Contents:
I. Labor law in Poland
II. Taxes in Poland
II. Establishment of a company in Poland
IV. Employer of Record in Poland
V. EOR and personal data protection
VI. What are the differences between EOR and PEO?

EOR PARTNER POLAND

Poland, formally called the Republic of Poland, is located in the Central European region and borders seven other countries. The population ranks high on issues such as education, healthcare, safety and living standards, but wages in Poland are among the lowest in Europe.

Over the years, Poland's large and attractive domestic market has become an important target of interest for investors - both from Europe and around the world. Currently, numerous international corporations and large local enterprises have their headquarters in the country.

The value of the Gross Domestic Product (GDP) in Poland in 2021 amounted to USD 674.05 billion, which represented 0.50% of the global economy. According to forecasts based on Trading Economics econometric models, Poland's GDP is expected to oscillate around USD 695.00 billion in 2023.

The legal structure in Poland includes the Constitution of the Republic of Poland (containing general principles on labor freedoms and social rights), international agreements on matters related to labor law, the Polish Labor Code, as well as laws and regulations defining the rights and obligations of employees and employers, along with other documents.

At present, Poland is experiencing an intensive period of economic and social development, as well as developing local talents. The national ecosystem offers a variety of conferences and programs to accelerate development, using a rich pool of qualified people with skills in areas such as technology, sales and marketing. These are just a few examples from the talent pool available.

In Poland, it is easy to attract well-qualified employees thanks to the functioning system of state universities, which generates highly specialized and creative employees, especially in the areas related to information technology and engineering.

In 2023, several novelties were introduced to the Labor Code regarding aspects such as remote work, sobriety monitoring, new types of leaves and parental rights. In addition, it is also important to know the operation of the National Health Fund (NFZ) and the Social Insurance Institution (ZUS). ZUS regulates benefits through a series of laws and regulations, covering a variety of support, such as sickness benefits, maternity leave, long-term incapacity for work, pensions, occupational accident insurance and others.

I. Labor law in Poland

Employment contract in Poland

Employers employing employees in Poland must be fully aware of the provisions and implementation of labor unions, as well as a thorough knowledge of the Polish Labor Code.

There are three types of employment contracts:

- trial,
- temporary
- permanently.

When signing an employment contract in Poland, it is important to precisely specify relevant information, such as personal data, work schedule, salary, scope of duties, procedures related to contract termination and any detailed clauses that may be relevant in a given sector or profession.

Therefore, when choosing the form of employment, it is important to take into account the above three types of contracts in order to create an effective team appropriate to the nature of the work.

The contract signed for a trial period may not exceed three months and may be extended only in special situations. Fixed-term contracts may be for a fixed period or continue until a specific event occurs, such as the return of another employee after a short absence or the performance of certain duties. If the contract is concluded for a definite period of time, it may be extended up to two times, and the sum of the lengths of all contracts may not exceed 33 months. When a fixed-term contract is renewed for the third time, it automatically becomes a contract of indefinite duration.

Contracts for an indefinite period do not have a set end date and guarantee employees a greater sense of employment stability. Such agreements are particularly suitable for long-term employment relationships and are often used in positions that require full commitment.

Citizens of the European Union, foreigners with a settlement permit and persons with the status of EU long-term resident in Poland do not need to obtain a work permit. In the case of people from outside the European Union, it is necessary to obtain prior permission to work. This consent applies only to the position for which the application is submitted; in the case of a change of job by the employee, it is required to submit a new application. The obtained work permit is valid for three years.

There are five main groups of work visas in Poland: Category A - In the case of obtaining employment on the basis of an employment contract or a civil law contract with an employer based in Poland. This is the most common type of work permit.
Category B – This type of work visa applies to persons serving as a board member and planning to stay in Poland for more than six months in the next 12 months.
Category C - You can apply for a work permit if a foreign employer sends an employee to Poland for a period exceeding 30 days in a calendar year to work in a branch or branch of a foreign company operating in the country.
Category D - If a foreign company sends an employee to work temporarily in export services. A foreign employer cannot have its own branch or subsidiary in Poland.
Category E - You can apply for this visa if you have work responsibilities that do not fit into any of the four categories above.

