Types of employment contracts and other quasi-employment relationships
People seeking their first or simply a new job often encounter job postings specifying that a given position requires a certain form of employment. The most common forms include an employment contract and a contract of mandate. These are not the only forms that dominate the labor market; in addition to the above, we can also distinguish contracts for specific work and so-called "B2B contracts" concluded between entrepreneurs. This article will explain the basic issues that may raise doubts, the required and optional provisions in contracts, and examples of unusual situations that candidates may encounter.
Employment contract – a few words of introduction
An employment contract is a bilateral legal act that establishes an employment relationship. Its main elements are two declarations of intent by the parties: the employee, who undertakes to perform a specific type of work for and under the direction of the employer, and the employer, who undertakes to employ the employee and pay them a specified remuneration.
To qualify as an employment contract, a contract must meet a number of characteristic features. Furthermore, this contract is characterized by a relatively close relationship with the employer. This relationship is based on the principle of employee subordination to the employer, with duties performed under strict supervision. This characteristic undoubtedly distinguishes the employment relationship from others that dominate the Polish market.
The employee gains employment stability and broadly understood protection, such as legally guaranteed notice periods, specified time limits for work, the right to vacation and parental leave, employment protection during justified absences, and additional financial benefits such as severance pay or holiday pay.
Employment contract – necessary and essential provisions
Due to its high level of protection, primarily for the interests of both the employee and the employer, an employment contract must contain certain essential elements to be considered a contract. Essential contract elements include: the parties to the contract, the type of contract, the date of conclusion, working and pay conditions, the type of work, the location, the duration of work, remuneration, and the commencement date. Detailed information on the elements of an employment contract will be discussed in the next article, which we invite you to read next Friday!
First contract – trial period contract
Among employment contracts, one of the first that a candidate for a given position may enter into is a trial period. Logically, the employer, often not fully understanding the skills of a newly hired employee, wants to test their skills in everyday tasks, which will allow them to make a decision about further cooperation. The duration of the contract is crucial here, i.e., three months, unless the contracting parties include a provision allowing for the contract to be extended for the employee's justified absence, such as leave to care for a child under 14, or special leave.
It seems that a period of 3 months will allow the employee to both adapt to the new job system and enable the employer to assess the employee in terms of his or her qualifications for a given position.
Further employment contracts – fixed-term contract
Among employment contracts, we also distinguish between fixed-term contracts and indefinite-term contracts.
A fixed-term employment contract can be concluded for a maximum of 33 months. Furthermore, employers cannot enter into an unlimited number of contracts with employees. The regulations clearly state that employers can enter into a maximum of three contracts with employees, with the third being a contract for an indefinite period. The purpose of the regulations is undoubtedly to protect the employee's interests, as an indefinite-term employment contract guarantees greater stability for the employee both in the labor market and financially, for example, by increasing their creditworthiness.
Contract for an indefinite period
It's considered one of the more stable forms of employment. It lasts indefinitely, meaning its expiration date is specified. Can the parties expect their relationship to be terminated early? Of course!
There are three ways to terminate an employment contract for an indefinite period:
- by agreement of the parties;
- by submitting a declaration by one of the parties while observing the notice period – termination of the contract by notice;
- by declaration of one of the parties without observing the notice period – termination of the contract without notice.
More information on how to terminate an employment relationship will appear in one of the next articles.
Contract of mandate – a short description
Other forms of employment that are very popular in the marketplace include contracts of mandate and contracts for specific work, which are regulated by the Civil Code. These are often chosen by both employers and employees, depending on their preferences.
A mandate contract is a best-efforts under which the contractor undertakes to perform specific tasks at the client's request. The undoubted advantages of a mandate contract include the contractor's freedom to decide: how to perform the work within the scope of the contract, where the task will be performed (in most cases), and when.
If the contract of mandate is paid, the client is obliged to transfer a certain amount to the contractor, taking into account the minimum hourly rate.
Additionally, the regulations also regulate when a contractor should receive their remuneration. If the contract is concluded for a period longer than one month, payments should be regular and occur at least once a month.
These types of contracts, which include contracts of mandate, are covered by mandatory insurance from the Social Insurance Institution (ZUS). Contractors should generally be subject to social security and health insurance, with sickness insurance being voluntary. A contractor will only be covered by health insurance if they are otherwise subject to mandatory social security and earn a salary equal to or higher than the national minimum wage.
An important issue in the case of a contract of mandate is the possibility of terminating it without a notice period, unless the contract provides for the possibility of termination with a notice period.
Contract for specific work as a result
The subject of a contract for specific work is the performance of a specific, specifically designated and individual work, constituting the end result of the commissioning party's actions, e.g., writing an article, painting a picture, creating a piece of work, or designing and constructing a garden. As you can see, the essence of this contract is the achievement of a specific result .
As with a contract of mandate, the parties can regulate this relationship quite freely, due to the principle of freedom of contract, i.e., with respect to the place and time of performance, as well as the lack of direction. An example of this is a contractor operating equipment who sought judicial recognition of his contract as an employment contract. However, the lack of clear direction determined the lack of such a classification.
An important issue with contracts for specific work is that they are not covered by Social Insurance Institution (ZUS). Therefore, this form of employment is often chosen by employers.
A contract for specific work has a relatively limited option for termination. Termination of the contract may occur by mutual consent or in specific cases, as provided for in the Civil Code. The client may withdraw from the contract for specific work by paying the agreed-upon fee, which undoubtedly protects the interests of the contractor. However, the client may reduce the fee by the amount the contractor saved due to the non-performance of the work.
The Code provides for a number of circumstances that allow for the early termination of the relationship between the parties to a contract for specific work, through withdrawal, e.g. in the event of an increase in the estimated remuneration or a delay in the work, the ordering party may withdraw from the contract.
B2B contract
A well-known and increasingly common form of cooperation is the B2B (business-to-business) contract. What distinguishes this contract from other forms of employment is that the parties to the contract must have entrepreneurial status. This can be a sole proprietorship, a corporation, or a partnership; there are no requirements. A B2B contract can also be a lease or sales agreement between entrepreneurs, but it is most commonly used as a form of employment in Poland.
As for the remaining elements, the parties are governed by the principle of freedom of contract, i.e., they are limited by the purpose, principles of social coexistence, and the nature of the legal relationship. A B2B contract does not enjoy the same protections as an employment contract.
An "employed" person independently pays social security contributions and personal income tax advances, as well as pays VAT (if they are a "VAT payer"). This independence and the assumption of so-called "accounting" responsibilities by the employed person are increasingly prompting employers to offer this form of employment, and employees to choose it due to the typically higher and therefore more favorable remuneration conditions.
Summary
As can be seen, after conducting a preliminary analysis of contracts popular on the Polish market that resemble an employment contract in their structure, as well as the employment contract itself, issues related to the choice of a given form of employment should be analyzed in case.
The above legal relationships are somewhat similar in form to an employment relationship, but the most important aspect that clearly distinguishes them from an employment contract is the lack of management, which implies equality of parties. This is a key difference.
If you have any doubts, both at the stage of choosing the form of employment and later, please contact us.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of August 30, 2023
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