Hiring an employee under a contract of mandate – what does it look like in practice?
A contract of mandate is one of several forms of employment available in Poland. It is a very popular document, but it should be remembered that it is regulated by the provisions of the Civil Code. What does the issue of employment under a contract of mandate look like in practice? Learn the most important information on this topic.
What is a contract of mandate?
A contract of mandate is one of the most commonly used forms of employment in Poland. Employment on a contract of mandate is particularly popular in the case of temporary, seasonal or casual work. Contracts of mandate are regulated by the provisions of the Civil Code. This is a significant difference, because employment contracts are subject to the Labor Code.
A contract of mandate is very flexible for both parties, i.e. for both the principal and the contractor. A contract of mandate specifies that one of the parties is obliged to perform certain activities for the other party, of course for a previously agreed fee.
The contract of mandate does not specify that the work must be performed personally by the contractor, which allows him to entrust the performance of the work to a third party. Of course, only if it is not prohibited by the nature of the contract or the relevant provisions contained therein. In the case of this contract, there is no specific place and time to perform tasks. An exception to this is a situation in which both parties agree otherwise. In the case of a contract of mandate, there is complete freedom and freedom. This form does not impose too many strict obligations on the contractor as an employment contract.
In this case, permanent recruitment and recruitment of IT staff, which is also often used during employment on a contract of mandate, are also different.
A contract of mandate can be performed both for a fee and free of charge. In the case of the first type, the remuneration is paid only after the completion of the order, and the recipient must inform the employer about the progress. The provisions of the Labour Code do not apply in this form of contract. However, the employer must ensure the safety of employees, and the activities performed are based on the arrangements contained in the document. A contract of mandate is also taxed in an appropriate way.
How to hire an employee under a contract of mandate?
In order to answer the question of how to hire an employee under a contract of mandate, it is necessary to analyze the basic elements of this document. The most important information is about the scope of obligations and the duration of such a contract. This form of employment means that the person performing the work is not completely subordinate to the employer. The entrepreneur should also not organize activities in detail. If there are conditions of subordination at a specific place and time, the contract of mandate must be converted into an employment contract. In the event of an inspection by the National Labour Inspectorate, there is a risk of penalties being imposed.
Step 1 – preparation and negotiation of contract terms
In the first step, it is important to determine the terms of cooperation. The conditions that must be set out in the contract of mandate are:
- scope of responsibilities (precise definition of tasks),
- duration of the contract,
- remuneration (defined as an hourly rate or remuneration for specific activities),
- the manner of performing the order,
- Principles of Responsibility.
If we are talking about remuneration, the contract of mandate must include the minimum hourly rate, which from July 2024 is PLN 28.10 gross.
Step 2 – drawing up a contract of mandate
Once all the terms and conditions are set, it’s time to draft a written contract. Although the Civil Code does not require a written form for the validity of a contract of mandate, it is recommended to conclude such an agreement for evidentiary purposes. The contract should include the data of the principal (company name, NIP) and the contractor (name and surname, PESEL, address). The subject of the contract must also be specified, i.e. a description of the tasks that apply to the person accepting the order. If the order has a specific lead time, this should also be included in the contract. The same applies to remuneration. All this information is important for the proper performance of the order by the contractor.
Step 3 – reporting the contractor to ZUS
An employer employing on the basis of a contract of mandate is obliged to report the contractor to the Social Insurance Institution in a situation where the contractor is subject to social and health insurance. Such a notification must be made within 7 days from the start of the order.
In a contract of mandate, it is the employer who acts as a tax payer and is obliged to perform a specific legal action that results from it. This means that he is responsible and must ensure that social security contributions are paid, but also income tax (PIT). The amount of contributions is calculated on the basis of the contractor’s situation, i.e. whether he has other sources of income or is, for example, a student.
Very often, therecruitment of employees from the East is also based on such a document. It is a form of contract taxed in a slightly different way than in the case of an employment relationship, which is why it has been very popular for years. However, it is worth remembering that it can only be used in certain situations.
Contract of mandate and ZUS
Signing a contract of mandate is associated with the obligatory payment of social and health insurance contributions. The exception is a situation in which the contractor is exempt from this obligation because, for example, he or she is a student under 26 years of age. In the case of a contract of mandate, the employer is obliged to report the employee to the Social Insurance Institution, but also to pay pension, disability, accident and sickness insurance contributions for him. Importantly, these contributions are deducted from the contractor’s remuneration. Treating this type of employment separately allows for greater flexibility in terms of incurring costs.
A contract of mandate with your own employee is also possible, but in this case you need to remember to follow a few rules. First of all, the commissioned activities must not coincide with those performed by the person in connection with the employment relationship. It is also important to ensure that the deadlines for the performance of specific obligations are adapted to the legal requirements. It is worth knowing that even if you sign a contract of mandate with your own employee, you have to pay the mandatory health, disability, accident and pension rates.
Employer’s obligations under the contract of mandate
An employer who decides to hire an employee under a contract of mandate must complete several formalities. The most important thing is to report this fact to ZUS within 7 days of starting cooperation (the date is placed on the document). The employer must pay for all mandatory insurance. In general, voluntary sickness contributions can be omitted, but there are exceptions to this rule. This is the case, for example, when a person is already employed in the same company under an employment contract, but performs an order outside of their duties. In such a case, it is also subject to sickness insurance.
