Poland: Social Insurance Institution inspections threaten businesses

1. Inspections of civil law agreements

   On 1 January 2017, a minimum hourly wage of PLN 13 per hour was introduced for persons performing work under a mandate agreement, and along with it, inspections authorities announced that they will double the number of inspections of businesses. There is no doubt that those inspections will seek, where possible, to change existing civil law agreements into employment contracts. This will result in immediate tax and social insurance arrears arising for the employer, which may in turn threaten the further existence of an entity that had been employing a large number of workers under civil law agreements.
   
   

2. Questioning specific task contracts

   Based on our experience to date, we anticipate that 2017 will be another year in which Social Insurance Institution inspectors will be questioning specific task contracts. To guard against that threat, we recommend conducting a review of all contracts concluded and, where necessary, introducing changes to minimize the risks involved.
   
   

3. Takeover of employees by external companies
   
   A recent judgment by the Supreme Court of 8 February 2017 (I PK 72/16) confirms that insurance optimization, which consists in transferring employees to an external company, does not exempt an employer from paying amounts due to employees and the Social Insurance Institution. This means that entrepreneurs using this type of optimization bear an increased risk resulting from the ineffectiveness of such an employee transfer and the unreliability of the entity that takes over the employees.

All of the above areas pose a serious threat to the further existence of businesses that are inspected, and may also lead to financial, criminal and penal-fiscal liability on the part of management boards and those liable for employment and financial matters. By conducting an appropriate review of all contracts concluded and introducing any necessary changes, you can minimise those risks. We encourage all those interested in checking their situation in light of possible inspections by the Social Insurance Institution to contact our HR services team.