The Ministry of Family, Labor and Social Policy in Poland has prepared a draft law that will impose a social security contribution on all civil-law contracts. This plan has been discussed in the Economic Committee of the Council of Ministers. The business community, including the Business Centre Club, the Confederation of Leviathan, and Useme.com, are unanimously against it. Applying these charges to all contracts, especially contracts for specific work, amounts to punishing active and entrepreneurial people, such as freelancers, who take the opportunity to perform additional, often small, projects. This will also further hinder small and medium-sized companies, many of which are already struggling. As a result of full imposition of social security contributions, unemployment will increase, and a large proportion of contracts will be settled in the grey zone. The Polish economy will also lose a vital element of innovation and competitiveness.
The Ministry of Family, Labor and Social Policy has finished working on a project for the universal imposition of social security contributions on all civil law contracts, including contracts for specific work. This means that two laws will be changed—the law on social insurance and the law on occupational accident and disease insurance. These projects have just been discussed in the Economic Committee of the Council of Ministers. The law amendment will see all contracts for work and other contracts covered by mandatory social insurance, such as pensions, disability, sickness and accident insurance. The only exceptions will be for works performed by secondary school students or university students under 26. In the case of contracts for specific work, sickness insurance will not be mandatory.
The changes will affect at least 2.3 million people working on commission and similar contracts, including 330 thousand freelancers, mainly working under contracts for specific work, as well as over 2.6 million small and medium-sized companies, which primarily use freelance services.
Business response to the plan of introducing a compulsory social insurance contribution on all contracts
The global economy has significantly slowed down, especially the European Union’s economy. Additionally, the German economy, which is strongly linked to Poland, has entered a technical recession in 2023. Orders in Polish companies from abroad are decreasing as is the Polish export. This all leads to companies needing fewer employees or collaborators, such as freelancers.
In this difficult time for many companies, the Ministry of Family, Labor and Social Policy, led by Minister Agnieszka Dziemianowicz-Bąk, plans to introduce compulsory social insurance contributions on all contracts, to further increase the already growing labor cost in Poland and put more hurdles for freelancers trying to earn more. What do NGOs and market experts have to say about this?
Katarzyna Lorenc, an expert from the Business Centre Club in labor market, management, and work efficiency, says -“We strongly oppose further attempts to impose social security contributions on contracts for specific work and increase the burdens associated with the commission contracts. The Ministry’s actions are harmful to the Polish economy and are part of the trend of increasing the costs of businesses, including labor costs. The Polish economy is becoming less competitive and low-profit. It will expose us to bankruptcies in situations of economic shocks and crises. The obvious beneficiary of these actions is ZUS (Polish Social Insurance Institution). Those who use contracts understand their operation and can take care of themselves, for example, voluntarily insure themselves if this type of contracts is their only source of livelihood. However, usually, people combine regular employment with commissions. Additional burden is a punishment for their professional activity. The beginnings of entrepreneurship and freelancing also start from civil-law contracts. It is hard to justify hindering the entry into the market with their services when starting with personal business activities with additional burdens.”
Storm hits companies and labor market
It’s worth mentioning that working in Poland in the last two years has become very expensive, due to a 40% increase in the minimum wage- a phenomenon on a global scale, and high CPI inflation (close to 40% in the last 3 years). Even worse, from January 1, 2025, the minimum wage is set to increase by another 7%. But that’s not the end of adverse changes for firms. The leftists have already announced that they are working on a new 9% tax on health. As a cumulative effect of these negative changes, companies start to lay off employees, and everything suggests that we are just at the beginning of this wave of layoffs. Another phenomenon that increasingly hits companies is bankruptcy.
