Employer of record in Poland. What are legally allowed solutions?

So-called employer of record is the practice of “lending” employees between companies. This one was especially visible during the COVID-19 epidemic, when occurred problems with prolonged absences of employees or business downtimes. As a result, there were made attempts to transfer employees globally without necessity of setting up a subsidiary or a branch. As far as B2B contracts are concerned, it is not a problem. However, for an employment relationship, the situation is different.

Table of Contents

• Employer of record in Poland. When, according to labour law, can an employee be delegated to work for another entity?
• Employer of record. Unpaid leave to work for another employer
• The solution closest to legally viable – employees hired by a temporary employment agency
• Delegation of workers in the framework of providing services
• Employer of record in Poland. Summary

Employer of record in Poland. When, according to labour law, can an employee be delegated to work for another entity?

Firstly, it should be noted that the main principle of labor law is to define the employment relationship. It is the performance of work for the employer and under his direction. It is performed for remuneration, at a place and time designated by the employer.

The phenomenon of  ‘external employment’ disrupts the traditional model of an employment relationship. It involves separating the role of a formal employer (with whom the employment contract is made and who performs legal and factual actions with regard to the employee) from the role of the actual employer, for whom the work is being performed. Both case law and practice assess such a phenomenon as negative. The Polish legislature specifies several situations in which the separation of these roles is acceptable by law. They involve:

1. Granting an unpaid leave to perform work for another entity (Article 174¹ of the Labour Code),
2. Performance of work by temporary workers. (It is regulated by the Act on the Employment of Temporary Workers),
3. Delegation of an employee to work for another entity under the freedom to provide service. It involves a foreign employer.

Employer of record. Unpaid leave to work for another employer

Article 174¹ of the Labour Code defines a special type of unpaid leave. Its purpose is to perform work for another employer. This leave consists in the ‘lending’ of employees to another employer. The employers’ settlements determine the period of the service. 

What does this institution involve in practice? The employer, with the prior written consent of the employee, may grant him unpaid leave. Its purpose is to enable work for another employer. The basis for such leave is the agreement between the employers. They should determine the period during which the ‘borrowed’ employee will work for another entity.

Art. 174¹ § 1 of the Labour Code shows that in the case of such leave, the employee is ‘lent’ to another employer. An employee doesn’t receive remuneration from the current employer during this time. But, he retains his employment rights. The entity to which the employee is delegated pays the remuneration for the service.

Art. 174¹ of the Labour Code doesn’t allow employers to perform such services if their main purpose is to ‘lend’ employees to other entities. Such practice cannot be assumed in advance.  This would blur the difference between traditional employers and institutions that mediate in hiring workers. 

The solution closest to legally viable – employees hired by a temporary employment agency

Temporary employment is a form that involves three parties in a  legal relationship. It has a limited duration. The essence of temporary work is the employment of a worker by the agency. It is done only for the period and purpose indicated by the user-employer. The basis for such a service consisting in providing personnel for a specific job is an agreement between these parties. The employee is formally related to the agency and makes claims against it. But, he performs work for the user-employer and is subject to its supervision.

A temporary employment agency performs the employer’s obligations related to:

1. conclusion of the contract,
2. application to social insurance,
3. payment of remuneration,
4. payment of social insurance contributions and taxes.

The employer for whom the temporary employee actually performs work supervises it. He assigns tasks to the employee and controls their realization.

It should be clearly emphasised that this form of ‘external employment’ is available only to entities with the status of employment agencies. The activity carried out by employment agencies is regulated. Its performance requires meeting certain conditions specified by law. Moreover, it must obtain an entry in the register of regulated activities.

Delegation of workers in the framework of providing services

The last example of ‘external employment’ is delegation within the framework of providing services. Polish entrepreneurs hiring employees may temporarily direct them to work on the territory of another member state of EU, EEA or Switzerland as part of services provided by their company abroad.

Such delegation may occur in the following situations:

1. in connection with the agreement between a Polish company and an entity operating in the territory of another country.
2. when the delegation takes place to a branch or to a company belonging to a group of enterprises to which the Polish entity belongs,
3. when the delegating entity is a temporary employment agency that directs temporary workers to a user-employer located in the territory of another EU or EEA country, or Switzerland.

Temporariness is a characteristic feature of delegation. By definition, it lasts a certain period of time and cannot be a permanent state. The delegating employer must also provide the employee with all the components of salary and allowances that would be due to a local worker from the same industry, profession and region.

Employer of record in Poland. Summary

The institution of “employer of record” is a broad concept. We may have to deal with both legally allowed solutions and those more risky. An employer who ‘lends’ staff in a way not described in the law must expect the possibility of determining the existence of an employment relationship. It may occur if there is a relationship of dependence between the employees and the ‘lending’ entity. Such an entity will be considered an employer. It will have to bear consequences including, e.g. social insurance and advance tax payments. 

Are you looking for an accountant in Poland or a payroll services provider in Poland? Specialists from our accounting firm in Poland, Warsaw will be happy to help. If you are interested in company registration in Poland visit our dedicated landing page.

If you want to know more about labour law or the legalization of the stay and work of foreigners in Poland, we invite you to visit the Mobility & HR section. It is available at cgomobility.pl.