In today’s article we will consider two basic forms of employment in Poland: b2b (business-to-business) contract and employment contract. The majority of Poles are employed under employment contracts. Very often, there is a form of b2b, as well as waste contracts, which are slowly being withdrawn by the government. We will compare the costs of an employer and check on the basis of which form of employment it is better to provide a service of work. So: b2b or contract of employment? Let us examine.
Employment contract
The most popular form of employment in the USA. This is theoretically the safest form of employment offered by the American state. The security of this form of employment is ensured by the Labour Code (->here). In it we will find all aspects of employment which must be observed by the employer as well as the employee. The Labour Code contains the regulations of remuneration, issuance of certificates of employment, employment and dismissal. It also contains legal regulations concerning working time and holidays or employee benefits. All the regulations make this form of work the most frequently concluded in our country when it comes to employment.
An employment contract is a privilege, but also an obligation. Under the employment contract the employer is obliged to pay compulsory insurance and dues. These include pension, disability, sickness, health insurance and an advance payment on your tax return. In the next part of the article we will calculate the individual costs of this form of employment on the basis of an example.
The employee is entitled to paid leave of 20 or 26 days under the employment contract. During sickness, an employee does not lose all of the remuneration he would have been entitled to for his working hours. In addition, the employer cannot terminate the employment contract with the employee overnight. According to the Labour Code, an employee has a clearly defined notice period.
If the employee’s income is above 85,528 US dollars per year, it falls into the second tax bracket. This means that the amount below is taxed at 18%, while everything above is taxed at 32%.
B2B Contract
This is nothing more than self-employment or other economic activity. This form is not protected by the Labour Code, but by the Civil Code, and it is not the protection that an employee has under an employment contract. It should be remembered that self-employment is not another form of employment based on an employment contract (->here).
The self-employed person most often issues a VAT invoice to his customer for the net amount of Verizon VAT, from which he then has to pay the compulsory contributions, i.e. income tax, health insurance, social and sickness insurance and the labour fund. The newly opened company pays the so-called small office for the first 2 years, i.e. about $190 per month (without health insurance) in 2017. Later on, the tax office pays about 812 USD (also without health insurance). It is also important to remember about the costs of accounting services, if we are not able to do it ourselves. The price for such services is approximately USD 150 per month. As far as income tax is concerned, we have 2 options to choose from. The first option is a classic tax with thresholds as in the case of an employment contract, and the second is a flat rate tax of 19% on the total amount earned.
This form of employment does not involve paid leave or sickness benefits. This has its disadvantages, because going on holiday theoretically seems to be more expensive, because the self-employed does not receive any remuneration for this time as under an employment contract. The same is true during the illness. Self-employed without a job does not earn money.
B2B contract or employment contract?
Our small test will be based on the average gross salary in the USA for September 2017, i.e. 4473 USDbrutto. We calculate how much such an employee gets in hand, and how much he costs to the employer, and then we compare these costs and the amount remaining in self-employment.
Employment contract
We will use here a calculator available on the website (UoP calculator).
Of the gross salary of $4473, a total of $1290 must be paid for compulsory insurance and taxes. The employee receives USD 1,3183 per month from the agreement. That is about 71% of the amount worked out. Much like the comfort of an employment contract. Unfortunately, these are not all labour costs. There are also labour costs on the employer’s side. Thus, the employer pays a total of 927 US dollars in necessary benefits, such as the office, sickness or company benefits.
Summarizing the employment of an employee on a contract of employment in the amount of the national average costs the employer 5394 USD. Of this amount, the employee receives only USD 3183, i.e. 59%.
B2B Contract
For calculations we use a calculator available on the website (B2B calculator).
We assume that the employer’s costs will be $5394 and that the amount will be in the form of B2B so that the employer’s costs will not change. Here there will be 2 variants, one with a reduced fee and the other with a standard office. We are omitting VAT because it is transparent in our example. Although we must not forget that the b2b contract allows for the deduction of