Polish Deal: A New Dimension of Employment Control. Only the Employer Will Be Liable Before the National Labour Inspectorate (PIP)

Until now, employees working “off the books” or receiving part of their salary unofficially faced criminal and fiscal liability, including the obligation to pay outstanding taxes and part of the overdue social security contributions (ZUS). From January 2022, employees will no longer bear any legal consequences for illegal employment. According to the amendment, responsibility for undeclared work will rest solely with the employer.

Consequences of undeclared work

As the Ministry of Finance informs on the National Tax Information website, from 1 January 2022, the Polish Deal will introduce new tax and contribution solutions aimed at limiting illegal employment and the concealment of part of wages from the appropriate authorities.

From next year, the consequences of illegal employment will affect only the employer, not the employee. It will be the employer who pays tax on wages paid “off the books” or part of the salary paid under the table. The employer will also be assigned additional income equal to the minimum wage for each month of illegal employment, regardless of whether or how much remuneration was actually paid.

Dishonest employers will also be required to pay in full the social security and health insurance contributions on wages paid off the books or under the table. Moreover, both the paid wages and the contributions will not be deductible as tax costs for the employer.

Meanwhile, an illegally employed employee:

• will not pay tax on income derived from illegal employment or underreported earnings,
• will gain access to healthcare and social security benefits (pensions, disability benefits, and allowances),
• will not finance social security contributions on declared wages, as these contributions will be fully covered by the employer, including the part normally borne by the employee under general rules.

B2B contracts in the spotlight

The State Labour Inspectorate’s Action Programme for 2022–2024 has been published. The Inspectorate announced increased frequency of inspections concerning employment conditions where mutual obligations are regulated by agreements between entrepreneurs (in a B2B arrangement). The authorities will verify whether the terms of such agreements have not been unilaterally imposed by the employer.

Retroactive effect of regulations

The provisions introduced in the amendment to counteract illegal employment may be used to report notifications to the State Labour Inspectorate regarding not only current periods but also previous ones, i.e. before 2021.

As can be seen, the coming year will bring much stricter enforcement of employment control among Polish entrepreneurs, and the consequences will fall solely on employers. In case of doubts or if you seek legal advice on this matter, we recommend consulting the specialists from our team. ATL Law Anna Błaszak Legal Advisor’s Office has many years of experience in providing legal advice to entrepreneurs, helps minimise risks related to business activities, and offers services in broadly understood compliance, particularly in the context of new challenges posed by the Polish Deal to employers.