B2B and employment contract in Poland

Hiring Polish Software Developers: Everything You Need to Know About the Types of Cooperation Agreements in Poland

Have you already discovered the benefits of outsourcing software development services and hiring Polish developers? If so, you are undoubtedly interested in legal issues related to hiring employees in Poland. In this article, we will try to answer all the important questions on this subject. Ready? Let’s go.

Definitions

What is an employment contract?

An employment contract is a standard form of employment in Poland. It contains the scope of rights and obligations of both the employer and the employee. It describes the role of the employer and the specific tasks of the employee. The employer must pay the employee as previously agreed, and the employee is to perform the duties assigned by the superior. The employment contract and all its rules are based on the Polish Labour Code.

What is B2B contract?

The B2B (Business-to-Business) contract is an alternative to an employment contract. A software developer starts his own company (and becomes self-employed) to provide services to another IT company. Instead of a monthly salary, he or she issues an invoice that the client is required to cover. It is a contract between two companies; it is governed not by the Labor Code but the Civil Code.

B2B and employment contract — the two most popular types of employment among Polish software developers

B2B contract and employment contract are the two most popular forms of employment among Polish software developers. Interestingly, according to the No Fluff Jobs report “Rynek pracy w IT w Polsce w 2020 roku”, the popularity of a particular type of contract depends on years of experience. 

As we can see, the popularity of the employment contract decreases with increasing experience. In the case of Juniors, only 45,4% of them work on a B2B contract, while in the case of Seniors, this number rises to 87,2%. 

Are you wondering what the reason is? On various forums for software developers, you will often find discussions and polls about what type of contract they prefer. Why? Because many employers give them a choice between a B2B and a work contract. The answer to “what’s more profitable” is usually “it depends.” On what? First of all, on earnings – the more they earn, the more beneficial it becomes to start a business and invoice as an entrepreneur.

B2B and employment contracts — key differences

To better understand the difference between the two most common types of developer contracts, we have prepared a table covering the most important issues. If any points need more explanation, you will find them under the table.

B2BEmployment contract
Paid holidayCan be offered on gentleman’s agreement20 / 26 days (depending on work experience)
Paid sick leaveNoYes
Special leaves (births, funerals)NoYes
FlexibilityLargeSmall
Notice periodFlexible, depending on the contract (usually 1 month)From 2 weeks to 3 months
Payment termIn the date specified in the contractBy the 10th of each month
Payment frequencyDepending on the contractAt least once a month
Who is responsible for paying social security contributions?Self-employedEmployer
Who is responsible for paying health contributions? (ZUS)Self-employedEmployer
Exemption from paying health contributionsFor the first 6 months after starting a businessFor people under 26 years old
Applicable lawsCivil CodePolish Labor Code
Possibility of signing a contract with a software developer by a foreign company without establishing a business in PolandYes



No



Possibility of paying a flat taxYesNo

Paid holiday — to whom and how many days does it entitle?

When you sign a B2B contract as a client, you are under no obligation to offer paid vacation days. However, this is flexible, and you can agree on “paid rest time” at a given number of days in a year. If you hire an employee under a contract of employment, the Polish Labor Code requires you to provide the employee with 20 or 26 days of vacation.

What does the difference depend on? In short, people who work more than 10 years (for all employers) should have 26 days of paid leave. However, “work experience” in this case also includes time spent in secondary school, vocational school and college.

  • 4-5 years — for people from a general or vocational secondary-level school,
  • 8 years (in total) — for people who have completed higher education (regardless of the type of degree obtained).

Taxes, health, and social contributions

It’s time for the most complicated and dynamically changing difference between these two employment contracts — taxes, health, and social insurance contributions. When comparing a B2B and an employment contract, you should remember that the gross amount is not all the expenses you incur as an employer. Some of the premiums are deducted from the employee’s gross amount, and some are added to the employer. We have outlined the significant differences in contributions in the table below.

However, the critical difference here is not the percentages but how they are calculated.

For an employment contract, contributions are calculated on:

  • the employee’s gross salary – for social contribution
  • gross salary minus social contributions – for health contributions

For B2B, contributions are calculated on:

  • an amount not less than 60% of the average salary in Poland (in 2021, it’s 3155,40 PLN) – for social insurance on the entire Social Insurance Institution (ZUS) contributions
  • an amount no less than 75% of the average salary in Poland (in 2021, it is 4242,38 PLN) – for health contributions

Total costs — the differences

To better understand the difference in earnings for B2B and employment contract programmers, just take a look at the comparison table.

Total employer’s costsGross amount / Net on invoiceThe net amount (for employee)*
B2B10 000 PLN10 000 PLN7 071, 18 PLN
Employment contract12 048 PLN10 000 PLN7 140,39 PLN
Total employer’s costsGross amount / Net on invoiceThe net amount (for employee)*
B2B20 000 PLN20 000 PLN15 171,18 PLN
Employment contract24 122 PLN20 000 PLN14 194, 78 PLN

* In this example, the developer pays full ZUS (without discounts) on the minimum contribution base and a flat tax for his business.

Please note: The amounts listed are just examples and may vary depending on the tax chosen and whether the developer can use the contribution payment on preferential principles.

As you can see, the amounts on the contract, i.e., gross in the case of an employment contract or net in the case of a B2B, generate completely different employer costs and employee compensation. Therefore, if you would like to give an employee a choice between different types of employment, we suggest setting your total costs rather than a gross amount.

Want to learn more about hiring programmers from Poland? Contact us. We will try to answer all your questions and clarify any doubts.

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