B2B or an employment contract?

The decision regarding whether to opt for a B2B arrangement or a traditional employment contract is one of the most significant issues for employees and entrepreneurs operating in today’s labour market. Both forms entail different obligations, benefits and risks, which affect job security, financial aspects and the nature of the relationship between the parties. In this study, based on an in-depth analysis of current legislation, case law and market practice, I present a multi-faceted comparison of both legal frameworks, highlighting their advantages, limitations and potential implications.

Legal foundations of forms of employment

Employment contract

An employment contract, governed by the Labour Code, is a legal relationship in which an employee undertakes to personally perform work for the employer, under the employer’s supervision and at the place and time specified by the employer. The employer, in turn, undertakes to pay remuneration and to bear the economic and social risks associated with the employment. This contract guarantees the employee numerous benefits, such as the right to annual leave (20–26 days), sick leave funded by the Social Insurance Institution (ZUS), protection against unfair dismissal, and compliance with health and safety standards and workplace regulations.

B2B contract

A B2B (business-to-business) contract is a civil law contract concluded between two business operators, where the service provider runs a sole trader business and independently settles their taxes and social security contributions. The collaboration is based on the principle of equality between the parties, without the subordination typical of an employment relationship. The contract specifies the scope of services, deadlines, remuneration and the liability of the parties, often including clauses on confidentiality and non-competition. Unlike an employment contract, there are no employer obligations, such as providing paid leave or sick pay, which results in greater flexibility but also means the need to manage insurance cover and any financial risks independently.

Fundamental differences between an employment contract and a B2B contract

Nature of the relationship and subordination

The key distinguishing feature between the two forms is the issue of subordination. In the permanent employment model, the employee works under the employer’s supervision, carrying out duties at a specified place and time. In a B2B contract, on the other hand, the contractor organises their own working hours and place of work, carrying out tasks on their own terms. In its judgement of 25 January 2017 (ref. II UK 621/15), the Supreme Court emphasised that the assessment of a legal relationship should take into account the actual circumstances, and not merely the name of the contract. In situations where a B2B contract resembles an employment relationship (e.g. fixed working hours, exclusivity, supervision), there is a risk that it will be deemed an employment contract, which entails serious consequences for both parties.

Tax and social security obligations

An employee hired under an employment contract is exempt from paying social security contributions and income tax advances themselves – these obligations rest with the employer, who fulfils them in a timely and comprehensive manner. In the case of B2B arrangements, the entrepreneur settles their tax liabilities with the tax authorities independently, choosing a form of taxation (tax scale, flat-rate tax, lump-sum tax), bears the costs of bookkeeping, and pays social security and health insurance contributions themselves. Although B2B allows for the deduction of business-related expenses (e.g. equipment, software, car leasing), it also requires careful management of finances and documentation.

Social benefits and job security

An employment contract provides access to a full package of social benefits: paid holiday, sick pay from the Social Insurance Institution (ZUS), maternity leave, protection against dismissal in certain situations, and the right to notice periods in accordance with the relevant formalities. In the B2B model, there are no statutory guarantees regarding holiday or sick leave, although the parties may negotiate individual terms regarding breaks from work or additional bonuses. Employment under a B2B arrangement is characterised by greater flexibility, but also by greater volatility and a lack of protection against the sudden termination of the working relationship.

Flexibility in working hours and location

B2B offers freedom in organising one’s work – the contractor decides when and where to carry out tasks, which suits those who value independence and the ability to work remotely. In an employment contract, working hours and the place of work are defined and regulated by law, which ensures predictability but limits flexibility.

Financial aspects of choosing a form of employment

The switch from an employment contract to a B2B arrangement is often motivated by financial benefits – the self-employed receive a higher net income because the employer does not pay social security contributions or taxes on their behalf; these are instead borne by the entrepreneur. In addition, it is possible to optimise tax liability by choosing a favourable form of taxation and deducting business expenses. However, those who continue to work with their former employer in the same capacity lose their entitlement to reliefs such as the ‘Small ZUS’ relief or preferential tax regimes during the first few years of running their business.

For example, for a fixed gross salary of 10,000 zł per month, after taking into account contributions, taxes and business operating costs, a self-employed person may receive up to 15–20 per cent more ‘take-home pay’ than a full-time employee, but must take into account the lack of social security cover and the need to manage administrative formalities independently.

Risks and challenges associated with a B2B contract

The B2B model entails increased financial and administrative responsibility. The self-employed person is obliged to pay contributions regularly, keep accounts and issue invoices. The lack of any guarantee of a steady flow of work and market volatility can lead to income instability. Furthermore, there is a significant legal risk associated with an incorrectly drafted contract – if the contract exhibits characteristics of an employment relationship, supervisory authorities (ZUS, PIP) may challenge the form of employment, resulting in an obligation to pay outstanding contributions and penalties.

