Poland’s Crackdown on the B2B Model

Last year, businesses in Poland were surprised by legislative proposals aimed at cracking down on sham employment relationships. The draft bill sought to grant the Labour Inspectorate new powers allowing it to reclassify virtually any contractual relationship as an employment relationship. Until now, such authority was vested exclusively in the labour courts, and has never been exercised lightly. Also, the original draft provided that reclassification decisions would become effective immediately and could apply retroactively for up to three years.

Market Turmoil

These proposed changes triggered turmoil across the market. In recent years, the Polish labour market has benefited from flexible engagement models that allow professionals to work under legal regimes other than employment law. For highly skilled workers, this has meant so-called business-to-business (B2B) arrangements. Such models have enabled both contractors and businesses to reduce tax and social security burdens, especially for high earners. B2B contractors have often been easier to manage from a labour and tax compliance perspective, particularly regarding workations or permanent remote work performed abroad. When an employment relationship could more easily create a permanent establishment for tax purposes, B2B arrangements often remained below the regulatory radar.

The proposal for a new reclassification mechanism was met with very strong resistance from the IT sector, which for years had operated with only minimal exposure to the risk of contract reclassification. This environment blurred the distinction between contractors and employees in day-to-day practice, even where contractual terms formally maintained that distinction.