The validity of the work permit is three years:

- Required documents
- Completed application form
- Confirmation of the application fee
- Current confirmation of the legal status of the employer from the National Court Register
- Current documentation regarding the employer's business activity
- Copies of the relevant pages of the applicant's passport containing travel information
- Confirmation of the applicant's health insurance

Employers must act to prevent discrimination in the employment process, while employees have the right to claim compensation in Polish court proceedings.

Personal data protection

The protection of personal data is regulated by the General Data Protection Regulation (GDPR), which entered into force as a result of the Act of May 10, 2018 on the protection of personal data. It concerns the protection of the personal information processing process and applies in the context of national regulations on various categories of confidentiality.

Minimum wage

The amount of the minimum wage is set annually at the national level and applies to all full-time employees. If an employee works part-time, the minimum wage is calculated in proportion to his working time.

In the case of people receiving a salary, it is often paid on a monthly basis. In contrast, for employees who are paid on the basis of working hours, payments can be made on a weekly or monthly basis. There are also employers that use other payment schedules, such as bi-weekly. Regardless of the frequency of payouts, it is important that this plan is clearly defined in the written statement of information that is provided to each employee at or before the start of employment.

The minimum wage in Poland is PLN 3,600 gross per month. Employer tax in Poland is usually 19.48%. This includes contributions to the Pension Fund, Accident Fund, Benefits and Labor Fund (ZUS), PPK and Disability. The employee tax in Poland is progressive and reaches a maximum of 32%: The tax-free amount is PLN 30,000. Income tax has a fixed rate of 12% for income from PLN 30,000 to PLN 120,000 per year. Then the rate increases to 32% for income over PLN 120,000. Overtime pay in Poland must comply with applicable law and is subject to a limit of 150 hours per year, with the possibility of compensation of up to 200% of the employee's standard hourly rate.

The employee capital program enables employees to collect funds for retirement purposes. The employer is obliged to pay 1.5% of the salary, and the employee 2%. An exception to the obligation to create a PPK are only employers who use the Employee Pension Scheme (PPE) adapted to the requirements of the PPK.

It is worth noting that tax and legal regulations in Poland are subject to change, so it is important for enterprises to constantly monitor the latest guidelines to stay compliant.

In Poland, it is common practice to pay wages every month for a period of 12 months. Employers are obliged to comply with the provisions of labor law in Poland, which include regulations on working time, safe and hygienic working conditions and timely payment of remuneration.

Working time

A standard working week consists of forty hours spread over five days. In urgent situations, it is possible to extend working hours for a period of up to one month, provided that the longer days are compensated by shorter hours on other days. Companies operating in the manufacturing sector that need to operate continuously can have an average working week of 43 hours and working days of up to 12 hours, over a period of four weeks.

Overtime work is usually only permitted in emergency situations or when the employer has specific, exceptional needs that need to be considered. The overtime limit is a maximum of eight hours per week and does not exceed a total of 150 hours per year. Overtime pay is a percentage of an employee's standard rate of pay and is paid when an employee works additional hours at night, on Sundays or holidays, or on vacation days.

Instead of being paid for working overtime, an employee has the option of receiving compensation in the form of time off instead. Executives and senior managers are entitled to compensation for overtime work when working on Sundays or holidays, but this does not apply to work exceeding an average of 40 hours per week.

Holiday leave

All employees in Poland are entitled to an annual paid leave, the length of which depends on the number of days worked:

- 20 days of paid vacation if the employee has worked less than 10 years.
- 26 days of paid holiday if the employee has at least 10 years of service (assuming a first-time employee receives 1/12 of a year's holiday for each month worked).

According to the employee's request, the holiday leave can be divided into stages. However, in this scenario, at least one such portion of leave must be a minimum of 14 consecutive calendar days. Remuneration for annual leave is paid in the same amount as for working days.

Maternity and parental leave

A female employee who becomes the mother of one child is entitled to 20 weeks of maternity leave. In the event of the birth of more than one child, this leave is extended accordingly. Before the expected date of delivery, a woman can take up to six weeks of maternity leave. Each parent is also entitled to an additional 32 weeks of parental leave, giving a total of 52 weeks related to the birth of the child. In general, a parent on maternity leave receives 100% of normal pay for the first half of the period and 60% for the second half.

