Does the company need to employ staff?

In this article, we outline the key legal regulations governing the employment of staff in companies, highlight situations where permanent employment is mandatory or practically essential, and discuss available legal alternatives, such as B2B collaboration, civil law contracts and outsourcing. We also analyse the risks associated with avoiding permanent employment and present a practical checklist to help assess when hiring an employee is the optimal or even essential solution.

Key legislation

The issue of companies employing staff is governed by several key legal acts. The most important of these include:

• The Commercial Companies Code (CCC) – sets out the rules governing the operation of companies, their governing bodies, and the powers of shareholders and the management board, but does not explicitly impose an obligation to employ staff.
• The Labour Code – defines the employment relationship, the obligations of the employer and the employee, as well as the conditions for lawful employment under an employment contract.
• The Social Insurance System Act – regulates the obligation to register with the Social Insurance Institution (ZUS) and pay contributions, including rules concerning employees, contractors and self-employed persons.
• Tax Acts (PIT, CIT, VAT) – specify the tax implications of various forms of employment (permanent position, B2B contract, civil law contracts).
• The Minimum Wage Act – imposes an obligation to ensure a minimum wage for persons employed under an employment contract.

A company may use various forms of engagement of third parties in the conduct of its business. It is crucial to distinguish between the following legal statuses:

• Employee – a person employed under an employment contract, subordinate to the employer, and subject to the full provisions of the Labour Code and social security regulations.
• Contractor (B2B cooperation, civil law contracts) – a person providing services under a contract of mandate, a contract for specific work, or as a sole trader (B2B); such cooperation is not governed by the Labour Code but is subject to other regulations, e.g. the Civil Code or tax legislation.
• Member of a company body (e.g. the management board) – a person holding a position within a company body (by appointment or under a separate civil law contract); their legal status and duties differ from those of typical employees or contractors, and the rules governing remuneration and taxation are specific.

No general obligation to employ staff

Polish law does not provide for a general, abstract obligation for a company to employ staff. In principle, it is possible to conduct business without creating permanent positions – in both partnerships and companies. However, the manner in which work is performed for the company and the actual nature of the relationship between the parties are of key importance. In practice, labour, tax and social security legislation may require employment in the form of a permanent position in certain cases (e.g. the regular performance of work under supervision at a place and time designated by the company).

When must a company employ staff?

Under Polish law, there is no general rule requiring every company to employ staff. However, there are situations in which employment under an employment contract becomes mandatory or de facto necessary from the perspective of the law and the company’s legal certainty.

Such cases primarily include situations where the manner of performing the work meets the definition of an employment relationship – if a person performs work personally, under supervision, at a place and time designated by the company, and for remuneration, there is a legal obligation to employ them under an employment contract.

Failure to employ staff where necessary may result in negative consequences during inspections by the Social Insurance Institution (ZUS), the National Labour Inspectorate or other authorities.

Alternatives to employment

Companies very often use civil law contracts as an alternative to employment contracts. The most common are contracts of mandate and contracts for specific work. A contract of mandate involves performing specific tasks for the company, whilst a contract for specific work concerns achieving a specific result. The main advantage of these solutions is greater flexibility. However, it should be borne in mind that if the nature of the cooperation meets the definition of an employment relationship (work under supervision, at a specific place and time), there is a risk that this form of contract may be challenged by the Social Insurance Institution (ZUS) or the National Labour Inspectorate and reclassified as an employment contract.

Another popular form is establishing cooperation with a sole trader (B2B). Such a person issues an invoice to the company for services rendered, is neither an employee nor a contractor, and settles their own taxes and social security contributions. B2B cooperation is particularly common in sectors where independence, flexibility and high specialist skills are expected (e.g. IT, consultancy, marketing). However, even in this case, if the collaboration effectively meets the criteria of an employment relationship, there is a risk that the supervisory authorities may reclassify the relationship.

A company may entrust the performance of specific tasks to an external entity, e.g. in the areas of accounting, IT support, marketing, cleaning or even manufacturing. Outsourcing allows a company to reduce its obligations as an employer and focus on its core business activities. Well-drafted contracts and the selection of a reliable service provider are of key importance here.

In the case of outsourcing, the company is not a party to the employment relationship with the subcontractor’s employees, but is responsible for complying with certain obligations (e.g. regarding health and safety when working on the company’s premises).

Members of the company’s governing bodies (management board, authorised signatory, supervisory board)

Some individuals performing duties for the company may not be formally employed – this applies to members of the management board, authorised signatories or members of the supervisory board. Their remuneration may be determined by a resolution, on the basis of a management contract or another civil law agreement. This type of relationship is not subject to the provisions of the Labour Code, and the rules governing social security contributions and taxation differ from those applicable to employees.

Risks associated with avoiding employment

Classification of the employment relationship by supervisory authorities

One of the greatest risks associated with moving away from traditional employee employment is the risk that state authorities may question the actual nature of the working relationship. The National Labour Inspectorate (PIP), the Social Insurance Institution (ZUS) and the tax authorities may conclude that, despite the conclusion of a civil law agreement or a B2B contract, an employment relationship actually exists. This occurs when the work is carried out under supervision, at a specific place and time, and the person performing the work is subordinate to the company. In such a situation, the authorities have the right to reclassify the contract as an employment contract, with all the legal consequences that entails.

Financial and administrative consequences

Reclassifying a civil law contract or B2B cooperation agreement as an employment relationship may result in the need to pay outstanding social security and health insurance contributions (covering a period of up to several years), together with interest and any financial penalties. In addition, the company may be required to settle unpaid taxes, as well as to pay other employee benefits (e.g. holiday pay, severance pay, overtime allowances). Regulatory authorities have the right to impose administrative fines on the company for breaches of labour and social security legislation.

Summary

The issue of a company’s obligation to employ staff does not have a clear-cut answer and requires an individual analysis of each specific situation. The law does not impose a general obligation to create permanent positions — a company may operate on the basis of various cooperation models, including civil law contracts, B2B contracts or outsourcing. However, the manner in which tasks are performed and the actual nature of the relationship between the parties are of key importance.

When choosing a form of cooperation, one should take into account both organisational and financial benefits, as well as potential legal risks, including the possibility of the contract being reclassified as an employment relationship by the supervisory authorities. For the company’s protection, it is advisable to analyse the facts of each case, prepare reliable documentation and, in case of doubt, consult a lawyer or tax adviser.

A responsible approach to choosing an employment model and transparency in cooperation with those involved in the company’s operations helps to mitigate risks and ensure the stability of the company’s operations in a dynamic legal environment

Author

Agata Bączkowska

Adwokat, Senior Associate

She specializes in commercial and civil law. She has gained experience in Warsaw law firms providing comprehensive services to companies and a law firm specializing in labor law. She has extensive experience in corporate consulting. She has participated in mergers and acquisitions at every stage of the process, from pre-transaction legal examination to fulfillment of regulatory requirements related to the transformation process. She prepares and reviews contracts entered into by clients and advises in cases of…

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