agreement is diverse and dependent on the individual circumstances of each worker. Therefore, before signing a specific-task agreement, it is important to carefully consider all aspects and obligations, both from the perspective of the employer and the worker.

How much does employment with Bizky cost?

By settling with Bizky, the employer gains the ability to settle the work of their employees without issuing any direct contracts in the company. Thus, there is no obligation to settle taxes and report to ZUS – Bizky takes care of that. Employers save on employment costs and the work of their payroll team, receiving one VAT invoice for all employees.

On the other hand, employees benefit from the possibility of higher earnings, without the need to run a business, and they save on ZUS contributions.

The Bizky model involves the complete transfer of responsibilities related to employment to us. Employees processed by Bizky can receive remuneration based on a work contract, specific-task agreement, or an employment contract. Additionally, every employee hired through Bizky can enjoy benefits such as private health insurance, pension insurance, and sports cards.

By employing with Bizky, companies could hire globally, in many countries worldwide, using our Employer of Record (EOR) service.

The cost of employing a worker through Bizky depends on the chosen cooperation model.

* The Social Insurance Institution (ZUS) is the state organizational unit and holds legal personality. Its tasks are defined in the Act of 13 October 1998 on the social insurance system. ZUS also fulfils numerous functions entrusted by virtue of other laws.

The social insurance and health care systems reforms, which entered into force on 1^st of January 1999, and their structural nature, strengthened the position of the Social Insurance Institution as the main element of the administration of the Polish social security system.

Take advantage of the opportunity to employ employees in Poland thanks to Bizky Employer of records