In the last two years, especially in 2023, many companies have closed, suspended their activities, or drastically reduced them. Over 0.55 million small businesses just last year stopped operating, employing workers and cooperating with other businesses, as well as stopped paying taxes and other public levies. What’s worse, more and more companies have severe difficulties with payments, getting clients, and conducting business. For 68% of businesses, payment backlogs are a barrier to conducting business activity. Every fifth company doesn’t pay its contractors on time because it itself doesn’t get paid by its clients, according to the “Invoice arrears in Polish companies'” report.
Effects of introducing compulsory contribution to all contracts
The Ministry of Family, Labor and Social Policy justify their plans for the introduction of compulsory social insurance with the need to protect contractors and workers against lack or low pensions in the future or lack of health care. However, as the research of Useme.com, a leader in managing remote work in Poland and CEE, which has been studying freelancers annually for nearly a decade shows, most of them (59.9%) add to their regular salaries. Przemysław Głośny, CEO of Useme.com, summarizes – “Freelancing in Poland is primarily an additional source of income for specialists, as the vast majority of them already are employed under a contract of employment. And that means taxes and all contributions are already paid. Therefore, imposing contributions on all contracts will result in paying these charges several times, thus decreasing freelancers’ salaries by 28%, without any clear benefits in return. Having to pay health insurance several times a month does not increase health care for freelancers, and no one seems to believe anymore in the argument about saving up for a “decent,” state pension. As shown, e.g., in forecasts by ZUS (Polish Social Insurance Institution) and the European Commission, shortly the replacement rate will be only 20%. This means that the future pensioners will receive only 1/5 of their last salary every month. Is that a decent pension?”
We also cannot forget the fact that 2/3 of Polish freelancers earn by small orders up to 3 thousand PLN a month (nearly 40% of freelancers receive up to 1 thousand PLN a month, and 27.7% of freelancers earn between 1 thousand and 3 thousand PLN), who primarily work for micro-firms and small and medium-sized enterprises, whose financial situation has considerably worsened in the last 2-3 years.
Robert Lisicki, director of the Department of Labor of the Confederation of Leviathan, warns – “Employers are uneasy about another increase in the costs of cooperation with individuals. When introducing new costs, there is a lack of discussion about reducing the current burdens on employers and employees. The proposed solution can bring more negative effects than benefits. It will reduce the already too small supply of work. It will worsen the situation of the most active people, who take the opportunity to perform additional, often small tasks. It will also worsen the situation of those earning while taking care of children (e.g., during parental or individual leave). Moreover, it may lead to an increase in unreported contracts.”
Less obvious consequences
Imposing social insurance contributions on contracts will also result in a decrease in the number of freelancers working legally and paying taxes in Poland, both Polish and those working abroad. Some of them will move to the grey zone, a certain group will start working only abroad, and some will completely stop their freelance activities. Companies, especially the smaller ones, will reduce the number of collaborators they cooperate with in Poland and will take advantage of other cheaper, foreign possibilities. What’s more, as a result of the medium period, the state budget will not only fail to gain the additional 4 billion PLN, which is talked about in the case of imposing social insurance contributions on all contracts for work and contracts for specific work or the amount of 0.6 billion PLN in case of introducing compulsory contributions to contracts for specific work only, but might lose much more in the form of a decreased tax and contribution source.
Przemysław Głośny, CEO of Useme.com, sums up – “As a result of imposing social insurance contributions on contracts for specific work, the Polish economy will lose a very important element of innovation – well-educated, highly qualified intellectual workers, knowing languages, giving it a competitive edge on the global market. In the end, the perception of Poland as a modern and innovative economy, a friendly one for companies as well as the freelancing industry, will worsen.”
As a consequence of a planned introduction of compulsory social insurance contributions on all contracts, freelancers’ earnings will be deducted by nearly 1/3, or in case the companies were to take all the costs of imposing contributions to contracts upon themselves, then it would be a 40% increase in the costs of such contracts.
Source: https://managerplus.pl/kontrowersje-wokol-oskladkowania-umow-cywilnoprawnych-biznes-protestuje-przeciw-planom-ministerstwa-69304
