Are you hiring in Poland or intend to do so? Or maybe you’re thinking about working in Poland? This article is a great source of knowledge about legal aspects of employment in Poland – you will get to know the types of employment and the basics of the Polish labor law. It aims to clarify the formal and legal aspects of different types of contracts regulating various employment methods. It covers those arising from the Labor Code as well as those, increasingly common, from the Civil Code. The solutions resulting from current law are discussed in this publication to familiarize employers or the individuals seeking employment with their most important elements.
What Exactly Is The Definition Of Employment?
Employment is a form of professional activity that involves the paid engagement of human resources and skills (human capital) in the activities of an economic entity. Each such employment is a specific type of agreement between the employee and the employer and is subject to legal regulations. The common feature of various employment contracts is a clear division: the employer guarantees the employee a job under strictly defined conditions and for a strictly defined remuneration, and the employee, in return, ensures honest and well-performed work.
What Are The Kinds Of Employment In Poland?
In Poland, there are different forms of employment. Depending on the legal nature of the contracts, they are divided into those arising from the Labor Code and those arising from the Civil Code:
- Labor Code (k.p.) – This is the Act of June 26, 1974, Labor Code (Journal of Laws of 2014, item 1502, as amended), which is the primary source of labor law and includes various types of employment contracts
- Civil Code (k.c.) – This is the Act of April 23, 1964, Civil Code (Journal of Laws of 2016, item 380, as amended), which regulates civil-law relations between natural and legal persons, including contracts for specific work and contracts of mandate.
What Are The Types Of Employment Contracts Under The Polish Labor Code?
The Labor Code, depending on the duration of the contract and the purpose for which it is concluded, distinguishes three types of employment contracts:
- For a trial period
- For a fixed term (including a substitution contract)
- For an indefinite term.
In addition to employment contracts, the Labor Code also distinguishes:
- Appointment
- Nomination
- Election.
What Are The Advantages Of A Polish Employment Contract?
An employment contract gives the full scope of rights arising from the Labor Code. With this type of contract, the employee is entitled to paid leave, maternity leave, and health benefits. During illness, the employee receives remuneration paid by the employer or the Social Insurance Institution (ZUS) and can access free medical services. In case of an accident, social insurance covers treatment and rehabilitation costs, and in case of loss of work capacity, it provides the right to apply for a pension. After losing a job, it is possible to receive unemployment benefits, and upon retirement, a pension is paid.
For most people starting work, it is more beneficial to enter into an employment contract, thus establishing an “employment relationship”. By establishing an employment relationship, the employee commits to performing a specified type of work for the employer under their direction and at a place and time designated by the employer. The employer, in turn, commits to employing the employee for remuneration. Establishing an employment relationship and determining the conditions of work and pay, regardless of the legal basis of this relationship, requires the mutual consent of the employer and employee. It is not permissible to replace an employment contract with a civil-law contract while maintaining the conditions for performing work.
Trial Period Contract
According to the regulations, a trial period contract is usually the first contract concluded with an employer and can last for a maximum of 3 months. During this period, both the employer and the employee have the opportunity to evaluate each other – the employer can assess the employee’s skills and qualifications and their potential for performing a specific type of work, while the employee can assess the working conditions, scope of duties, and the workplace atmosphere.
Such a contract can be concluded only once. This limitation does not apply if another trial period contract is concluded with the same employee but for a different position or if there is at least a 3-year break in employment. After the trial period, an employment contract can be concluded for a fixed term or an indefinite term. The employer may also choose not to conclude any further contract, resulting in the termination of the employment relationship. A trial period contract cannot be concluded with minors, whose employment and dismissal are regulated by separate provisions.
During the trial period, the employee is entitled to paid leave, sick leave, free health care, remuneration, and a notice period. The law also provides protection for pregnant women during this period, but only if the contract is concluded for a period longer than one month and would expire after the third month of pregnancy. In this case, the employer is obliged to extend the contract until the end of pregnancy, with the contract ending on the day of delivery. The woman retains the right to maternity benefits without the right to maternity leave.
