Clients often ask us how they can employ workers in Poland. The obvious solutions is setting up a company or a branch in Poland. These are not the only ways, however. If you want to know smart and cost-efficient ways of employing workers in Poland – read this article.
Employment by a Polish SPV
The employment of an employee by a Polish entity is the most common solution. Many foreign companies set up a subsidiary in Poland, only to employ workers in Poland. And although the subsidiary is a separate entity and its employees are subordinate to the subsidiary, the work is actually provided to the parent company. There are also cases where the daughter company does not carry out own activity at all. At the same time the parent company finances its entire activity. The costs of employing employees and maintaining the subsidiary in Poland are financed, and the subsidiary does not, for example, sell its own products.
In such a case, the formalities related to the employment of a worker are standard and do not differ from the situation of employment by entities owned by Polish residents. Employer has to report the employment of an employee to the Polish Social Security Institution (ZUS). You should also inform the employee about the terms and conditions of employment. You should also refer him for medical examination before starting work.
Employment by a branch of foreign company
We have covered the topic of setting up a branch of a foreign company in Poland in this article. We mentioned there that the branch does not have its own legal personality. It is a part of the foreign company. Therefore, for example it is the foreign entrepreneur who will be the party to the court trial, not the branch. However, we also mentioned that this rule does not apply, to cases concerning employees’ issues.
This is because, in the case of employees, a branch of a foreign company is an employer. It is not a part of a foreign company. Therefore, the branch of the foreign company carries out all employment related formalities.
However, in addition to the ‘usual’ employment duties, the branch must register itself with relevant Tax Office. In order to do so, the branch must send a notification on an official tax form (NIP-8) before it hires the first employee. The branch is then issued with a separate Tax Identification Number (NIP), which will be used in order to fulfil obligations related to employment of workers (payment of social security contributions and advance income tax payments for employees).
Employment through a foreign company
But is it absolutely necessary to set up an entity in Poland in order to employ a worker here?
The answer to this question is negative. A foreign entity can employ worker directly. However, if the employee is a Polish resident, he or she will be subject to social insurance in Poland. This means that the foreign company will have to comply with obligations related to the employment. It will have to e.g. pay social insurance contributions. To this end, the foreign employer should be reported to the ZUS, as is the case with a Polish employer or a branch of the company.
However, any notification of the employee to ZUS should be made using the employer’s Polish NIP number. A foreign company – for obvious reasons – will not have such a number. It is therefore necessary to obtain one. A foreign entity that does not have a branch in Poland issues an application for a NIP number to the Second Tax Office in Warsaw. The application must be filed on the official form (NIP-2). Only after obtaining a NIP number, the foreign employer reports himself to ZUS as the payer of social insurance contributions.
Employing workers in Poland by an employer who does not have its registered seats or representative office in Poland
One more solution is worth noting. An employer who does not have its registered seats or representative office in Poland may conclude an agreement with an employee, under which the employee will take over the duties of a social security payer. In such a case, it is the employee himself who reports for social insurance and calculates and remits to the ZUS the contributions due. The employee will have to make notification to the ZUS office competent for his or her place of residence. A copy of the agreement (of taking over social security payer) concluded with the employer must also be attached to the notification to ZUS. In order to register with ZUS, the employee must have his or her own NIP number. If an employee does not have one, he or she must apply to the tax office for it).
Of course, there is nothing to prevent a foreign employer or an employee who has taken over the social security payer’s duties from hiring an external accountant or HR specialist to represent them in front of ZUS in regards to fulfilling duties related with social securities.
When it comes to advance payments for income tax – if an employee works for a foreign employer who does not have its registered seats or representative office in Poland, then it is the employee himself who is responsible for calculating the advance payment for income tax and paying it to the relevant tax office. There is no need to sign separate agreement in this matter.
Employing workers in Poland – summary
As you can see, there are different ways of employing a worker in Poland and each of them has its pros and cons. The least formalities involve employment by a Polish entity, however, it is necessary to bear the costs of its functioning. The employment of persons from Poland directly by a foreign company, on the other hand, seems to be an interesting solution for entities that do not intend to conduct any activity in Poland, but have only found a required specialist here.
If this article was interesting for you and you want to know more on the topic it concerned we encourage you to contact us. Are you looking for an accountant in Poland? Specialists from our accounting firm in Poland, Warsaw will be happy to help. If you are interested in bookkeeping in Poland visit our dedicated landing page.