Fraudulent use of all contracts, especially contracts for specific work, is a punishment for active and enterprising people, including: freelancers who take advantage of the opportunity to perform additional, often small, orders. It is also a further obstacle to small and medium-sized companies, many of which are already struggling with a very difficult situation. As a result of full insurance coverage, unemployment will increase and a large part of contracts will be settled in the gray zone. The Polish economy will also lose a very important element of innovation and competitiveness.
The Ministry of Family, Labor and Social Policy has already completed work on the project of contributing to all civil law contracts, including contracts for specific work. In fact, the changes concern two acts, i.e. the Act on the social insurance system and the Act on social insurance in respect of accidents at work and occupational diseases. The projects have just been agreed upon by the Economic Committee of the Council of Ministers (KERM). The amendment to the law will result in all mandate contracts and contracts for specific work being covered by mandatory social insurance, i.e. retirement, disability, sickness and accident insurance. The exception will be those performed by secondary school students or students under 26 years of age. In the case of contracts for specific work, sickness insurance will not be mandatory.
The changes will affect at least 2.3 million people performing work on the basis of mandate contracts and related contracts, including 330,000. freelancers, working primarily on the basis of contracts for specific work, as well as over 2.6 million small and medium-sized companies that use primarily the services of freelancers.
Business response to plans to eliminate insurance for all contracts
The global economy has slowed down significantly, although the EU economy has slowed down even more. Additionally, the German economy, with which Poland is very closely linked, recorded a technical recession in 2023. Orders from foreign companies in Polish companies are decreasing and Polish exports are shrinking. All this leads to fewer needs of companies in terms of employment, either employees or collaborators, e.g. freelancers.
And in this difficult moment for many companies, what does the Ministry of Family, Labor and Social Policy, headed by Minister Agnieszka Dziemianowicz-Bąk, plan to do? Abolish all contracts to further increase the already dynamically rising labor costs in Poland and make it more difficult to earn extra money, among others. freelancers. What do non-governmental organizations and market experts say about this?
– We are firmly against further attempts to impose contributions on contracts for specific work and to increase the burdens related to mandate contracts. The activities of the Ministry of Family, Labor and Social Policy are harmful to the Polish economy and are part of the trend of increasing enterprise costs, including labor costs. As a result, the Polish economy becomes less competitive and has low margins, and is therefore exposed to bankruptcy in situations of economic shocks and crises. – says Katarzyna Lorenc, Business Center Club expert on the labor market and work management and efficiency. – The obvious beneficiary of these activities is ZUS. People using contracts decide on them, understanding the principles of their operation and are able to take care of themselves, e.g. take out voluntary insurance if this type of contract is the only source of income. Typically, however, people combine full-time work with commissions. The additional burden is punishing them for their professional activity. The beginnings of entrepreneurship and freelancing also begin with civil law contracts. It is difficult to justify making it difficult to enter the market with your services when starting a personal business with additional burdens. – concludes Katarzyna Lorenc, Business Center Club expert on the labor market and work management and efficiency.
The turmoil hits companies and the labor market
It is worth mentioning that working in Poland has become very expensive in the last two years due to, among others, to increase the minimum wage by as much as 40% – a unique event on a global scale, as well as high CPI inflation (nearly 40% over the last 3 years). What's worse, from January 1, 2025, the minimum wage will be increased again by 7%. But this is not the end of unfavorable changes for companies. The left has already announced that it is working on a new 9% health tax. As a result of the accumulation of the above unfavorable changes, companies are starting to slow down and everything indicates that we are only at the beginning of a wave of layoffs. The second phenomenon that increasingly affects companies is the wave of bankruptcies.
In the last two years, and especially in 2023, many companies have closed, suspended their operations or significantly limited their operations. Last year alone, over 0.55 million small enterprises stopped operating, employing employees and associates, and paying taxes and other public levies. Worse still, more and more companies are having great difficulty paying, acquiring customers and running their business. For 68 percent for enterprises, payment backlogs are a barrier to running a business. One in five does not pay its contractors on time because it does not receive payment from customers, according to the study "Overdue invoices in Polish enterprises".
Effects of insurance contracts
The Ministry of Family, Labor and Social Policy explains its plans to fully tax all contracts, the fact that it wants to protect contractors and contractors against no or low pension in the future or lack of health care protection. However, according to research by Useme.com, the leader in settling remote work in Poland and CEE, which has been examining freelancers every year for almost a decade, most of them (59.9%) earn extra money. – Freelancing in Poland is primarily an additional source of earnings for specialists, because the vast majority of them are already employed under an employment contract. This means that taxes and all contributions have already been paid. Therefore, contributing to all contracts will lead to paying contributions several times, i.e. reducing freelancers' remuneration by 28%, without any clear benefits in return. Since paying health insurance contributions several times a month, there are no more freelance healthcare workers, and no one seems to believe in the arguments about saving for a "dignified" state pension anymore. As follows, among others, According to ZUS and European Commission forecasts, the replacement rate will soon be 20%. This means that future retirees will receive only 1/5 of their last salary each month. Is this a decent retirement? – summarizes Przemysław Głości, president of the management board of Useme.com.
We also cannot forget about the fact that 2/3 of freelancers in Poland earn extra money by doing small jobs up to PLN 3,000. PLN per month (almost 40% of freelancers receive up to PLN 1,000 per month, and 27.7% of freelancers earn between PLN 1,000 and PLN 3,000) and the fact that they work primarily for micro-companies and small and medium-sized enterprises whose financial situation has deteriorated significantly over the last 2-3 years.
– Employers are concerned about further increases in the costs of cooperation with natural persons. When introducing new costs, there is no discussion on reducing the current burden on employers and employees. The proposed solution may bring more negative effects than benefits. It will reduce the already too low labor supply. It will worsen the situation of the most active people who take advantage of the opportunity to perform additional, often small, orders. It will also worsen the situation of people who earn extra money while caring for children (e.g. the period of parental or parental leave). Moreover, it may lead to an increase in unregistered contracts. – warns Robert Lisicki, director of the labor department of the Lewiatan Confederation.
The effects are less obvious
The deregulation of contracts will also lead to a reduction in the number of freelancers working legally and paying taxes in Poland, both Polish and foreign. Some of them will move to the gray zone, a certain group will start working only abroad, and some will stop freelancing altogether. Companies, especially smaller ones, will limit the number of collaborators they cooperate with in Poland and take advantage of other cheaper foreign opportunities. Moreover, as a result of the medium-term effect, the state budget will not only not receive the additional PLN 4 billion that is being talked about in the case of the insurance of all contracts for mandate and specific work, or the amount of PLN 0.6 billion in the case of the insurance of only the contracts for specific work, but it may lose much more in the form of a reduced tax and contribution source.
– As a result of subsidizing contracts for specific work, the Polish economy will lose a very important element of innovation – well-educated, highly qualified white-collar workers who know languages – giving it a competitive advantage on the global market. As a result, the perception of Poland as a modern and innovative economy, friendly to companies and the freelance industry, will deteriorate – summed up Przemysław Głości, president of the management board of Useme.com.
As a result of the planned taxation of all contracts, the income of freelancers will be reduced by nearly 1/3, or if companies were to bear all the costs of paying contributions for contracts themselves, the costs of such contracts would increase by as much as 40%.
