How to Manage and Pay Contractors in Poland

Poland, a small but significant EU economy, ranks 22 worldwide for overall GDP. Poland also has one of the largest concentrations of independent contractors and freelancers in Europe. 

When you partner with contractors in Poland, you’ll need to understand how to: 

• Manage contractor payments

• Maintain compliance

• Onboard and recruit 

Polish law does not restrict the length or use of independent contractors. The laws aren’t nearly as stringent as with many other countries in the EU. 

What is the difference between an independent contractor and full-time employee in Poland? 

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 performing their duties (the company can make recommendations, but the final decision is the contractor's)

• Are allowed to subcontract tasks

What are employers required to provide employees in Poland?

In Poland, the Polish Labour Code protects full-time employees from mistreatment from employers and regulates pay and benefits.

For example, 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 the employee's gross annual salary 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. 

Compliance obligations for contractors in Poland

Distinguishing between contractors and full-time employees in Poland can be a little tricky, especially compared to other countries, because the contractor laws are more nuanced and many workers actually prefer being onboarded as contractors.  

Employers 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

What is a Commissioned Contract? 

A commissioned contractor is one who works under a Commissioned Contract, where social security and health insurance aren’t deducted from a worker’s pay. These types of agreements are only in the cases when there is no company or branch of the employer located in Poland. 

What is a Contract of Mandate? 

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. 

Taxes

Poland’s tax system is progressive for both employers and employees. Employed contractors are 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 (meaning you've lived in Poland for more than 183 days). 

Contractor forms PIT-36 vs PIT-37: What’s the difference?

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. 

Form PIT-36

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 more geared towards individuals who generate most of their income from their own business or are entrepreneurial.  

Form PIT-37

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. 

Misclassification penalties

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). 

How to pay contractors in Poland

After you’ve onboarded your contractor in Poland, 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: 

• Justworks International Contractor Payments. If you are a Justworks customer, you can make international contractor payments to workers in Poland.

• 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 a while to process, and the contractor will have to physically deposit them. This is a good option for a one-time payment. 

• Digital wallets. You can set up a digital wallet through multinational peer-to-peer lending companies like PayPal that 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 Justworks. 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 businesses 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. 

How Justworks Can Help 

Justworks’ global EOR is the solution for small businesses looking to easily hire talent in countries where they don’t already have a legal presence. 

Justworks has direct entities in 11 countries, with the ability to hire in 100+ additional countries upon request through our trusted local partners. You can fearlessly handle HR essentials like payroll, benefits, local compliance, and more. 

Learn more about our EOR services, and get started today!

FAQ

What is an employment contract in Poland? 

Employment contracts in Poland are agreements between both parties that detail the working relationship between employees and employers  or other organizations. In Poland, there are 3 types of employment contracts: trial period agreements, indefinite contract period, and definite contract period. 

Can you onboard contractors from other countries? 

Yes, most of the time you can onboard and pay contractors in other countries. You will need to understand the laws and regulations of how to manage contractors in another country to remain compliant. Partnering with Justworks can help you navigate through the process.

How much is the basic salary in Poland? 

As of January 2023, the national minimum wage in Poland is $3,490 PLN (around $789 USD) per month. 

How do I set up as self-employed in Poland? 

To set yourself up as self-employed or as a contractor in Poland, you will need to make sure you register CEIDG which is the Center for Information on Economic Activity. You will also need to register with the Polish social security system and make sure you are deducting your own income taxes.