A female employee has the option to resign from the rest of her maternity leave, provided that she has used at least 14 weeks after giving birth. In this case, the employee who is the father and takes care of the child is entitled to the remaining, unused period of maternity leave at his written request. The child's father is also entitled to a two-week paternity leave.

Contributions

The obligation to pay social security contributions rests with both the employer and the employee, and the employer is obliged to deduct part of the contribution from the employee's remuneration. In addition, Poland has a support system covering family benefits, social assistance benefits and unemployment benefits.

The ZUS contribution rate is 35.8%:

- The ZUS contribution rate for employers is 22.1%,
- The ZUS contribution rate for employees is 13.7%.

The rules of taxation of income of natural entities apply to both Polish citizens and foreigners. The social insurance system covers retirement, disability, accident, labor fund and disease insurance.

Termination of the employment contract

Depending on the length of service, the notice period is:

- Less than 2 weeks 3 days
- From 2 weeks to less than 3 months 7 days
- 3 months 14 days

Termination of a contract in Poland is usually a complex process that requires special care.

To meet the compliance requirements, it is possible to terminate the contract as follows:

- By mutual consent of the parties
- Through the resignation of the employee
- As a result of the expiration of the contract
- For disciplinary reasons on the part of the employer, in the event of not performing work during the probationary period, reduction of employment or termination of business
- It is always recommended to conclude a mutual agreement to confirm the termination of the contract in Poland.

Employees have the right to receive severance pay in the event of termination of their employment as part of employee reduction or dismissal for reasons beyond their control, if the company employs at least 20 people.

The amount of the severance pay may not exceed 15 times the minimum wage specified in the Minimum Wage Act (equivalent to approximately EUR 8,600). However, the parties may choose to grant a higher severance pay. The Labor Code also defines the rules for granting death benefits to employees and severance pay related to retirement or disability.

II. Taxes

Taxpayers in Poland are obliged to pay taxes on their income. Non-residents are taxed only on income earned in Poland. The powers of the tax authorities to tax non-residents are limited if a person who is not a resident in the country of residence has concluded a Double Taxation Avoidance Agreement (DTT) with Poland. In such a scenario, the Polish tax authorities can generally only tax the part of the non-resident's income that is attributable to the Permanent Establishment (PE) located in Poland, provided that the non-resident has earned such income in Poland. However, there are exceptions for certain types of income, such as royalties, interest, dividends and capital gains, which may be taxed in Poland even in the absence of a Permanent Establishment (PE).

VAT rates are as follows: 23% (standard rate), 8%, 5%, 0% and exemption. Except where specific VAT regulations allow for different rates or regulations, the common VAT rate of 23% generally applies to the supply of all products and services.

Deliveries that are subject to the reduced 8% rate include, but are not limited to, medicines, passenger transport services and deliveries made under the Social Housing Program (with an area not exceeding 150 m2).

The category of goods and services taxed at 5% includes books, magazines, raw food and basic meals. The export of goods to countries outside the European Union is an example of activity taxed with a zero rate. Examples of goods and services exempt from VAT include certain financial, insurance and educational services.

In Poland, employees and employers are required to contribute a certain percentage of their remuneration to social benefits. These premiums cover issues such as pension funds, health insurance, workplace accident insurance and more. For employees, around 14% of their wages are typically withheld, while employers are around 18%.

Income tax

Employers are obliged to withhold tax from their employees' taxable wages and pay it to the Polish tax office (ZUS) by the 20th day of each month. In order to settle the annual income tax, you must submit and pay your tax return by April 30 of the following year, declaring all sources of income and, if necessary, paying additional tax liabilities.

In Poland, the basic tax rates are 17% and 32%. If the tax base does not exceed PLN 85,528, a rate of 17% is applied. If this amount is exceeded, a rate of 32% applies. The tax is also reduced by a degressive tax relief amount.

Income taxable in this way includes earnings from work, pensions and business income.