Fixed-Term Contract
A fixed-term contract can be the second contract with an employer after the trial period or the first one if no other contract preceded it. This is a term contract, meaning the termination date must be specified in the contract.
Amended labor law provisions limit the duration of such a contract and the number of consecutive fixed-term contracts with the same employee. The total period of employment based on a fixed-term contract or contracts concluded between the same employer and employee cannot exceed 33 months. A fixed-term contract can be concluded only three times with one employee. Concluding another fixed-term employment contract or if the total period of employment based on fixed-term contracts exceeds 33 months will automatically result in concluding an indefinite-term employment contract.
Transforming a fixed-term contract into an indefinite-term contract depends on the following conditions:
- Fixed-term contracts must follow one another
- The period between the termination of one contract and the conclusion of another must not exceed one month
- The successive contracts must be terminated.
Transforming a fixed-term contract into an indefinite-term contract depends on the following conditions:
Substitution Contract
A substitution contract is a specific type of contract to which the provisions concerning fixed-term contracts indicated in Article 25 of the Labor Code apply. Employers can conclude it to provide a substitute for an employee absent for justified reasons, e.g., due to illness, parental leave, or unpaid leave. The employer can assess a potential substitute by employing them for a maximum 3-month trial period.
The substitution contract should specify the same type of work (position) as the substituted employee’s employment contract. However, it can specify a different working time and remuneration.
A substitution contract differs from a fixed-term contract primarily due to:
- No limitation to 33 months total duration of employment and no necessity to transform it into an indefinite-term contract even if it is concluded for the fourth time – this means that if a substitution contract was concluded for a specified period (e.g., two years), and after this term, the substituted employee does not return to work, the employer can extend the substitution contract for another, any period. Such extensions can occur multiple times, and an employee working on a substitution contract does not transition to an indefinite-term employment contract
- No protection for pregnant women – this means that if the period for which the employee was employed expires, the employer does not have to extend her employment contract until the day of delivery (similarly in the situation when the substituted employee returns to work). During the contract period, a pregnant woman has the same rights to leave work for medical examinations related to pregnancy, which cannot be conducted outside working hours, retaining the right to remuneration.
An employee employed under a substitution contract is entitled to social insurance and has the right to free medical care and sick leave. However, if the substitution contract expires during the employee’s illness and the substituted employee returns to work, the substitution contract is not extended.
Indefinite-Term Contract
An indefinite-term contract is an open-ended contract concluded without specifying the end date of the employment relationship. It assumes the existence of a permanent legal bond between the employer and the employee and guarantees employment stability. This is the most advantageous form of employment for the employee, providing the most extensive guarantees, primarily regarding the permanence of the employment relationship. The benefits of an indefinite-term contract include longer notice periods, the necessity to justify the decision to terminate, and, in some cases, the requirement to consult with trade unions operating at the workplace. An employee employed under this contract is entitled to all privileges arising from the Labor Code, namely:
- Insurance (retirement, disability, sickness, health)
- Wage protection (cannot be lower than the minimum and must be paid on time)
- Working time protection
- Stability of employment (notice period)
- Leave entitlements
- Protection for certain groups (women, minors, disabled persons)
- Special entitlements for specific occupational groups.
Appointment
Appointment is a non-contractual employment relationship established by administrative decision. It is a way of establishing employment where the nature of the job requires it and in situations where employees face particularly high demands. An employment relationship based on appointment is established in cases specified in separate regulations, known as service pragmatics (specific sectoral regulations). These are legal acts regulating the rights and obligations of public service employees.
Civil Law Contracts In Poland
Employment based on civil law contracts occurs when the employer enters into a legal relationship with a natural or legal person that is not regulated by the Labor Code but is governed by the provisions of the Civil Code. When concluding civil law contracts, there is greater freedom in shaping the terms of the contracts. However, this does not mean complete freedom. Civil law also sets specific boundaries that the parties to the contract cannot exceed.
Among the many contracts provided for in the Civil Code, the most widely used as the basis for providing work are:
- Mandate contract
- Contract for specific work
- Agency contract.
