According to some, in the Polish labor market, the days of the employment contract are numbered and all IT professionals will finally move to the so-called B2B model. While such extreme theses are unlikely to ever materialize, we must admit that civil law contracts in Poland are still gaining in popularity when it comes to hiring employees from the technology sector. But why is this the case? Does an employment contract really have no advantages?
Why do programmers choose B2B contracts?
At the very outset, we need to make some corrections - a B2B contract, which in Poland is a common substitute for an employment contract, is concluded between an employer and a person who is self-employed (so runs a one-person business). Some may question the "feasibility" of one-person enterprises, but as long as the law does not prohibit such practices, it is worth looking at them a little more closely.
All right, but where did this unusual phenomenon come from? The answer to this question is very simple - it's all about money. Current labor and tax laws make the net salary from an employment contract simply unattractive for many people. High taxation, compulsory vacations and the need to make salary-dependent pension contributions make younger people do everything they can to avoid switching to employment contract, also known as UoP.
It’s worth noting that, in addition to higher earning, Business-to-Business (B2B) collaboration offers significantly greater flexibility. The parties can shape the contract according to their needs, altering the notice period, settling overtime on non-standard terms, and completely resigning from paid leave - a crucial aspect for organizations highly focused on the continuous execution of projects.
Sole proprietorship also allows for the deduction of costs that, until now, the employee had to cover entirely of their own pocket. A prime example of this includes laptops, computer accessories, fuel for the car, and certain courses or bootcamps. In many cases, tax savings.
Does an employment contract have any advantages?
Contrary to common belief, an Employment Contract (UoP) is not all that bad. It undoubtedly has several fundamental advantages, including:
- Significantly greater stability than in the case of B2B contracts - both the allowance during potential maternity leave and the pension will be significantly higher;
- A longer notice period, which, in the event of job loss, provides more time to find new employment;
- More assured work-life balance, as the employer is much more restricted by the Labor Code and other laws.
Individuals, especially those planning to have a child soon, typically seek an employment contract. This model ensures higher social benefits, allowing for the peaceful care of a new family member. In such situations, lower net earnings are justified - it’s simply the price for a higher quality of life and a lower risk of losing one’s means of living.
An employment contract also guarantees peace of mind, as there is no risk of potential disputes with the tax administration, which affects an increasing number of individuals employed on a B2B basis. This is a result of inconsistent interpretations regarding lump-sum taxation and certain allowances applied by the IT sector workers.
It’s also worth noting that an employment contract may simply be cheaper than B2B. Although running your own business may be financially rewarding, even with around 5 thousand PLN net monthly. You need to consider whether, for a few hundred zloty, you want to deal with an accountant, pay taxes, and issue the invoices.
When is it worth choosing B2B, and when an employment contract?
If your prospect+ive employer offers you the choice between an employment contract and a B2B contract, consider the following questions:
1. How much will I save by choosing B2B?
For obvious reasons, it's a good idea to check the salary differences between the two settlement models first. To do this, it is worth using salary calculators. We have included sample rates below:
The calculations we have provided are indicative - we are not tax specialists, so if you are planning to switch to a B2B basis, make sure it is viable in your case. The regulations in Poland are very complicated, so don't shy away from working with a lawyer.
Consider, too, that some employers further promote the B2B model to the point that the net rate offered exceeds the gross amount you would receive under an employment contract.
2. Do I qualify for tax deductions?
Some tech professionals may pay as little as 8.5 percent tax on their income, while others will be forced to hand over 12 or even 15 percent. While the choice of tax form rarely determines the profitability of a B2B contact, it does have a direct impact on the savings you will generate this way.
3. Do I plan to suspend my career or stop it altogether in the coming years?
As we have already mentioned, an employment contract gives you much more security when it comes to the possible inability to perform your job duties. Whether you plan to go on maternity leave, retire, or expect that your health may deteriorate markedly, for example, due to age, seriously consider whether a higher salary is adequate compensation for instability.
Of course, every inconvenience can be compensated to some extent - some employers offer attractive medical packages, and higher earnings allow you to buy pension insurance or save regularly. However, this requires some discipline and the ability to anticipate.
4. Am I prepared for additional liability?
If you opt for B2B cooperation, you need to keep in mind the much broader scope of liability for mistakes made while providing services to your client-employer. This is, of course, due to labor laws - a person employed on an employment contract is liable up to 300% of their salary, while a specialist under contract is not protected by this limit.
You can offset the risk by purchasing liability insurance - it is not expensive (starting at about 100 zloty per month), but you must remember to pay the premiums regularly. At the same time, let's note that although the policy provides additional mental comfort, in many professions the chance of making a mistake at work is rather small.
5. Will I remember about administrative and accounting matters?
If you run a sole proprietorship, you need to remember to pay your taxes on time, collect accounting documents and submit them to an accounting firm. If you know that you have problems with punctuality and often lose important things, you need to seriously rethink B2B - oversights can result in penalties. The IRS can be unforgiving, and any disputes with this institution can be costly.
Before making a final decision, be sure to think about the answers to each of the above questions. If you are unable to give them even after a long moment of reflection, it is likely that this model of work is not for you. Regardless of your decision, we are curious to hear your opinion. Share this article on Linkedin and write what you think!
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