The Employer of Record (EOR) model is gaining popularity in Poland alongside the growth of remote work and the globalization of employment. Increasingly, foreign companies want to hire specialists in Poland without the need to establish a company or branch of a foreign entity here. Using the EOR model makes it possible to formally employ a worker through another entity while still benefiting from the results of that person’s work.
What exactly is an Employer of Record (EOR)? Is the EOR model regulated in any way in Poland? What risks and obligations are associated with EOR employment?
What or who is an Employer of Record (EOR)?
An Employer of Record (EOR) is an entity (most often a Polish company) that formally employs an employee in its own name (acting as the formal employer) and makes that employee available to perform work for another company (the actual employer – the EOR’s client).
The EOR therefore acts as the employer in relation to the Social Insurance Institution (ZUS), the tax authorities, and the employee himself or herself (it is the EOR that signs the employment contract with the employee). The EOR maintains employee documentation, calculates and pays social security contributions and income tax advances, grants leave, calculates compensation for unused leave, and pays the employee’s salary.
The actual employer (the EOR’s client), on the other hand, organizes the employee’s work, assigns general tasks, and generally supervises the performance of duties. The actual employer also provides the funds needed to pay the employee’s salary and related liabilities (social security contributions, tax advances, etc.).
Is the Employer of Record (EOR) model regulated under Polish law?
No. Polish regulations do not define or formally recognize the concept of an “Employer of Record” (EOR). The model has developed in practice and is becoming increasingly popular among foreign entities that want to hire employees in Poland before deciding to establish a formal structure here.
Foreign companies often use this approach to test whether it is worthwhile to launch operations in Poland, to verify market opportunities, or simply to buy time to complete the formalities associated with establishing a formal structure in Poland, while already benefiting from the work of local employees.
Most often, employment under the EOR model functions in a manner similar to service outsourcing. In such cases, the EOR formally employs the worker and manages the employee to some extent (for example, by deciding on the place and hours of work). Meanwhile, assigning specific tasks, evaluating their performance, and setting goals remain within the domain of the actual employer (the EOR client).
What does the Employer of Record (EOR) model look like formally?
The EOR model essentially combines two separate agreements:
While the employment contract between the EOR and the employee may have a classic structure and is usually fairly standard in itself, the agreement between the two employers (the EOR and the actual employer) is particularly important. It clearly defines the division of rights, obligations, and decision-making authority between the parties. It also specifies the method and timing of settlements between the two employers.
In the agreement between the two employers, it is worth determining at least the following:
Is using the Employer of Record (EOR) model risky?
It can be. The EOR structure operates on the boundary between regulations concerning temporary work and employment agencies, employee outsourcing (body leasing), and the delegation of an employee to temporarily perform tasks for another employer. Shifting too far toward, for example, the framework of a temporary work agency may result in serious legal and financial consequences for both employers.
If the actual employer directly supervises the employee, issues instructions, decides on working time and workplace, and decides on and grants leave, there may be a risk that the actual employer will be considered the formal and real employer within the meaning of Polish labor law. In extreme cases, this may lead to the establishment of an employment relationship directly between the employee and the actual employer, along with liability for social security contributions and taxes.
For this reason, it is very important that the EOR agreement (regulating the relationship between the two employers) clearly defines the influence of the actual employer over the employee and limits it to setting general directions for tasks and exercising general supervision. The authority to issue instructions and decide on the place and time of work should remain with the formal employer. This helps reduce the risk that the EOR structure will be considered unlawful or as an attempt to circumvent the law.
In addition to the classic employment contract, Poland has civil law contracts under which it is also possible to provide services (labor). Thus, the basis for employment in Poland may be an employment contract, a contract of mandate (contract for the provision of services), a contract for specific work and a B2B contract.
The law allows you to “hire” employees through both a temporary employment agency and a bodywork leasing contract. What is a bodywork rental contract? What type of job can I use to “recruit” an employee? Can a bodywork rental contract be considered as a contract with a temporary employment agency?
