Employment of Staff

Employment of workers

Every investor who wishes to start and develop their business activity in Poland must take into account the employment of workers. Polish law describes and regulates various possibilities of employment. The main legal form of employment is the employment relationship regulated by the Polish Labour Code from 26 June 1974. The employment relationship is connected with the system of guarantees and rights of employees. In accordance with the Labour Code the employee has right to:

• Receive the remuneration for his work, the financial conditions of which are defined in the employment agreement and the employer is obliged to pay it regularly to an employee. The employee may not earn less than the minimum monthly remuneration which in 2015 is PLN 1,750.00 for full-time work,
• Use their holiday leave time - The employee has the right to annual paid leave, the length of which depends on their seniority, but In general every employee is entitled to 20 or 26 days of paid annual leave. The employee is not allowed to renounce their leave and the employer is obliged to pay the equivalent to an employee for unused leave,
• receive sickness allowance,
• working time rules,
• special protection of some employees’ groups,
• procedure of termination of employment.

The Labour Code lists various forms of employment contract:

• For a trial period - This kind of contrach may be concluded only once between a given employee and employer. Its purpose is to check the employee’s suitability to perform the duties for an extended period of time. The trial period may not exceed three months,
• For a fixed period - This kind of contract is defined by a specified date. The law does not regulate the maximum duration of such an agreement, but the terms of the contrach should be reasonable. However, there is a limit to the number of such contracts which can be concluded with one employee.

Employment of Staff

In accordance with the Polish law, a permanent employment contract must follow after two consecutive contracts for a fixed period,

• For an indefinite period,
• For a period of absence of another employee.

The employment contract must define the parties, working hours, financial conditions, type of work and place of its performance, and should be concluded in writing. Asides from the employment contract, the employee should receive from the employer written information concerning their employment within seven days after starting work. The employee is obliged to perform their work In the hours specified In the contract, to carry out the instructions of their supervisors and act in the interest of the employer.

Apart from the employment relationship regulated by the Labour Code, there are rother forms of employment based on the Civil Code – known as civil law contracts. These contracts give more latitude in formulating the content of legal relationship between the parties without any minimal guaranties which result from the Labour Code. The parties may decide on such matters as the amount of remuneration or working time because these factors are not regulated by the Civil Code. The most common contracts under the Civil Code are as follows:

Task contract – This kind of contract is also called as agreement of result. The employee receives a defined task which must be carried out in order to achieve specified results and the employer is obliged to pay the salary for the realisation of tasks according to the provisions in the contract.

Service contract – Based on the contract, the employee receives defined tasks and activities which must be realised by the employer. The employee performs the work by himself because there is no subordination or work performance under someone’s management, which is characteristic of an employment contract. The contract expires automatically with the end of the term or when a given task or activity Has been completed. An employment agrement may be terminated upon mutual agreement of both parties (at any time and regardless of the type of contract), by one of the parties upon prior notice (at the end of a specified notice period), or by one of the parties without priori notice (if a serious breach on the side of the other party occurs or if employment cannot be continued for certain reasons). The notice period depends on the type of contract concluded by the parties and the actual duration of the employment.

In general (there are many exemptions in Polish law), foreigners who are going to perform work in Poland are obliged to obtain a work permit. The need to obtain the work permit concerns non-EU citizens who are going to work In Poland as an employee. In the case of citizens of non-EU countries who are members of the management board in legal entities in Poland, Polish law gives a simplification. Namely, they are allowed to perform the work in Poland for a period not exceeding six months, within 12 months without the work permit, after receiving an appropriate legal document which permits the worker to stay in Poland.

Because of the recent changes in the Polish regulations concerning the legalisation of work and residence of foreigners in Poland, the procedure connected with obtaining a work permit in Poland has been simplified. Various types of work permits were implemented but now there is no ‘promise’ to grant work permits anymore. A company who is going to employ a foreigner receives a work permit after submitting a complete application with the required documentation. With the work permit, the foreigner can receive the visa In order to perform the work or permission to hale temporary residence in Poland. The last step is signing the contract between the foreigner and the employer according to the conditions mentioned in the work permit.

Polish social security system

Pillar I, II & III

In 1999 a reform of social insurance was carried out, which was based on the co-financing of Premium by the employer, the employee and three pillars – one repartition and two capital pillars.

