Hourly rate does not facilitate changing a worker’s contract

Polish companies can breathe a sigh of relief. The legal duty to track hours worked by contracting persons does not entail a necessity to execute employment contracts with them.

The laws guaranteeing a minimum hourly rate for contractors and for the self-employed were intended to afford the National Labour Inspectorate a tool for counteracting abuse of individuals employed pursuant to contracts for completion of a specific task or commission contracts. If the number of hours actually worked pursuant to such contract is specified, the reasoning went, the National Labour Inspectorate will find it easier to establish stability and regularity of employment and, on this basis, demand that the individual concerned be retained pursuant to a “full” employment contract. The first year during which these rules were in force vindicated these expectations; in 2017, the number of persons who received employment contracts consequent to interventions by the National Labour Inspectorate increased by no less than 89%, from 9,000 to 17,000. Yet this tendency was not borne out; in 2018, this number was only 6,500, i.e. 2.5 times less than the year before. The conclusion would be that the new rules have little impact on challenging alternative civil law bases for employment; business enterprises may continue using them without losing sleep over possible consequences of National Labour Inspectorate audits.

Many reasons

“It’s possible that the spike observed in 2017 was due to a novelty effect. The authorities and employers alike were sensitised to the rules which had just come into force. Some companies, having analysed the hours worked by their contractors, may have decided to offer them employment contracts of their own accord”, explains Adam Kraszewski, attorney at GESSEL.

Kraszewski also emphasises that the shift towards employment contracts may have been compelled by the market itself. Increasingly often, labour shortages are becoming an issue, leading companies to take the initiative in offering more advantageous terms (e.g. “full” employment contracts, as opposed to alternative civil law forms). As much is confirmed by the statistics. In Q3 2018, a record 10.1 mln Polish workers were retained pursuant to indefinite term employment contracts – 363,000 more than just one year earlier and 690,000 more than in Q3 2016.

“It should also be borne in mind that the possibilities for oversight by the National Labour Inspectorate are limited. It is being asked to shoulder ever-new tasks, such as enforcing the new restrictions on Sunday shop openings or the new employee capital plan rules; it could be that the inspectors are choosing to focus on these new duties”, Kraszewski adds (…)

Things are better

National Labour Inspectorate data for 2018 also seems to suggest that employing establishments themselves have grown accustomed to the hourly rate rules. Practice still brings examples of employers making deductions from wages to cover items such as rental of equipment or of working attire (in an attempt to manipulate the statutory minimum). Yet the previous year brought a decrease in the number of employers who met the statutory minimum wage pay-out only subsequent to an intervention by the National Labour Inspectorate; in 2017, PLN 3 mln was thus secured for 3,000 employees who had been mistreated in this way, but in 2018 these statistics dropped to, respectively, PLN 1 mln and 1,300 employees (…)

The full text of this article (by Łukasz Guza) is available (in Polish) in Dziennik Gazeta Prawna and on GazetaPrawna.pl