New powers of the National Labour Inspectorate
At the beginning of September, a draft law appeared on government websites that could significantly impact the labor market – inspectors of the National Labour Inspectorate (Państwowa Inspekcja Pracy, PIP) are expected to gain the authority to issue administrative decisions that convert civil law contracts into employment contracts.
Important: A PIP inspector will exercise these powers if, during an inspection, they determine that a contract for specific work, a B2B (Business-to-Business) contract, or a contract for a task meets the criteria of an employment relationship as defined in Article 22 §1 of the Labour Code.
The inspector’s decision is to take effect from the moment it is issued. An appeal against the decision will not halt its effects “going forward” (from the date of issuance). Simultaneously, in the course of any potential court proceedings, it will be the employer who must prove that an employment relationship did not exist — the burden of proof rests on them.
The draft law also provides for a significant increase in financial penalties for employers – for example, an increase in the penalty for entering into a civil law contract where an employment contract should apply under the law, potentially up to PLN 60,000.
Consequences of conversion
The consequences of converting a B2B contract into an employment contract “going forward” (from the date the decision is issued) include, in particular:
- Subjecting the contractor to the provisions of the Labour Code – the contractor formally becomes an employee, and therefore the employer should, for example, create their personnel files, direct them for medical examinations, ensure employee rights, and register them with the Social Insurance Institution (ZUS);
- The contractor ceases issuing invoices and independently paying PIT advances – this obligation is taken over by the employer in accordance with labor law regulations;
- If the contractor does not operate a business in any other capacity, e.g., does not provide services to other clients, they should deregister their business from the CEIDG (Central Registration and Information on Economic Activity) and from ZUS – the responsibility for paying social security contributions will be assumed by the employer.
Filing an appeal against the PIP decision does not suspend the above effects.
In the context of “retroactive” effects (up to the date of the decision), many uncertainties arise:
- Retroactive consequences will take effect after the appeal period for the decision expires, and, if an appeal is filed, after the final court ruling;
- The employer’s risk primarily concerns treating remuneration paid to the contractor’s account over the last five years of cooperation as “net” amounts and “grossing” them according to the terms of employment contracts – thus calculating PIT advances and ZUS contributions. The employer is the payer of these remuneration components and is therefore responsible for their correct calculation and payment. In practice, this means that authorities may direct their claims toward employers regarding amounts paid by both the employer and the employee. The employer may, however, seek reimbursement from the employee through civil proceedings;
- The employee’s risk involves outstanding social security contributions and significant additional PIT payments – depending on the method of taxing business activity, the consequences may vary. A particular challenge may be the lack of recognition of income-related costs in the PIT paid (such as typical car lease costs). ZUS contributions and PIT advances are paid by the employer, but they can seek repayment from the employee through civil proceedings.
Both parties to the contract also face risks related to VAT:
- The employer who deducted VAT from the received invoice and considered the net amount as a deductible cost of income must consider the risk of extensive settlement adjustments or accusations of tax fraud;
- The employee is exposed to the risk of being accused of issuing “fake invoices,” which is currently treated very severely by law – VAT-related offenses may carry penalties of up to 25 years of imprisonment (depending on the invoice values).
Currently, the draft law does not contain provisions limiting the above risks in terms of VAT.
How to prepare for the changes
In light of such significant changes, it is worth preparing in advance for a potential inspection.
An employment relationship exists when an employee performs work for remuneration, for the benefit of the employer, under their direction, and at the time and place specified by them. Entering into a civil law contract in relation to an arrangement that meets the above conditions may entail the risks described. To mitigate them, companies should consciously analyze the differences between a B2B contract and an employment contract and ensure real differentiation of these relationships within the organizational structure. Furthermore, an audit of already concluded and ongoing civil law contracts within the organization is advisable.
Companies that extensively use civil law contracts must be aware of the risks that — if ignored — could lead to serious consequences.
When will the law come into effect?
The changes will come into effect on January 1, 2026. Additionally, from April 2026, PIP inspectors will have the option to conduct inspections remotely.
Businesses have limited time left to conduct the required audits and implement organizational changes.
