What is a B2B agreement?
B2B stands for Business-to-Business. It describes numerous types of relationships (for example sale of goods, cooperation, or employment), in which entrepreneurs are the parties to the agreement. Against common understanding, B2B agreements are not limited to “employing” another entrepreneur (even though they appear most commonly in the context of B2B agreements in Poland).
In the context of B2B relations, the legal form of an entrepreneur does not matter. Any sole trader, partnership or company can conclude desired B2B agreement. The setup of the parties does not matter as well – a sole trader can conclude a contract with a partnership, a company or another sole trader, a partnership can conclude a contract with a sole trader, a company or another partnership, and a company can conclude a contract with a partnership, a sole trader or another company. The only requirements are: running a business, being registered in an adequate register (either CEIDG or KRS) and the will to conclude a B2B agreement.
The opposite of a B2B agreement is the so-called B2C (Business-to-Consumer) agreement. Parties to a B2C agreement, as opposed to B2B agreement, are not solely composed of entrepreneurs, but respectively – a consumer (so a natural person who does not run a business) and an entrepreneur (despite their legal form).
B2B vs B2C – main differences
Among every type of B2B agreement, wide freedom of contract is a common feature. Naturally, such freedom is wider than the one present in B2C agreements. Polish legislation surrounds the consumer with quite specific protection – analogically wider than in the context of the entrepreneurs.
It is therefore prohibited to include unfair terms of contract in B2C agreements. Such unfair terms shape the rights and obligations of the consumer in a manner contrary to good practice or grossly infringe their interests – as in for example making the conclusion of the contract subject to an undertaking by the consumer to enter into further contracts of the same type in the future.
It is also important that B2C agreements preclude the possibility to exclude or modify the provisions of the statutory warranty (art. 558 §1 2nd sentence of Polish Civil Code).
Aforementioned limitations are not binding in B2B relations. Therefore, entrepreneurs are able to exclude or modify the provisions of the statutory warranty. They are also not bound by the limitations set out in provisions setting out the unfair terms of contracts imposed on B2C agreements. The principle of freedom of contract is the limit. Thus – provisions (or purpose) of B2B agreements must not be contrary to law (e.g. an agreement on human trafficking will be prohibited), to the nature of the specific relation (e.g. a reference to results in so-called contracts of performance – so for example concluding a legal services contract in which one of the parties undertakes to win a case) or to the rules of social conduct (e.g. commercial honesty, loyalty).
B2B “employment”
B2B agreements are commonly used in Poland for the purpose of establishing a working relationship similar to employment. The key difference between classic employment and B2B employment is the separation of such a B2B “worker” from the rights and obligations of employees and transferring 100% of tax and contribution obligations to them. What does it mean in practice?
If “employed” on the basis of B2B agreement (functioning under different names – such as a cooperation agreement, a contract for services or a management contract), the “employee” is solely responsible to pay their own social security contributions, advances on PIT and VAT (if they are a VAT payer). Doing so is very convenient for the “employer” and at the same time it often allows such an “employee” to obtain a higher net remuneration. This occurs because for the “employment” agreements in B2B model, the costs of the employer (the value of social security contributions, for the time being detached from the amount of income or revenue, lack of costs of safety training and periodical examinations of the employee and the possibility for such an “employee” to use the flat tax rather than the threshold tax) are lower. The “employer”, therefore, with a certain gross amount available for use, with lower per-employee costs, is able to directly use such an amount for the remuneration of a B2B “employee”.
From the point of view of a B2B employee it is important to remember to take these issues into account when negotiating remuneration with a contractor under a B2B agreement. Net amount set out on an invoice issued by the “employee” will never be the amount they actually receive. To be exact, the “employee” will have to subtract the social security contributions (in full, currently within 1.400 PLN per month) and PIT advance (for the flat tax – 19%, for the threshold tax – respectively 17 or 32%) from the net amount they receive.
On the one hand, the person “employed” on a B2B agreement is not eligible for paid leave. What is more, they are solely and fully responsible for the damage caused (e.g. as a result of failure to complete a task on time, which caused the employer’s client to withdraw from cooperation).
On the other hand, B2B “employee” is not subject to the direction of the “employer”, who cannot affect the timelines of the commissioned work (naturally – as long as the final work is delivered at the predetermined date). Therefore, “B2B employee” has a wide freedom to determine the time and place of work, as well as their time commitment, e.g. on particular days. The “employer” is not obliged to provide a workstation nor to determine time of work of the “employee”.
Of course, although these issues are not commonly specified directly in the B2B agreement itself, they are often regulated within the so-called gentlemen’s agreement, particularly with regard to leave and sick pay rules for the B2B “employee”.
Daria Milewska Aleksandra Kostrzewa
attorney paralegal