The main feature distinguishing these contracts from employment contracts is the lack of subordination of the contractor (employee) to the principal. At the same time, contractors of civil law contracts are deprived of the protections and employee rights provided to employees by the Labor Code. In most cases, they are not covered by regulations on paid leave, maternity leave, minimum wage, overtime, and notice periods.
Mandate Contract
The subject of the mandate contract is the performance of a specified legal action (for a fee or free of charge) for the principal. The parties to the mandate contract can be any individuals or legal entities, provided they have the legal capacity to act. The principal commissions specific actions, and the contractor performs the mandate. The mandate contract can be paid or unpaid.
In the case of a paid mandate, the amount of remuneration should be specified in the contract so that the remuneration for each hour of performing the mandate is not lower than the minimum hourly rate.
In the case of an unpaid mandate, it is necessary to include a clause in the contract stating that there is no remuneration. If such a clause is missing, and it is not clear from the contract or the circumstances that the contractor agreed to perform the mandate without remuneration, the mandate is considered paid. If the amount of remuneration is not precisely determined, the contractor is entitled to “remuneration corresponding to the performed work,” taking into account the time spent on the mandate, the complexity of the tasks, and the contractor’s professional preparation.
The contractor must inform the principal about the progress of the contract and, upon completion, provide a report on its execution. Mandates are contracts of diligent performance, meaning that the work performed for the principal is important, even if it does not necessarily lead to a specific result.
The Civil Code does not require any specific form for the validity of a mandate contract, meaning it can be concluded in any way, i.e., orally, in writing, or implied. There are also no limitations regarding the duration of the contract.
The regulations allow the inclusion of a substitution clause in the mandate contract, under which the contractor can entrust the performance of all or specific tasks to a third party.
A mandate contract, like an employment contract, involves the obligation to pay health insurance contributions unless the contractor has contributions paid from another source (e.g., is a student under 26 years of age, has an employment contract, or runs a business – but in a different scope than the mandate). The payment of the sickness insurance contribution is voluntary.
A mandate contract can be terminated by either party at any time. If the principal terminates the contract and it is paid, they must pay the contractor part of the remuneration corresponding to the completed tasks. In the case of mandate contracts, the cost of earning income is 20% or 50% (applied when using copyrights), and the tax is 18% of the remuneration base.
A mandate contract is less convenient for the contractor because it does not provide full-time employment or job security and does not grant employee rights such as paid leave.
Contract For Specific Work
A contract for specific work is an agreement in which the contractor agrees to produce a specified work, and the principal agrees to pay for it.
A contract for specific work is a typical contract of result, paid and bilateral. The condition for the existence of a contract for specific work is the specification in the contract of the work to be performed by the contractor. The work can be tangible, such as creating a database, writing an article, or intangible, such as organizing a trip.
The contract must specify the type of work, the deadline, and the method and amount of payment. If the work is improperly or untimely performed, the principal can terminate the contract. Such a contract does not provide the employee with any social protection, and the employer does not bear responsibility for ensuring occupational safety and health, paid leave, severance pay, or benefits.
One advantage of this contract is that the principal does not care when and how it is performed – only the final result matters.
The remuneration for the work should be specified in the contract, but it does not necessarily have to be in the form of a specific amount. Instead, it can include guidelines for determining the remuneration after the work is completed, indicating what the principal expects and what could lead to higher or lower remuneration. Remuneration for the work can be in the form of a lump sum. If the parties cannot precisely determine the components of the remuneration when concluding the contract, such as the duration of the service, material costs, or the scope of work, they can adopt a cost-based remuneration.
A contract for specific work, unlike employment contracts and mandate contracts, does not involve the obligation to pay insurance contributions (except when the contractor performs work for their employer). Additionally, when the work is of a creative nature, and the contract transfers copyrights to the principal, a high cost of earning income – 50% – can be applied. In other cases, the cost of earning income is 20%.