The entrepreneur must also take care of the advance payment of income tax. Currently, however, there are regulations in force according to which this issue does not apply to people under 26 years of age, on the first tax bracket. It is worth checking the requirements related to the taxation of contracts of mandate on an ongoing basis, because the law changes very dynamically.
The contract of mandate can also be terminated. For this reason, it is worth including information on how to discontinue cooperation in such a document. In this case, however, the provisions on the notice period or the time of its submission do not have to be applied. In the event of termination of cooperation, the employer must settle accounts with the contractor in accordance with the terms and conditions contained in the contract, but also in accordance with applicable law.
In addition, the principal should provide appropriate conditions for the execution of the order. If the arrangements so require, he must also take care of safety if the contractor performs the order in conditions requiring compliance with health and safety. The same applies to hygienic working conditions.
Contract of mandate and temporary work
A contract of mandate is very often used in the case of temporary work. Why? It is characterized by greater flexibility than an employment contract and this speaks in its favor. Unlike traditional employment, a contract of mandate does not impose strict norms regarding working hours or place, which allows you to adjust the time and manner in which the task will be completed.
Temporary work is employment only for a specific, usually short time. It can also be based on a contract of mandate. This type of document is applicable both in the case of permanent work that meets certain conditions, as well as employment only for a short period, for example in the summer season. LeasingTeam helps both in searching for candidates for temporary positions and in drafting contracts. This is a great convenience for employers, who are often looking for many employees, e.g. for seasonal tasks.
Rights and obligations of an employee under a contract of mandate
As we mentioned earlier, a contract of mandate offers a lot of flexibility, but on the other hand, it carries some restrictions in terms of employee rights. A contractor who undertakes to perform work is obliged to:
- Execution of the order in accordance with the contract – the contractor is not responsible for the effect, but must remember about due diligence during the execution of the order,
- Compliance with deadlines – a contract of mandate gives great flexibility in the way of organizing work, but the contractor is obliged to meet the deadlines set in the contract,
- Is liable for failure to perform the order – it is the contractor who is responsible for the damage caused,
- Being subject to social insurance – it is the principal who deducts social security contributions, which are deducted from the salary.
- Income tax settlement – the contractor is obliged to settle income tax, which, as in the case of social security, is deducted from the salary.
An employee employed under a contract of mandate also has certain rights that result from this form of cooperation, and these include:
- Right to remuneration – the contractor has the right to receive remuneration in accordance with the arrangements contained in the contract. This remuneration may be calculated on the basis of an hourly rate, a lump sum rate or another form agreed upon by both parties.
- Freedom in work organization – a contract of mandate allows for great flexibility in organizing work. The person performing the order does not have to work strict hours, unless it is agreed in the contract. The place of work can also be determined. Maybe, but it doesn’t have to.
- No obligation to perform the mandate in person – Unless the contract excludes it, the contractor may entrust the performance of the mandate to a third party, which distinguishes a mandate contract from an employment contract, where the work must be performed personally.
- Right to terminate cooperation – the agreement may be terminated by both parties, but only with the arrangements contained in the agreement or in accordance with the provisions of the Civil Code. The contractor may terminate the cooperation at any time, unless the contract provides for other conditions.
Benefits of hiring on a contract of mandate
It is time to present the benefits of employment on a contract of mandate. We have already mentioned flexibility many times, but there are a few more advantages.
For entrepreneurs
Contracts of mandate are also not subject to the provisions of the Labor Code, which means less formalities for the principal. The situation is the opposite in the case of an employment contract.
Hiring an employee under a contract of mandate very often means lower costs incurred by the principal. These include, among others, lower costs related to social and health insurance.
The ability to quickly end cooperation is very important for both parties. In the case of termination of cooperation, the principal may do so with a shorter notice period than in the case of an employment contract.
A contract of mandate allows you to hire specialists for specific tasks within specific projects. There is no denying that this solution is beneficial for the employer.
For employees
In the case of employees, there are a bit more benefits and they include:
- Flexibility of working time – the employee sets the working hours himself, which allows him to combine professional duties with private life.
- Possibility to work on various projects – a contract of mandate allows you to take up various forms of employment, in different industries and projects.
- No formalities related to employment – a contract of mandate involves less formalities.
- Higher net salary – the salary under a contract of mandate may be higher, because the employee can negotiate the rate at no additional cost.
- Freedom in choosing orders – it is the contractor who decides which order he intends to accept and which to resign, which gives him more control over his professional career.
- No need to be in the office – the contractor can perform their duties remotely, which significantly affects the comfort of work.
- Opportunity to gain experience – freelance employment can be an opportunity to enter the labor market by gaining valuable experience in working with various industries.
- High availability of offers – the market offers a lot of job offers on mandate contracts, which gives the employee a choice and the possibility of quick employment.
A contract of mandate is one of the popular forms of employment in Poland, especially used in the case of temporary, casual or seasonal work. It is subject to the provisions of the Civil Code, which distinguishes it from a traditional employment contract, which is regulated by the Labor Code. Its flexibility gives you the freedom to perform tasks, organize your time and place of work. In the process of temporary employment, various types of recruitment take place.
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