III. Establishment of a company in Poland

To form a limited liability company (LLC) in Poland, you need to be aware of the tax structure and compliance with regulations regarding subsidiary companies. In order for the company to conduct any commercial activity, it is necessary to carry out several steps, which in turn requires careful preparation of all necessary documents. Below is a list of required documents:

- Company agreement.
- Agreement or statute with an official translation into Polish.
- Power of attorney to register the company.
- Founders: The company must have at least one shareholder, but there are no restrictions on the number of partners or their nationality.
- Capital contribution: Before registering your business, you must pay PLN 5,000 in cash or in kind.
- Management Board: There must be at least one person on the management board. In the case of companies with more than 25 partners or capital exceeding PLN 500,000, it is necessary to have a supervisory board consisting of at least three people.

A limited liability company (LLC) receives REGON numbers and a tax identification number. Additionally, registration is required to obtain a VAT number.

An LLC is taxed at a fixed rate of 19% on the income obtained in the country. Additionally, companies are obliged to meet annual reporting and audit requirements.

IV. Employer of Record in Poland

The Employer of Record service in Poland facilitates the expansion of operations in the country without the need to establish a local entity. Currently, Poland is a leading outsourcing center in Europe, attracting with its low employment costs. It is the only European country that managed to avoid recession during the global financial crisis in 2008-2009.

Employees in Poland have all the features necessary to be valuable employees. They are ambitious, hardworking, dedicated and ready to learn, they are also characterized by an entrepreneurial approach. However, it is important to thoroughly understand the strict employment laws that apply there before working in this country. EOR offers a comprehensive service of employment contracts, remuneration, consultations, tax issues and legal compliance, adapted to Polish labor law.

Creating a benefits system for employees in Poland can be challenging and complex if there is a lack of knowledge of the country, its culture and labor laws. Self-adjustment can take several weeks and potentially lead to unforeseen delays and extended business expansion. The company registration process can take many months. Creating a new unit requires in-depth knowledge of intricate labor law regulations in Poland and the European Union. Any incorrect actions may lead to financial penalties and legal action by the National Labor Inspectorate, which is responsible for enforcing Polish labor law. This applies to a variety of areas, such as working time and working week, wages, conditions of employment, holidays, holidays, annual leave, termination of employment and many others.

Employer of Record (EOR) services may prove attractive to companies that plan to start operations in a new country without excessive costs. Instead of setting up a new company and getting involved in the details of the applicable law, a better approach is to work with an outsourced hiring (EOR) company to take care of your staffing needs.

The client's enterprise regularly cooperates with the employee, and in the end it decides on the organization's strategy and its impact on the employee team. This means that after hiring a new employee through EOR in Poland, the client's company will continue to be responsible for his daily work, directing his activities and ensuring supervision over the tasks performed by him.

After selecting an EOR service provider operating in Poland, you can start the onboarding process of new employees by collecting the following information from them:

- Name and surname (corresponding to the account to which the remuneration will be paid). Date of birth and start date of employment.
- Contact details, including a correspondence address in Poland.
- PESEL number.
- NIP tax identification number.
- Bank account details.
- Amount of remuneration in Polish zlotys (PLN).
- ZUS ZUA: Application form for social insurance.
- ZUS ZZA: State health care benefits form.
- ZUS ZCNA: Healthcare for family members of employees or self-employed.
- Information about the Polish Health Insurance Card (KUZ).
- Medical examination result.
- It is worth remembering that citizens of EU/EEA countries do not need a work permit in Poland.

You will then need to provide an employment contract that spells out the key terms of employment, such as the type of job, position, location, working hours, salary, start date, and trial or trial period. Polish labor law imposes an obligation on the employer to inform newly recruited employees about their rights and obligations, remuneration, probationary period, etc., in the context of the employment relationship.

The EOR service can generate and transmit employment contracts automatically. Each employee employed in Poland will receive a contract in accordance with applicable regulations, containing statutory requirements regarding probationary periods, working time, minimum wage, benefits and termination rules, such as severance pay and notice periods.

