New regulations concerning Poland’s National Labour Inspectorate entered into force on 8 July this year. For entrepreneurs, they do not merely mean greater inspection powers for labour inspectors. They mark the beginning of a 12-month period during which companies should verify their employment models before the Inspectorate does it for them. Trenkwalder experts emphasise that the coming year is likely to be the largest HR audit in Poland in two decades.
Although public attention has focused mainly on the new powers of the National Labour Inspectorate to issue administrative decisions establishing the existence of an employment relationship, what happens over the next twelve months is far more important for businesses. It is now that lawmakers are giving employers the opportunity to organise their employment models on their own before any irregularities are identified during an inspection. For the first time, entrepreneurs are also receiving tools to reduce risk, such as the possibility of obtaining an individual interpretation from the Chief Labour Inspector.
According to experts, the biggest mistake would be to treat the 12-month transition period as time to postpone decisions.
“We look at the amendment to the National Labour Inspectorate Act as just another change to labour law. In reality, however, its impact is much broader. This is a regulation that will force many companies to change their employment strategies. It primarily concerns organisations that have built business flexibility on the basis of mandate contracts or B2B models,” says Ewelina Glińska-Kołodziej, CEO of employment agency Trenkwalder and Member of the Management Board of the Polish HR Forum.
The Protective Year Is a Time for Board Decisions, Not HR Departments
The coming months should not be seen as an HR project. This is a task for management boards, chief financial officers and those responsible for compliance. Changing the employment model may require rebuilding personnel budgets, updating remuneration policies, changing relationships with employment agencies, and reviewing cooperation with people providing services under B2B arrangements. Just a few years ago, companies focused primarily on optimising employment costs. The reform of the National Labour Inspectorate shifts the focus from costs to risk management.
“Until now, many employers have looked for the cheapest solutions. After the introduction of the National Labour Inspectorate reform, they should look for safe solutions. Reducing legal and financial risk is now becoming one of the important elements of business strategy,” emphasises Ewelina Glińska-Kołodziej.
Decisions Companies Should Not Postpone
According to experts, the coming months should be used for proactive measures rather than reacting to the first inspections. What actions should entrepreneurs take?
Audit contracts and identify risks. The purpose of this step is to determine which relationships may in practice meet the criteria of an employment relationship, such as subordination, performing work at a specified time and place, personal performance of work and remuneration.
Establish an action plan — prevention instead of reaction. After identifying contracts with an increased level of risk, the employing entity should decide which of two paths is appropriate: adjusting the terms of cooperation so that it retains a civil-law character, or voluntarily converting the relationship into an employment relationship. The second solution will be justified especially when the cooperation has employee-like features or when the employing entity is unable to ensure the genuine independence appropriate for a civil-law relationship.
Train key people and develop internal procedures. Before a possible National Labour Inspectorate inspection, the company should prepare the team and clearly divide responsibilities. The employing entity should designate people responsible for contact with the inspector and train employees in proper communication with the inspection authority.
Monitor high-risk areas. After the amendment, inspectors may also carry out some activities remotely, including requesting documents in electronic form or conducting interviews by videoconference. For this reason, the inspected entity should continuously monitor areas particularly exposed to being challenged.
Maintain order in HR documentation and ensure HR procedures comply with the law. Internal documentation should be reviewed as if an inspection were to begin the next day. The Act creates an interinstitutional ICT system for exchanging data between the National Labour Inspectorate, the Social Insurance Institution and the National Revenue Administration in order to analyse the risk of violations. This means that inspections will increasingly be selected algorithmically, based on discrepancies between tax, insurance and HR data. Employing entities that make extensive use of civil-law contracts while maintaining only a small number of employees on employment contracts may thus be automatically identified as higher-risk entities.
Verify cooperation with employment agencies. Business responsibility will increasingly also include the choice of partners that guarantee compliance with regulations.
Use professional support. In the event of doubts about the classification of a given contract or the way in which cooperation is structured, it is worth seeking legal assistance. The new regulations provide for the possibility of obtaining an individual interpretation from the Chief Labour Inspector as to the nature of a given legal relationship. At the employer’s request, the Chief Labour Inspector may determine whether a given contract constitutes an employment relationship within the meaning of Article 22 § 1 of the Labour Code. The interpretation costs PLN 40 and should be issued within 30 days of submitting a complete application. Importantly, an employer who complies with the interpretation obtained may not be subject to administrative, financial or punitive sanctions within the scope covered by it.
Flexibility Will Not Disappear, but It Will Cost More
Experts do not expect companies to abandon flexible forms of employment. However, the way they are used will change. Solutions that provide operational flexibility while maintaining full legal compliance, such as temporary work carried out by professional employment agencies, may become increasingly important. Data from the Polish HR Forum show that more than 80 percent of employees hired by agencies affiliated with the organisation already perform work on the basis of temporary employment contracts.
“Temporary work remains one of the few models that combines flexibility with legal security. In an environment of growing regulatory requirements, it will become a natural direction of change for many companies,” says Ewelina Glińska-Kołodziej, CEO of employment agency Trenkwalder and Member of the Management Board of the Polish HR Forum.
The coming year will therefore be a test not only for HR departments, but above all for the maturity of risk management in companies. Businesses that use the transition period to organise their employment models may treat the reform as a competitive advantage. Those that regard it as a time to wait out the changes risk having decisions on how people are employed made not by the management board, but by a labour inspector.