The social security system in Poland is based on three pillars:

• 1st Pillar (ZUS) – obligatory and common. Premiums, deducted from salaries, are written from the individual account of an insured person. The institution which manages the 1st pillar is the Social Security Establishment. Pensions, received from the 1st pillar, are based on the repartition system, which has the character of the generation contract. This means that payments of pensions are financed from the contribution of the people who currently work. The system functions efficiently only if the premiums of employees, which supply the system, are delivered in an amount sufficient for the payment of present pensioners. Thanks to obligatory premiums of 12.22% of gross salary, people acquire pensionable rights that aren’t inherited.
• 2nd Pillar (OFE) – is also an obligatory element of the social security system, the capital fund. The premiums, deducted from salaries, are written from the individual account of the insured person. Open pensionable funds belong to the 2nd pillar of the social insurance and are managed by private investing firms (Public Pensionable Associations) that invest premiums into financial markets.
• 3rd Pillar (IKE) – is a free capital pillar, which is organized as an investing fund. The insured people choose the insurance company (associations of the mutual insurance, insurance associations). After reaching a pensionable age the pensioners (women at 60, man at 65) get pensions from the Social Security Institution (ZUS) and the Open Pensionable Fund (OFE) through an Agent Company, and the eventually payment from the free 3rd pillar.

Obligatory social insurance contributions paid by the employee and the employer

According to the Act from 13 October 1998 regarding the social security system social insurance in Poland includes:

• pensionable insurance,
• rental insurance,
• insurance in case of sickness leave or maternity leave, known as sickness insurance,
• insurance in case of accidents at work and occupational diseases, known as accident insurance.

According to above mentioned Act regarding the social security system, obligatory pensionable and rental insurance concerns physical people, who in Poland are:

• employees,
• people running non-agricultural activity or people cooperating with them,
• people who perform casual work
• people who perform a job on the basis of agentive contracts, contractor contracts or another contract concerning the provision of services, to which according to the Civil Code are applied regulations about contractor contracts or individuals who cooperate with these people,
• people on parental leave or who receive maternity benefits.

Sickness insurance

The social security system, obligatory sickness insurance concerns the following people:

• employees,
• members of agricultural production cooperatives and cooperatives of agricultural circles,
• people who perform substitutionary services.

Voluntary sickness insurance concerns the following people, covered by obligatory pension able and rental insurance, on their own application:

• people who perform casual work,
• people who perform the job on the base of agentive contracts, contractor contracts or another contract concerning providing services, which according to the Civil Code apply to regulations about contractor’s contracts or individuals who cooperate with these people,
• people running non-agricultural activities or individuals who cooperate with them.

In general, the yearly base for social insurance in the following calendar year can’t be higher than the amount relative to 30 times the proposed average monthly salary in the national economy for the given calendar year. As of 2010, this is 94,380.00 PLN.

The employer spends 19.52% of the gross salary on pensionable insurance. The other contributions for the social security institution (ZUS) regard the following insurance: rental, sickness, accident, health insurance, Labour Fund and the EAG Fund.

Social security contributions (13.71%), income tax and health insurance (20.25%) are alsodeducted from the gross salary.

The employer must also pay part of any social security contributions (16.60 %).

EU Regulation 1408/71 and 883/2004

Since 1 May 2004, after Poland joined the European Union, regulations concerning the rules of liability for social insurance (included in EU Regulation 1408/71) have become obligatory. According to EU regulations, people moving across the European Union for the purpose of increased earnings are liable to legislation from only one of these countries.

The new EU regulations concerning the delegation of employees to work in other European countries came into force on 1 May 2010.

These are the following orders: no 987/2009 from 16 September 2009, which concerns the performance of the order (WE) no 883/2004 in the matter of coordinating systems of social protection, and no 988/2009 from 16 September 2009 as well as no A2 from 12 June 2009 from the administrative board of social protection, which concerns the interpretation of article 12 of order no 883/2004.

The general rule has remained, however, according to which, employees are liable to social insurance only in the country in which their work was performed.

There are a couple of exceptions to this rule which anticipate insurance in the sending country, including: keeping the relation between employer and employee and not exceeding the maximum periods of delegation.

The employer must operate their activity in Poland. For this purpose, it is the object of the company’s activities, such as the administration of the company, which is taken into consideration rather than its internal activities.

Order no 987/2009 introduced a rule that an employee is liable to the legislation of the delegated country just before the delegation itself. This means that the employee of a Polish company might be delegated according to EU regulations only if just before this time they were liable to Polish social insurance for a period of at least one month.

The delegated employee (according to union regulations) is a person who is sent by their employer to another EU country and a direct relationship between the two parties still exists.

It is also acceptable to hire an employee in order to delegate them. The delegation period can last up to 24 months. The new regulations refer also to employees who began a period of delegation before 1 May 2010.

Decision A2 stipulated that the next period of delegation cannot begin earlier than two months from the end of the previous period of delegation.

The document which confirms the delegation of employees is still undergoing a process of transition from E101. This document will be replaced by the A-1 form and, ultimately, by the A003 electronic form by 2012.

According to the new rules, the right for paying collections for an employee’s place of living depends on the performance of their work. If the person works for two foreign employers, neither of which has a head office in their place of living, their place of living will be adequate for paying collections.

It is very important that since 1 May 2010 any employees hired in two countries report this fact to the suitable jurisdiction for their place of living. The institution will then be obliged to point out the appropriate insurance system for this employee. Any temporary legislation passed on this matter will become final two months from the date that the appropriate institution was informed about the situation.