After gathering information regarding the new employment and signing the employment contracts by both parties, the EOR service provider will pay the Polish employees wages in Polish zlotys (PLN), while making the necessary lawful tax deductions from wages. These deductions include contributions for:

- Social security and pension schemes.
- Health insurance.
- Accident insurance.
- Other voluntary benefits (e.g. occupational pension plans).
- In Poland, employees are usually provided with a monthly payslip, which can be in both paper and electronic form.

EOR providers typically follow one of two pricing structures:

- Fixed monthly fee for each employee.
- Percentage of salary including applicable taxes.
- Both methods may also include various administration fees, implementation fees, and additional costs related to various functionalities.

The EOR may employ individuals or entire teams, which may consist of highly qualified employees or even managers. This can be beneficial in cases where the client is not yet sure whether he will decide to stay on a given market permanently or expand his business to a level that would require the creation of his own company or branch.

V. EOR and personal data protection

Delegating payroll management to an EOR company can save time and minimize compliance risks. However, sharing data with companies that work with third-party providers may expose the customer's company to potential data breaches resulting from manual transfers. In Poland, data protection is regulated by European Union law, in particular the General Data Protection Regulation (GDPR).

When searching for EOR service providers, look to see if they focus on your data protection priority, including:

- Compliance with privacy laws applicable in different countries.
- Having a secure infrastructure with continuous maintenance, operating 24/7.
- Reception of carefully vetted staff.
- Additionally, you may also consider entering into a Data Processing Agreement (DPA) with your payroll provider. Such an agreement imposes strict privacy practices and provides additional legal protections.

VI. What are the differences between EOR and PEO?

The Professional Employers' Organization (PEO) works by collectively hiring company employees and provides administrative services such as paying wages, ensuring compliance and paying payroll taxes. The client company and the PEO share joint responsibility for employees. However, PEO services do not allow employment in other countries where there is no local presence of the entity.

In contrast, in the case of EOR (Employer of Record), this supplier becomes the formal employer for a selected part of the workforce that he shares. The EOR assumes all related responsibilities. Thanks to EOR, companies can cooperate with employees in other countries without having to set up new legal entities.

To sum up, cooperation with the Record Employer (EOR) in Poland brings a number of significant benefits for companies operating on this market:

- Compliance with local labor law regulations - Poland has complicated labor laws and regulations that must be respected in the process of hiring employees. EOR is well versed in local labor laws and ensures that the client's business is operating as required, minimizing legal risks and regulatory issues.

- Simplified payroll and tax management - managing the payroll and tax aspects can be challenging, especially in a foreign country with specific requirements. EOR takes control of the entire payroll process, including accurate wage calculation, tax withholding and tax compliance. This avoids the administrative burden and ensures timely and accurate payouts to employees.

- Using local expertise - employment laws and practices in Poland may differ from those in the client's country. By cooperating with EOR, you gain access to experts with in-depth knowledge of Polish labor law and regulations. They are able to provide advice and best practice on employment contracts, working hours, holiday entitlements and in-work benefits, ensuring full compliance with local requirements.

- Effective personnel management - managing various aspects related to employees, such as onboarding new employees, administering contracts and maintaining personnel records, can be time-consuming and resource-intensive. Thanks to the cooperation with EOR, these administrative tasks are carried out professionally, which allows you to concentrate on your core business areas and strategic goals. This modern approach to personnel management increases efficiency and frees up valuable time and resources for the client's enterprise.

- Flexibility in global development - if a company plans to expand its operations on an international scale, EOR offers a flexible solution that allows it to operate in Poland without the need to create a new legal structure. Thanks to this, you can quickly and efficiently hire local employees, establish contacts with clients and discover new business opportunities, while complying with Polish employment regulations.

- Risk Mitigation - Dealing with the risks of working in a foreign country can be challenging. The EOR assumes the role of the legal employer, which means that it is also responsible for the associated risks and obligations. This helps to protect the client's company from legal disputes, labor claims and compliance issues, which brings peace of mind when expanding and operating in Poland.

By taking advantage of the benefits offered by Employer of Record services, companies can easily navigate the complexities of employment in Poland, which ensures compliance, increased efficiency and a stable foundation for the personnel-related business.