Self-employment - costs

Service Business

For employers, one of the most advantageous forms of recruiting an employee is signing a contract with a person who has decided to become self-employed. Compared to the employment relationship, cooperation with a sole trader enables the employer to significantly reduce costs. Moreover, with such a solution, he is not covered by certain obligations as a contribution payer. It should be remembered that receivables under contracts of mandate, contracts for specific work and management contracts may be included in tax costs only upon their actual payment.

Self-employment and a civil law contract

A civil law contract may be concluded when the working conditions do not have the characteristics of an employment contract (in the employment relationship, the employed person performs work for a fixed, specified remuneration, under the direction of the employer, for his benefit and risk, and at a place and time designated by him). Failure to comply with these provisions may result in the imposition of a fine and the establishment by an employment court of the existence of an employment relationship in the event of employee claims.

The National Labor Inspectorate supervises the correctness of employment, which may inspect employers without prior notification of the inspection. Civil law contracts define the form of activities or a description of the work. It should be remembered that these are not outsourced activities, and the self-employed contractor is not at the full disposal of the client.

Self-employment and the employment contract

It is often the case that a self-employed person in fact performs work under the terms of an employment relationship. The transition from an employment contract to a civil law contract and self-employment, with the simultaneous lack of actual changes in working conditions, is treated as an attempt to circumvent the law. Article 22 of the Labor Code lists the characteristics of the employment relationship, the occurrence of which in the case of self-employment may result in establishing the existence of an employment relationship by the labor court.

Types of self-employment

Non-agricultural economic activity and self-employment

Non-agricultural business activity is conducted in an organized, continuous manner, on its own behalf and on its own account. From 1 July 2011, non-agricultural business activity is registered with the CEIDG-1 application for business registration of natural persons. The Central Register and Information on Economic Activity was established to simplify the procedure for setting up a business. The CEIDG-1 application for natural persons is also an application for entry into the national official register of national economy entities (REGON), an identification or update application to the head of the tax office (NIP), a declaration on the choice of the form of taxation with personal income tax. This application also constitutes a notification or a change in the notification of the contribution payer to the Social Insurance Institution or a declaration on continuing social insurance for farmers.

A person running a non-agricultural business is required to calculate and pay taxes, submit tax forms and calculate and pay insurance premiums. A self-employed person performing work for his former employer cannot pay preferential ZUS contributions for new entrepreneurs and is obliged to settle accounts on general principles according to the applicable tax scale, keeping a tax book of revenues and expenses.

Self-employment and activity performed in person

Activities performed in person concern the provision of services only to the company that acts as the payer. This means that such a company calculates and pays tax advances (in cooperation on the basis of civil law contracts - 19% of receivables less lump-sum tax deductible costs in the amount of 50% from copyright or 20% from contracts of mandate), submits tax forms and calculates and pays insurance premiums (this obligation does not apply to a specific task contract concluded with an entity other than the employer).

Revenues from activities performed in person are revenues:

  • from personally performed activities under a management contract,
  • from the personal performance of services on the basis of a contract for a specific task or commission for the benefit of only entrepreneurs, a legal person and an organizational unit without legal personality (but not for the benefit of the public) or the owner or manager or administrator acting on his behalf, and the services are performed only for the needs of this property;
  • from personal creative activity: journalistic, educational, scientific, artistic, literary and coaching;
  • with a sports scholarship;
  • from playing sports;
  • from performing the function of a referee at sports competitions;
  • from the activities of the clergy (but not from the employment contract);
  • from scientific, cultural, journalistic and art-related competitions;
  • from social or civic activity (also compensation for lost earnings);
  • from activities ordered by authorities, local government or state administration, as well as by the court and the public prosecutor's office (experts in court, investigative and administrative proceedings, public collectors and payers, provided that they are not natural persons running a business who charge themselves remuneration);
  • from participation in committees appointed by self-government or state authorities or administration;
  • being a member of management boards, supervisory boards, committees or other governing bodies of legal persons (regardless of the method of appointment); such persons are not covered by the right to flat-rate income costs, increase of tax deductible costs up to the amount actually incurred, deduction of costs in the amount of actually incurred expenses for commuting by means of public transport and increased deductible costs for living outside the locality constituting their place of work; if the self-employed person performs work for more than one entity, his annual tax deductible costs may not exceed the amount of PLN 1,840.77;
  • on arbitration activities - Polish arbitrators participating in proceedings with foreign partners.