A contract for specific work terminates in the event of the contractor’s death or incapacity to work. This applies only to works whose performance depends on the contractor’s personal characteristics. If the materials used for the work belonged to the contractor and the work was partially completed and valuable to the principal, the principal must pay the contractor or their heir an appropriate part of the remuneration and take the materials in their current state. Claims arising from a contract for specific work expire after 2 years from the completion of the work, or if the work was not completed, from the date it should have been completed according to the contract. Time worked under such a contract is not counted toward the overall length of service.
Agency Contract
Another type of non-employment relationship is the agency contract. The essence and function of this contract are to regulate the provision of intermediary services between the parties to the contract.
By signing an agency contract the agent agrees, within the scope of their business activity, to constantly mediate in concluding contracts with clients on behalf of the principal, or to conclude them on behalf of the principal. The principal agrees to pay the agent the agreed remuneration (commission). To secure the agent’s interests the regulations guarantee that each party can request the other party to confirm the content of the contract and any amendments or additions to it in writing.
An agency contract can be concluded for a fixed or indefinite period. Termination of a contract concluded for a fixed period or a contract performed by the parties after the specified period occurs:
- With one month’s notice in the first year of the contract
- With two months’ notice in the second year of the contract
- With three months’ notice in the third and subsequent years of the contract.
Statutory notice periods cannot be shortened.
An agency contract can also be terminated without notice. The reason can be the non-performance of duties by one of the parties in whole or in part, or other extraordinary circumstances.
The agency contract provides the agent with some savings. As a self-employed person, the agent pays social insurance contributions at a fixed rate, independent of the earned remuneration.
Management Contract
A management contract is an unnamed contract, meaning it is not yet regulated by civil law provisions. The parties to this contract can freely determine their mutual rights and obligations based on the principle of autonomy of will and mutual agreement.
A management contract is a bilateral and paid contract. Its primary content is the management (conducting) of a business. By concluding such a contract, the manager agrees to continuously and effectively manage the business on behalf of and for the account of the other party for remuneration. It should be noted that this form of employment does not guarantee minimum remuneration or the right to paid leave. Another characteristic of a management contract is the unregulated working time.
Managers can be individuals, self-employed individuals, and legal entities. The other party to the contract must always be an entrepreneur. A management contract is generally considered a contract of diligent performance with elements of a contract of result. The contract can describe in detail what the diligence should entail. However, the manager will generally be liable for the lack of diligent performance, not for the failure to achieve the result. The entrepreneur can stimulate the manager to achieve desired results by stipulating in the contract a reduction in remuneration in case of not achieving the set result. The amount of remuneration depends on the parties’ agreements and should be specified in the contract, if not as a specific amount, then at least by indicating the principles of its calculation.
The management contract should not contain clauses characteristic of an employment relationship. The manager should have the freedom to conduct the business. They do not have to perform the assigned tasks personally, and the parties can allow third parties to perform certain tasks (substitutes). The manager can decide how and when to accomplish the assigned tasks. Working time should not be strictly specified, as it depends on the duties assigned to the manager.
The manager’s liability for damage caused to the entrepreneur is based on general principles specified by the Civil Code. The manager is liable for the full amount, not only for the actual damage caused to the enterprise but also for the lost benefits the entrepreneur could have achieved if the manager had not caused the damage. The manager is liable for both actions and omissions. Furthermore, the manager can be held responsible for the actions of others if they perform their tasks with the help of others or delegate the performance to others.
The management contract is also not subject to regulations guaranteeing employment protection. The manager must therefore be prepared to receive a termination notice at virtually any time. During the contract negotiations, attention should be paid to the length of the notice period.
Conclusion
The Polish labor market offers a variety of employment forms, each with its own legal framework and specific provisions. Employment contracts under the Labor Code provide comprehensive protections and benefits, including paid leave, health care, and social insurance, making them highly advantageous for employees. On the other hand, civil law contracts offer more flexibility but come with fewer protections and benefits.
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Sources:
- The Act of June 26, 1974, Labor Code (Journal of Laws of 2014, item 1502, as amended)
- The Act of April 23, 1964, Civil Code (Journal of Laws of 2016, item 380, as amended)
