With Poland's diverse and talented workforce, it's no wonder so many global companies choose to hire contractors in Poland. But when it’s time to pay them, what steps do you need to take to comply with all of Poland's dauntingly complex labor and tax laws?
Before you receive your first invoice, read on to learn what you need to know to correctly classify contractors, onboard them, cover social security requirements, and pay them according to Polish and European Union labor laws. We broke it down step by step.
Step #1: Classify your workers
Classifying Polish workers correctly is crucial. Misclassifying employees as contractors can result in a fine of PLN 1,000 ($233) to PLN 30,000 ($7,000) in addition to back taxes, and other harsh penalties.
Under Polish and European Union law, certain criteria can help distinguish between dependent work and contract work. An independent contractor is self-employed, offers their services on a contract basis, determines their own hours, and method of work, and can work for more than one client. They do not receive benefits and they file and pay their own taxes. Compensation is not based on Poland’s minimum wage and is not paid monthly.
Step #2: Determine the best way to pay your contractors
The first thing to do before you can pay contractors in Poland is to determine how you'll pay them. With the rise of global workforces and remote work, employers now have more choices than ever for making international payments to contractors. Here are some options:
- Bank wires. You can open a Polish bank account and use it to deposit funds into Polish contractors' accounts or use your bank to send a global wire transfer to pay a Polish contractor. You may need to be officially registered as a business or legal entity in Poland to open an account.
- International money orders. This long-standing payment method can be slow—especially because the employer needs to physically purchase the money order, and the contractor needs to physically deposit it upon receipt. Money orders can also come with fees and bad exchange rates.
- Digital wallets or payment platforms. Note that not all digital payment platforms are available in Poland (for example, Venmo only works within the US) though some employers use platforms like Wise to transfer money across borders. Remember that exchange rates can change from day to day, making it difficult to predict your outgoings.
- Global payroll services. Typically, contractors aren't included in payroll, since they aren't subject to the same withholdings as employees—instead, they invoice for their services, which goes through accounts payable for many companies.
Step #3: Use global payroll software to process payments
As you saw in Step #2, there are multiple ways to pay contractors in Poland. But the fastest and simplest way is paying contractors through global payroll software.
With Rippling, you can pay contractors across the world in a single pay run. Here’s a preview of how Rippling’s global payroll system works:
Step #4: Calculate and file your tax forms
While employers aren't required to withhold and pay taxes for contractors in Poland, they may have to file additional paperwork. Labor laws are always changing and it’s easy to miss something that’s required. While employers aren’t required to withhold and pay taxes for contractors in Poland, the IRS requires you to report any money you pay to foreign independent contractors.
Frequently asked questions about running payroll for contractors in Poland
Do you need to withhold taxes when paying contractors in Poland?
No, foreign companies don't have to withhold payroll taxes during the calendar year when paying contractors in Poland. Contractors are required to pay all of their own taxes.
Does Polish minimum wage apply to independent contractors in Poland?
No, minimum wage laws don't apply to independent contractors in Poland.
Do Polish contractors get benefits?
No, independent contractors in Poland are not entitled to benefits in the same way as employees. Offering benefits to independent contractors can even increase the risk that the courts will consider the contractors to have been misclassified.
Can you pay contractors in Poland in your home currency?
While you should try to pay international contractors in their local currency (Polish zloty or PLN), you can pay contractors in Poland in another currency. There may be additional transfer fees to do so.
Can you manually pay contractors in Poland?
Yes, and it's common for small business owners to manually process contractor remuneration in an attempt to cut costs. But this can be time-consuming, especially as your business grows and if you work with multiple contractors in Poland or across borders.
It's also important to note that manually processing payments comes with some risks:
- Compliance. Running payroll manually means assuming the risk of human error and omission. Protect yourself and your business with Rippling, which automatically enforces compliance with any applicable local laws—no matter where your contractors live.
- Security. Manual payroll processing also poses security risks, especially if you use spreadsheets or paper records. Sensitive employee information can be lost, stolen, or misused.
Make payroll automatic by using Rippling. Rippling syncs all your business's HR data with payroll, eliminating the need for manual data entry entirely. Employees and contractors all over the world get paid quickly (and compliantly) in a single pay run.
How do you turn a contractor into an employee in Poland?
While hiring independent contractors over full-time employees can come with financial benefits, sometimes you do need a full-time employee. The challenge is making sure all the legal requirements are in order to hire employees and that the employment contract and its protections are legal.
Poland's labor laws require payroll deductions for income tax (at the correct tax rates), health insurance and healthcare, and providing employee benefits like annual leave, maternity leave, paternity leave, severance pay, sick leave, paid time off, paid public holidays, notice period and more for employees that you don't have to worry about for contractors. Compliance with ZUS Poland (Poland’s Social Insurance Institution) regulations and other employment laws is also required.
Effortlessly manage contractors, no matter where they are
You can pay international contractors directly through Rippling, meaning you need just one system to pay all types of employees—wherever they are.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.