A contract for services is one of the most popular forms of employment. It is characterized by greater flexibility, no need to pay health insurance contributions, or the possibility of performing duties outside the client's office.
At the very beginning, it should be noted that a contract for services is a civil law contract. This means that when concluding, performing, resolving or settling any disputes , the provisions of the Civil Code (specifically art. 734-751) apply , not the Labor Code. A contract for services should be understood as an obligation of one person (the contractor) to perform a specific legal act (e.g. work) for another entity (the principal), under the terms specified in the contract.
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Employers often use a contract for services as a substitute for an employment contract, which is a lower cost for them. If the content of the contract requires that the duties be performed in person, for a fee and at a place and time designated by the client, then we are actually dealing with the performance of an employment contract. If, despite this, we work under a contract for services, such action by the employer may be the basis for a fine of PLN 1,000 to PLN 30,000 under Article 281 of the Labor Code, as well as for a lawsuit to establish a legal relationship in the form of an employment contract, which is associated with additional rights for the employee.
Differences between a contract for services and an employment contract
In the current economic situation, however, it is sometimes difficult to distinguish whether a person is performing their duties under an employment contract or a contract for services. A contract for services is distinguished from an employment contract by the following details:
- the contractor is not obliged to perform the order at a specific place or time, and is not dependent on the client,
- the order may be executed by a third party,
- a contract for services does not necessarily have to be paid,
- the salary does not have to be paid monthly,
- the contractor is liable with all his assets for any damage caused to the client or third parties in connection with the performance of the order.
What provisions must be included in a mandate contract?
The following elements must appear in the contract for services, which will be explained below: identification of the parties to the contract, description of the order and cooperation, deadline for completing the order and remuneration, and rules regarding liability.
- Identification of the parties to the contract
If the agreement is concluded between individuals, the agreement should include first names, last names, dates of birth, parents' names, residential addresses and document numbers of both parties to the agreement and the PESEL numbers of the parties. If the individuals who are parties to the agreement conduct business activity, the name of the activity and the Tax Identification Number will be required. If one of the parties to the agreement is a company, it will be necessary to provide the company's name, address of its registered office, entry number in the National Court Register, as well as persons authorized to represent the company. The place and date of the agreement should also be indicated on the contract.
- Description of the order and definition of the scope of cooperation
The parties must describe in detail what the order to be performed is to consist of. The more precisely it is described, the easier it will be to pursue any claims and resolve disputes. On the other hand, the contract should also include the obligations of the principal towards the contractor, including providing appropriate materials to perform the order.
- Deadline and remuneration
The contract should also regulate the duration of the assignment, specifying the start and end date (or indicating that the contract is for an indefinite period). Of course, the contract can be terminated during its duration.
Since 2018, a minimum hourly rate has been in force for work performed on the basis of a contract. Since 1 January 2019, it has been PLN 14.70 gross, therefore the hourly wage cannot be lower than this amount. However, if the parties have agreed on a lower wage, it should be adjusted to the minimum rate. In order to know the appropriate amount, a provision must be included in the contract specifying the method of confirming the number of hours worked.
- Responsibility
The contract of mandate should also contain a provision that regulates the situation of failure to fulfill the contract. This may concern failure to complete the order on time or improper or defective execution. This point should also specify the consequences of such events – for example, cancellation of the order or reduction of remuneration.
In addition, the parties may stipulate in the agreement that it is not permissible to entrust the assigned activities to third parties. It is also possible to add a provision that in matters not regulated by the agreement, the provisions of the Civil Code apply (which is only a confirmation), as well as the fact that any changes to the agreement may be introduced only in writing, under penalty of nullity. Of course, the agreement should be signed by both parties.
It should be noted, however, that a contract for services, unlike an employment contract, does not have to be in writing. The parties may also conclude a contract for services in oral form, and any changes to the contract contained in this form may also be introduced in the same way. Additionally, if the contract for services does not provide otherwise, we are not bound by, among other things, protective regulations regarding working time, minimum wage, the right to leave, the right to breaks at work or the notice period.
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When to conclude a mandate contract?
