Permanent workers based in Poland will be normally entitled to the benefit of Polish employment law, regardless of whether they have an English law contract or a contract that is expressly subject to Polish law. The fact that they are working remotely for a UK employer will not be relevant.
Many of the protections conferred by Polish law will be familiar to UK employers, since they derive from EU law – for example the laws on discrimination and working time. However the elements of employment protection that derive solely from Polish local law are different, and in some important respects more generous to a worker than the corresponding rights under UK law.
Assuming Polish law applies to the working relationship, it is unlikely that the worker would be able to bring proceedings in an employment tribunal as well as the Polish employment courts in the event of a dispute. However there may be some circumstances where such a claim may be possible – for example if the remote worker is a UK national, or there are additional factors connecting the employment to Britain, other than the mere fact of the employer being based in the UK.
Tax and social security
If the worker engaged is resident in Poland and performs work on the territory of Poland, they will be subject to Polish tax (basic rate currently 17% and from the surplus over PLN 85,528 of the tax base annually – 32%) and employer and employee social security contributions (currently approx. 20.5% (with some variation possible due to different accident contribution’s rates) and 13.71% respectively) on their gross earnings, even though these are derived from a UK employer.
If the Polish employee is employed directly by the UK based employer, Polish employee will be obliged to pay their own tax (the payer of personal income tax on the remuneration will be the employee). Therefore the UK employer is not liable to pay the personal income tax in Poland on the remuneration paid to the Polish employee. Whereas, the social security contributions payer in this case, will be the UK employer. In order to register the employee with the tax and social security authorities, the UK employer needs to have a tax identification number (NIP), which is obtained by applying to the tax authority. Only then the UK employer can register in Social Security Institution (ZUS) as a contribution payer. The UK employer is therefore advised to appoint a payroll agent in Poland to facilitate the registrations and appropriate deductions from the worker’s salary.
Assuming the worker is not conducting any business on behalf of the employer in Poland, is not representing the UK employer in Poland, is not authorised to negotiate and conclude contracts on behalf of the employer and is simply working from home, the engagement of a sole remote worker is not likely to amount to the creation of a permanent establishment to tax purposes, which would trigger an obligation for the UK employer to pay Polish tax on the income it derives from any operations in Poland, as well as having potential liabilities in relation to the Polish equivalent of VAT.
If the worker is moving from the UK, there is a possibility that for a least the first tax year, they may need be liable for tax in both jurisdictions. Any adverse impact for the worker would however be alleviated by the UK/Poland double taxation treaty (though it is necessary to apply in advance for treaty treatment to avoid the need to pay double tax up front). The same may apply to social security contributions, though there are some exceptions for temporary employment arrangements (known as the “detached worker” provisions) under the UK/EU Trade and Cooperation Agreement, which would avoid the need for social security contributions to be paid in both the UK and Poland.
Company law considerations
The arrangement envisaged above (ie the appointment of a single home-based worker) is not likely to result in a requirement for the UK employer to register with the Polish authorities as an overseas corporate entity.
However the position would be different if the worker is conducting any business on behalf of the employer in Poland, if more than one worker is involved, or if any office or other facilities were to be made available for them to use. Generally, any organized form of work performed in Poland require considering setting up a company in this jurisdiction. It is so also for practical reasons (e.g. entering into contracts or relations with local authorities).
Provided the worker is EU national, there will be no requirement to obtain a visa or work permit.
However if the worker is a UK national they will need to comply with Polish immigration rules, unless they were already resident in Poland as at 31 December 2020. The UK/EU Trade and Cooperation Agreement does not contain any provisions to facilitate new remote working arrangements of the kind envisaged by UK nationals.
To legally work while staying in Poland, a UK national must have a basis to stay in Poland (e.g. under visa-free travel, visa, residence permit) and right to work (typically a work permit). An employer who intends to hire a UK national in Poland applies for a work permit at the voivodship office in Poland. The worker does not have to be present in Poland during the procedure.
Application for a visa is submitted by worker on his/her own, at the Polish consulate in the country of residence and the application for residence permit – at voivodship office during a legal stay in Poland. Various documents are required. If the stay is based on work being performed in Poland, it will be necessary to attach documents from the employer who intends to employ a foreigner in Poland. A work permit has to be obtained first before applying for a work visa.
A UK national may start working once the work permit is obtained. Typically it takes couple of months to complete the process of getting all the required documents. This should therefore be taken into account while planning such employment.
This is document is a very brief summary of complex legal provisions. Specific advice should always be sought, based on your organisation’s precise situation.
For advice on Polish law please contact Polish coordinator, Bartosz Marcinkowski, Partner at DZP.
For advice on English law please contact David Mills, Employment partner at Mills & Reeve.