The Role of an Employer of Record in the Polish Business Landscape

Ani Gasparyan

Last updated on March 14, 2024 | 10 min read

Employer of RecordIT marketPoland

Poland has emerged as a thriving hub for businesses seeking new opportunities in Eastern Europe. As companies explore the potential of this dynamic market, they often encounter various challenges related to local regulations, employment laws, and cultural nuances. One solution gaining popularity to overcome this challenge in Poland is the concept of an employer of record (EOR). In this article, we’ll discuss the significance of an EOR and how it can simplify the complexities of managing a workforce in this diverse and rapidly evolving business environment.

Understanding employer of record (EOR)

An EOR acts as a third-party service provider that takes on the responsibilities of employment compliance, payroll processing, and HR administration on behalf of a company. This model allows businesses to establish a presence in a foreign country without the need to set up a legal entity. In the context of Poland, where regulatory requirements can be intricate, an EOR can serve as a strategic partner for companies looking to navigate the local business landscape effectively.

Furthermore, the expertise offered by an EOR extends beyond administrative functions, encompassing in-depth knowledge of the local market and cultural nuances. By leveraging the insights of an EOR, companies can enhance their understanding of the Polish business environment, fostering smoother operations and stronger connections within the local community.

Key benefits of EOR in Poland

Poland, like many other countries, has its own set of employment laws and regulations. From employment contracts and working hours to social security contributions and taxation, complying with these regulations is essential for businesses to operate legally. An EOR in Poland acts as a knowledgeable partner that ensures full compliance with local labor laws, helping businesses avoid legal pitfalls and penalties. Let’s discuss some of the key benefits of EOR in Poland.

Flexibility

One of the key advantages of employing an EOR in Poland is the flexibility it offers to businesses. Whether you are exploring the market, testing the waters, or planning a long-term expansion, the EOR model allows you to scale your workforce up or down without the bureaucratic hurdles associated with establishing a legal entity. Hence, the flexibility provided by this approach is beneficial in the dynamic Polish market, where unforeseen opportunities and challenges may emerge at any given moment.

Mitigating risks

Operating in a foreign country introduces a range of risks, from legal and regulatory issues to cultural and language barriers. An EOR assumes the responsibility of mitigating these risks, allowing businesses to focus on their core operations. By leveraging the expertise of a local EOR, companies can enhance their risk management strategies and build a solid foundation for continuous growth in Poland.

Cost-efficiency

Establishing a legal entity in a new country requires significant time, resources, and capital. On the other hand, engaging an EOR in Poland provides a cost-effective alternative. With optimized processes and local expertise, an EOR can help companies avoid the upfront costs associated with legal entity setup while ensuring compliance with local regulations.

The difference between Poland PEOs and Poland EORs

Now that we have a core understanding of Poland EOR, let’s discuss how it differs from Poland professional employer organizations (PEOs). Understanding the distinctions between Poland PEOs and Poland EORs is crucial in the process of international business expansion into Poland. While both PEOs and EORs assist businesses in managing their workforce in a foreign country, they operate with different focuses.

A Poland PEO typically engages in co-employment arrangements, where it shares employer responsibilities with the client company, including HR management, payroll, and benefits administration. On the other hand, a Poland EOR acts as a third-party service provider, taking full responsibility for employment compliance, HR administration, and payroll processing on behalf of the client. The key difference lies in the level of employer responsibility each model considers. Companies seeking a more hands-on approach may find a PEO suitable, whereas those aiming for a streamlined and fully outsourced solution often opt for an EOR to navigate the complexities of the Polish business landscape.

Interesting to know

When diving deep into the challenges of the employment processes and the significance of Poland EOR services, it’s important to highlight that the transfer of intellectual property in Poland is legally binding only when the document (contract) is manually signed or executed using a qualified electronic signature (QES) based on the European eIDAS standard. Notably, if a company employs DocuSign for contract signing with a developer, the transfer of intellectual property does not take place, creating a potential trap for companies. Thus, businesses should be careful and consider collaborating with a trustworthy local recruitment agency, EOR, or a local law firm.

Moreover, in the context of entering into a business-to-business (B2B) contract with Polish employees, it is essential to ensure the contract is bilingual. This is crucial because legal cases progress more efficiently when documents are presented in both English and Polish. Polish courts exclusively consider documents in Polish and will require certified translations of all evidence if the documents are solely in English.

Employment in Poland

Vacation leave in Poland

In Poland, vacation leave is an essential component of the employment landscape, highlighting the significance placed on work-life balance. Employees have a minimum of 20 days of paid annual leave, with the possibility of additional days based on factors such as seniority, years of employment, or industry-specific regulations. Employers typically engage in a cooperative process with their staff to schedule vacation periods, ensuring the effective operation of business activities. Poland’s vacation leave policies align with the European Union standards, fostering a culture that values employee well-being and the importance of taking adequate time off for rest and recreation.

Sick leave in Poland

The sick leave policy in Poland is designed to support employees facing health challenges while maintaining job security. When employees fall ill, they are entitled to sick leave benefits, which encompass both full and partial compensation, depending on the length of the absence. During the initial 33 days of sick leave, employees receive 80% pay. A medical certificate is generally required to validate the need for sick leave. Employers are obliged to respect and adhere to these regulations, recognizing the importance of supporting employees during health-related absences. This approach reflects Poland’s commitment to ensuring the well-being of its workforce and fostering a healthy and productive work environment.

Parental leave in Poland

In Poland, parental leave is a crucial aspect of the country’s family-oriented policies. Employees have the right to paid parental leave, and the financial coverage comes from the government rather than the employer. The standard duration of leave for the birth of a single child is 20 weeks, with an extension to 37 weeks in the case of multiple births (five or more children). Mothers are required to use at least 14 weeks following childbirth, but they have the option to return to work if they choose, allowing the father to utilize the remaining leave.

Additionally, fathers are entitled to a two-week leave, to be taken before the child turns two years old. Subsequently, parents can take up to 32 weeks each of parental leave, either concurrently or separately. This system aims to promote gender equality in parenting and provides a supportive environment for families to balance work and childcare responsibilities.

Taxation in Poland

In Poland, taxation for both employees and employers is an essential aspect of the country’s legal policies. Employees are subject to a progressive income tax system, with rates ranging from 17% to 32%, depending on their income level. Social security contributions, including health insurance and pension contributions, are also deducted from employees’ salaries.

Employers in Poland take the responsibility of contributing to social security funds, covering health insurance and pension contributions on behalf of their employees. Additionally, employers are subject to corporate income tax on their profits, with a standard rate of 19%. Small businesses may benefit from a reduced rate of 9% on their taxable income, up to certain circumstances.

Health coverage in Poland

In Poland, health coverage for employees and employers is primarily provided through the public healthcare system. Both employees and employers contribute to this system through social security payments, which include mandatory health insurance contributions. These contributions help fund the National Health Fund (NFZ), the entity responsible for managing and allocating resources to healthcare providers across the country.

Bottom line

As Poland continues to attract businesses seeking expansion opportunities in Eastern Europe, the role of an EOR becomes increasingly significant. By partnering with an EOR, companies can overcome the complexities of local regulations, achieve flexibility in workforce management, and mitigate risks associated with operating in a foreign market. As businesses strive for success in Poland, the EOR model proves to be a strategic and efficient solution for navigating the trickiness of the Polish business landscape.