As in the case of an employment contract, a contract for services is a contract of due diligence. This means that in this form of employment, the fact of performing a specific task is important, not its effect. This is different, for example, in the case of a contract for specific work, where its effect will be important, not the fact of performing it. Therefore, concluding a contract for services will be justified in, for example, the following types of work:
- distributing leaflets or telemarketing,
- security services,
- catering, cleaning,
- care for a child, an elderly or disabled person,
- outsourcing legal, accounting and IT services.
Contributions paid on a contract for services
Social security and pension contributions are charged from the gross salary resulting from the contract of mandate (they are not charged if the contractor has student status) and a health insurance contribution. Additionally, the contractor may, at his own request, charge his salary with a health insurance contribution.
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Contract of mandate and employment contract – differences
For each contract of mandate, similarly to an employment contract, an advance payment of income tax must be made in the amount of 18% of the benefit reduced by the costs of obtaining income, additionally reduced by the amount of the health insurance contribution collected, not exceeding 7.75% of the contribution assessment base.
| Basic employer obligations regarding benefits and insurance | ||
|---|---|---|
|
Benefit/insurance |
Contract of mandate |
Employment contract |
|
Social security |
Mandatory if it is the only title to insurance |
Yes, it is mandatory |
|
Health insurance |
Mandatory if it is the only title to insurance |
Yes, it is mandatory |
|
Health insurance |
Voluntarily (the contractor must submit an appropriate application) |
Yes, it is mandatory |
|
Vacation leave |
No, unless the employee agrees in writing with the client on remuneration for the time not performed. |
Yes, it results from the provisions of the Labor Code |
|
Sick leave |
Yes, if the contractor applies for health insurance coverage |
Yes |
|
Maternity benefit and childcare leave |
Yes, if the contractor applies for health insurance coverage |
Yes, it results from the provisions of the Labor Code |
|
Leave on demand |
Not eligible |
Yes, it results from the provisions of the Labor Code |
|
Length of service |
Yes, if the contract of mandate is the only basis for compulsory social insurance |
Yes |
|
Source: Own study, Bankier.pl |
||
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The difference in the cost of employment occurs when the contractor is a student up to 26 years of age or earns an income in another company equal to or higher than the minimum wage – then the employer does not pay its share of contributions to ZUS and the Labor Fund and the Guaranteed Employee Benefits Fund from the contractor. This is one of the reasons why civil law contracts are so popular.
The most important features of a contract for services
Employment in the form of a contract for services will be a better option for some people than working under an employment contract, but people looking for permanent employment may not be satisfied with it. A contract for services is characterized primarily by:
- great freedom both in concluding and terminating the contract, but on the other hand the risk of termination from one day to the next for both parties
- no contributions from a contractor who is a student, and no obligation to pay sickness insurance contributions
- lack of continuous supervision by the principal over the contractor
- higher net salary and lower employee costs for the employer
- no benefits resulting from the employment contract, however, the contractor, if there are appropriate provisions in the contract, may receive similar benefits to the employee, e.g. summer vacation, reimbursement of business trip expenses, etc.
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In summary, a contract for services is more flexible, can be outsourced to third parties, and can be performed outside the company's headquarters. However, the salary should not be lower than the minimum hourly wage, which is PLN 14.70 gross in 2019.
How to terminate a contract for services
As it results from the provisions of the Civil Code, termination of a contract of mandate may occur regardless of the time for which it was concluded. This means that after termination, the contract expires with immediate effect. However, the parties may include in the document a provision regarding the notice period, which does not exclude the possibility of termination for important reasons.
Termination of a contract of mandate does not have to be in writing as a rule, but it must be expressed in such a way that the parties have no doubts as to the nature of the legal act. Additionally, the termination should be in the form in which the contract was concluded.
What must the termination notice of a contract for services include? First of all, the date and place of submission of the notice, the identification of the parties – name and surname, address of residence, registered office address or place of residence. Additionally, it should include information about who is terminating the contract for services and, if the reason was valid, indicate the grounds for doing so. At the end, both parties must sign.
Marcin Lekki, Weronika Szkwarek