Case law and regulations concerning the classification of contracts

In the light of Article 22 § 1 of the Labour Code, the nature of an employment relationship is defined by elements such as the performance of work under supervision, a personal obligation to perform work, work carried out at a specified place and time, and the regularity and repetitiveness of duties. The Supreme Court has emphasised in numerous rulings that the absence of any one of these elements may be decisive in determining the absence of an employment relationship; however, the assessment must be made in the context of the relationship as a whole. In practice, a B2B contract must be carefully drafted to avoid any characteristics of subordination and elements typical of permanent employment, such as the absence of supervision, the possibility of using subcontractors, and flexibility in working hours.

Key considerations for employees and business owners

• For workers considering a switch to a B2B arrangement: you should assess your own financial situation, your readiness to manage your own insurance and tax affairs, and your preferences regarding job security versus flexibility.
• For business owners: it is essential to draw up the B2B contract correctly so that it does not bear the hallmarks of an employment relationship, which will protect against potential claims and sanctions from regulatory authorities.
• Both parties should: clearly define the scope of duties, the terms and conditions for the provision of services, the rules governing payments and liability, and consider including provisions regarding the use of subcontractors and flexible working hours.
• Before deciding to change the form of employment, it is advisable to seek the advice of a tax adviser or a solicitor specialising in labour and commercial law to thoroughly analyse the consequences.

How can B2B be simplified?

 Modern solutions, as exemplified by ‘Firma dla każdego’, show that for many people, concerns about running a business and tax returns act as a barrier to choosing a B2B arrangement. The ‘Firma dla każdego’ platform offers an innovative solution that eliminates the need to set up a company and manage your own accounts.

 Benefits of working with ‘Firma dla każdego’

•  A simplified invoicing process without the need to register a business;
•  Settlements on exceptionally favourable terms – income tax at just 6 per cent;
•  No obligation to pay social security contributions, allowing for a higher net salary – up to 40% more than with traditional B2B arrangements;
•  Full legal and accounting support, eliminating red tape and the risk of errors;
•  The ability to quickly start and end collaborations with clients.

 Thanks to this company, anyone wishing to enjoy the benefits of B2B can avoid the traditional inconveniences, allowing them to focus on their professional development and maximising their income.

Summary

Choosing between an employment contract and a B2B arrangement is a multifaceted decision, depending on the individual needs, expectations and financial and legal circumstances of both parties. An employment contract provides stability, social security and simpler administrative procedures, making it the preferred option in sectors where job security is a priority. In contrast, a B2B arrangement offers greater flexibility, the potential for higher earnings and the possibility of tax optimisation, but requires the entrepreneur to be self-reliant and to bear the risks. Changing regulations and increasing scrutiny by the National Labour Inspectorate and the Social Insurance Institution (ZUS) necessitate caution when drafting and implementing B2B contracts to avoid them being reclassified as an employment relationship. Ultimately, the best-considered choice of employment arrangement is one that reconciles the parties’ expectations with the current legal framework and their individual circumstances.

Frequently asked questions

What are the main differences between an employment contract and a B2B contract?

An employment contract governs the employee–employer relationship, specifying a place and time of work, as well as entitlements such as paid leave and sick pay. A B2B contract is a collaboration between two self-employed individuals, offering greater flexibility, no holiday entitlement, and the need to pay taxes and social security contributions independently.

Is switching from an employment contract to a B2B contract always worthwhile?

Not always. A B2B arrangement is mainly beneficial for those who can negotiate a higher salary or exceed the second tax threshold. If you continue working with the same employer, you are not entitled to social security reliefs and preferential treatment, which may reduce the financial benefits.

What rights and privileges do I lose when switching to a B2B contract?

Under a B2B contract, you are not entitled to paid leave, sick pay, protection against dismissal with notice periods, or any other social benefits provided for under the Labour Code. You must sort out all matters relating to insurance and leave yourself or in an agreement with your client.

How do tax and social security contributions work under a B2B contract compared to an employment contract?

Under an employment contract, the employer pays contributions and taxes, and the employee receives a net salary. Under a B2B arrangement, the self-employed person settles their own taxes and contributions, can choose their form of taxation and deduct business expenses, which may reduce their tax burden.

Is a B2B contract secure in terms of employment?

A B2B contract offers greater flexibility but less job security. The absence of statutory notice periods or severance pay means that the working relationship can be terminated quickly, often without legal protection, unless the contract stipulates otherwise.

Can I use subcontractors and work remotely under a B2B contract?

Yes, a B2B contract does not impose any restrictions on where or when you work, and the use of subcontractors is permitted, which is not allowed under an employment contract. This provides considerable freedom and flexibility in organising your work.

How can ‘Firma dla każdego’ help with B2B accounting?

‘Firma dla każdego’ enables you to settle accounts on a B2B basis without having to set up your own business. It offers a simplified invoicing process, a lower tax rate (6 per cent) and no obligation to pay social security contributions, meaning that net earnings can be up to 40 per cent higher than with traditional B2B arrangements.