Milewska Legal

Risk of conversion of a B2B contract into an Employment Agreement

30 October 2022

Employers take varied measures in order to mitigate costs of employment and eliminate a part of their responsibilities. Some of them, instead of classic employment contract, conclude so-called B2B agreements with job applicants. Others decide to change the method of “employment” after it commences – they decide to change from employment contract to B2B contract. However, concluding B2B contracts can result in some particular kind of risk.

Employment Agreement – basic information

Employment Agreement is a contract under which an employment relationship is commenced. Such relationship is defined in art. 22 §1 of the Polish Labour Code. Based on this definition, we can distinguish features of employment as follows:

for the employer: employing an employee in exchange for remuneration as well as incurring a risk connected with organisation of work as well as economic, social and personal risks;

for the employee: subordination to the employer, performance of work in person, performance of work in a continuous and repetitive manner and provision of work of a specific type.

Characteristic features of a B2B contract

 Abbreviation “B2B” comes from “business to business”. The B2B contract itself is distinguishable by the sole fact that it is concluded in between of entrepreneurs. You can read more about B2B contract here: .

For the purpose of this article, we will thoroughly examine a certain type of B2B contract, namely – a cooperation agreement between two entrepreneurs. This is, in fact, a contract intended to constitute the “employment” of a person running a business, outside the regime of an employment contract.

The main difference between an employment contract and a cooperation contract is primarily the issue of distribution of risks and costs between the parties. A B2B relationship is characterised by the transfer of risks and costs from the “employer” to the “employee”. When it comes to people “employed’” on the basis of a B2B contract, it is the ”employed” person themselves who pays social security contributions, PIT advances and VAT. The “employed” person is also not entitled to statutory paid annual leave and, if they do not pay sickness contributions, they are also not entitled to sick pay in the event of an illness.

Possibility of converting a B2B contract into an employment contract

When concluding a B2B contract, one should consider the content of art. 22 §11 of the Polish Labour Code, according to which any legal relationship which contains attributes of an employment relationship will be deemed an employment relationship regardless of the name of the contract concluded by the parties. This means that in the event that the cooperation agreement concluded by the parties contains excessive number of features of the employment relationship, it will be deemed an employment contract.

According to the rulings of the labour courts (cf. the judgment of the Supreme Court of 17 May 2016 in case no. I PK 139/15): “When a contract is actually performed under conditions indicative of an employment relationship, this identification, and not the content of the declarations of intent made at its conclusion, determines the nature of the legal relationship between the parties“.

Even if the content of the contract (i.e., the statements of intent) indicate the conclusion of a B2B relationship, if the content of the contract itself or the performance of the contract fulfils the conditions typical for an employment relation (such as paid holidays, supervision by the principal-employer, no possibility of subcontracting the services to another person, the necessity to perform the contract at a place and time determined by the principal), the relationship in question will be deemed an employment relationship.

 The Personal Income Tax Act may also provide some guidance on the risk of a B2B contract being reclassified as an employment contract. It indicates the conditions for not qualifying a given activity as a business activity. It might prevail for the qualification of a given relationship as an employment relationship. Thus, if in a given contract:

Consequences of converting a B2B contract into an employment contract

If the relevant relationship is recognised as an employment relationship, the contracting parties are subject to severe consequences. The newly recognised employer will be obliged to pay outstanding social and health insurance contributions and advance personal income tax. They also will not be able to reduce the VAT due by the input tax incurred in connection with the issuance of VAT invoices by the employee (provided that the newly recognised employee was entitled to issue such invoices).

Conclusion of contracts of the nature of an employment contract under the guise of concluding a cooperation agreement, if converted, shall be deemed an offence punishable by a fine from PLN 1,500 to PLN 45,000. The employee, in turn, shall be entitled to seek compensation for overtime and payment for outstanding annual leave for a period of up to three years back.

In addition, the employee may be subject to obligation to pay outstanding PIT amounts through differences in income tax settlements (in the case of an employment relationship, the tax scale applies; in the case of business activity, the entrepreneur may choose a different, more favourable in a given situation, form of taxation, such as a flat tax or a lump sum).


 When concluding a B2B contract, it is important to consider, first and foremost, the issue of features common with or similar to the employment contract. In the event that the cooperation agreement or its method of execution contains features characteristic for an employment contract (such as paid holidays, management of the principal, fixed days and hours of performance of the agreement), the relationship in question may be deemed to be an employment relationship – and the contracting parties may be subject to severe consequences from the state authorities.

Aleksandra Kostrzewa


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