How to Pay Remote Contractors in Poland?
Poland makes an ideal destination for companies looking to expand their teams. Most Poles are well educated, so employers have no trouble getting skilled and multilingual workers. Moreover, they cost far less than having full time employees in their own countries.
So if you too want to expand your team by hiring independent contractors in Poland, this post will give you the overview you need. But before we dive into it, let us skim through the differences between an employee and an independent contractor.
Employee vs. independent contractor: What’s the difference?
Who is an employee?
An employee works for an employer on a regular basis for a fixed monthly remuneration called salary. The employee is hired for a specific job that comes with its own tasks, duties, responsibilities, and authorities. The employee may be part-time, full-time, or temporary, and the company maintains full control over their work.
Who is an independent contractor?
An independent contractor is a person who provides services as per the contract between them and their client/employer. They get paid by the employer on a freelance basis.
A contractor is free from any control or influence of the employer and can decide how to complete the assigned task. They are also entirely responsible for the outcome of the project.
Differences between hiring an employee and independent contractor in Poland
A company can hire employees in Poland once it establishes its Polish legal entity. These are the responsibilities of an employer as they hire Polish employees:
Employers need to give their employee a legally mandated contract before they begin work at the company. The contract should be written in Polish or have a Polish translation.
Setting up and running a payroll
An employer must open a local Polish bank account and gather all employee information to run the payroll.
Minimum wages and working hours
The minimum wage in Poland is PLN 3010/month. According to the country's Labor Code, employees can work eight hours per day, forty hours per week. Employees may work beyond these hours, though the employer has to approve the overtime. The overtime cannot exceed 150 hours/year, and the employer must compensate employees for overtime work at 150 - 200% of their regular pay or through additional time off.
What statutory benefits must an employer grant their Polish employees?
Annual leave, paid leave, and maternity leave
An employers must give employees 20 to 26 paid vacation days a year, depending on how long they have been employed or in school. Paid leave time may also include four sick days. Employees are eligible for paid sick leave up to 33 days against a certified doctor's note. They also get 13 paid public holidays and maternity or paternity leave.
Termination of employment and severance
If an employer decides to terminate employees, they must be given notice as well as severance. The notice period may vary depending on the type of contract and the length of the employees' service. The severance pay typically depends on the employees' time in the company.
Tax obligations for employers in Poland
An employers is obligated to deduct personal income tax from their employees' paychecks and submit these payments to the tax office until the 20th of the following month.
Poland social security contributions
Similarly, social security contributions are mandatory in Poland. It is necessary for an employer to contribute to ZUS (Poland's social insurance institution) on behalf of their employees. The employer pays 22.14% of each employee's gross pay, while employee pays 14% of their gross annual remuneration.
An employers must deduct the contribution amount from their employee's salary and pay it at the social security office until the 15th of the next month.
So, as you can see, having a legal entity in Poland and hiring employees can be complex and costly. If you don’t necessarily want to control the hiring and payroll process of your Polish workers, collaborating with an EOR or hiring independent contractors may turn out to be far better for your company.
A company can hire Polish contractors without establishing a business entity in Poland. This means, the employer does not have to withhold any portion of the contractor’s pay for income tax or social security contributions. They will also not need a local Polish bank account to pay contractors.
It is no doubt a lot easier to work with independent contractors. However, you will need to take the time to establish a reliable way to pay them correctly and on time. Here are a few payment methods that you can use to pay your Polish contractors.
What payment methods can you use to pay remote contractors in Poland?
The most popular forms of payment used and accepted in Poland are:
Most companies prefer to pay contractors using SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunications. It's a secure method that ensures the contractor's pay is safely transferred to their bank account in their home country. Various financial institutions around the world use it widely.
There are, however, certain drawbacks such as SWIFT expenses adding up in the long run. This is because payments are usually routed through various banks before reaching the receiver, and each bank typically levies a transfer fee.
So, if your contractors don't mind losing approximately $20 to $40 or more in each remittance, they may not be keen on SWIFT. Moreover, the fees charged by banks aren't consistent, and your contractors might find it frustrating to have varying fees charged to them each time you send them money.
You can consider working with any local Polish bank to pay your contractors. However, some Polish banks may not be willing to work with a company that is not registered in Poland.
Money transfer company
Though there are several perks to using money transfer companies like Xoom, Remitly, and Wise, their main advantage is the convenience. You can transact via their websites or app, making transfers easy and quick.
These transfer services may require you to use their company-issued debit cards as a medium to pay and charge a fee every time you use the card. The exchange rate markups of such money transfer companies are slightly better than those of banks, but these charges and percentage-based fees may mount in the long run.
This is particularly true in the case of Poland which does not use the Euro as its official currency. Though it is part of the EU, the country uses Zloty or PLN.
Traditional money transfer services
Companies such as Moneygram and Western Union offer online services and physical locations, making them easy to access. Their markups on currency rates are also lower; however, like most money transfer services, they do levy percent-based fees.
The popularity of cryptocurrency as a payment method has been rapidly growing in the last few years, and Poland has no law barring this kind of exchange. Hence, you can pay your contractors through Bitcoin, Ethereum, Dogecoin, or others, depending on your cryptocurrency setup.
Some may assume that crypto income is outside any traditional payment methods and hence impervious to any taxes or civil law, but it's not so. Crypto income is still an income, and therefore your contractors will be charged tax on it.
Are you looking to hire independent contractors for your company? Read this article to get all the information you need to streamline your search.
At Starkflow, we offer a cost-effective service to rapidly and legally hire employees in Poland. You don't have to take the risk of hiring contractors or go through the expense of setting up a Polish entity. We will help you in the hiring process and set up the payroll, complying with every Polish employment law.
As the employer of record, we ensure every detail is attended to during the hiring or onboarding process and while setting up payroll. We keep employees happy with their work agreement and have a quick, transparent onboarding. We offer them great benefits and a reliable employment contract compliant with local regulations. We ensure that the agreed monthly salary is paid on time and that our employees are always taken care of.
If you are looking for more information, feel free to contact us.