Transition from an employment contract to a B2B arrangement

The decision to switch from an employment contract to a B2B contract is one of the most significant changes in a professional career, and one that an increasing number of professionals in the Polish market are facing. This choice involves not only redefining the relationship with one’s current employer, but also the need to enter the world of self-employment – with all its privileges and responsibilities. Whilst this change can bring tangible financial benefits and greater flexibility, it requires careful analysis and thorough preparation to avoid unnecessary legal and tax risks.

The origins and significance of the transition from an employment contract to a B2B arrangement

The growing popularity of self-employment in Poland is the result of both cost pressures on employers and employees’ expectations regarding flexibility and the opportunity to increase their real income. The B2B model – that is, cooperation between two business entities – allows for the issuing of invoices for services rendered, the freedom to decide where and when to work, and the use of tools to optimise tax liabilities. However, the transition to a B2B arrangement, particularly with the same employer, presents significant formal challenges and risks; disregarding these can result in serious financial and legal consequences.

Key differences between an employment contract and a B2B arrangement

• Legal framework: An employment contract is governed by the Labour Code, which ensures employee protection, a minimum wage, the right to holiday leave and a notice period. A B2B contract is a civil law contract governed by the Civil Code and gives the parties greater freedom to determine the terms of their cooperation.
• Scope of freedom: Under a B2B contract, the contractor decides for themselves how to organise their work; they are not subject to the client’s management, nor are they obliged to work at a specific place or time.
• Social benefits: A full-time employee is entitled to paid annual leave, sick pay, length-of-service allowances and other benefits. A self-employed person has no statutory right to annual leave or sick leave under the current rules.
• Tax and social security obligations: The employer deducts taxes and social security contributions on behalf of the employee. In a B2B arrangement, full responsibility for accounting, taxes and insurance rests with the contractor.

How to switch from an employment contract to a B2B arrangement

1. Analysis of the situation and preparation: Before making a decision, it is worth weighing up the benefits and risks – taking into account financial and legal aspects, as well as your own aptitude for running a business.
2. Terminating your employment contract: You must observe the notice period and ensure that all obligations towards your current employer are fulfilled. It is good practice to have an open discussion about your plans to switch to a B2B arrangement.
3. Registering a business: Setting up a sole trader business is now a straightforward process that can be completed online. You need to select the appropriate PKD code and tax regime, and register with ZUS.
4. Agreeing the terms of cooperation: When negotiating a new contract with your former employer, you should clearly define the scope of duties, the rate of pay, the terms of payment, and matters relating to leave or the exclusion of liability.
5. Signing a B2B contract: The contract should be drawn up in writing and avoid provisions typical of an employment relationship (e.g. fixed working hours, place of work, and reporting lines).
6. Accounting and settlement management: It is essential to keep sales records and to pay taxes and social security contributions on time. It is worth considering seeking support from an accountancy firm.

Tax and social security restrictions when switching to a B2B arrangement with the same employer

One of the most common mistakes is the assumption that a self-employed person providing the same services to a former employer will gain complete freedom in choosing their tax regime and social security relief. In reality, if the scope of B2B activities overlaps with the duties performed as part of full-time employment in the current or previous year, the self-employed person loses the option to choose the flat-rate tax or the lump-sum tax and will not be eligible for start-up relief or preferential social security contributions during the first year of business.

Example: Przemek left his full-time job on 31 March 2022. On 1 April, he set up his business and signed a B2B contract with the same employer, carrying out identical tasks. In 2022, he could only opt for taxation under the general rules and pay the full social security contributions. It is only in the following year that he becomes eligible for the flat-rate tax, whilst the lump-sum tax is only available from the third year onwards.

These restrictions do not apply when working with a new client – in that case, the self-employed person benefits from the full range of tax reliefs and options from the outset.

The risk of bogus self-employment and legal consequences

Regulatory bodies, including the National Labour Inspectorate and the tax authorities, are increasingly scrutinising whether a B2B contract is, in reality, a disguised employment contract. If, in practice, a self-employed person carries out tasks under the supervision of their former employer, at a specified location and during specified hours, whilst remaining subordinate, the contract may be reclassified as an employment relationship. This results in an obligation to settle outstanding social security contributions, taxes, as well as any financial penalties and employee claims.

“It is important that the new contract does not bear the hallmarks of an employment relationship – it should not be performed under the employer’s management, with a prescribed place and time of work. Otherwise, there is a risk that it will be reclassified by the National Labour Inspectorate (PIP) or a court.”

In practice, clearly distinguishing a business relationship from a relationship of subordination can be difficult, particularly in companies that are not prepared to operate on a partnership basis. It is worth seeking legal advice and using tools that automate the drafting of contracts, thereby eliminating the risk of including incorrect provisions.

Cost-effectiveness and practical aspects of B2B cooperation

Financial and tax benefits

By switching to B2B, a business owner can independently account for business operating costs – from equipment and office rent to training. For new contracts, tax reliefs are available, such as the ‘start-up relief’ (6 months’ exemption from social security contributions) and preferential social security contributions for a further 24 months. The self-employed person can also choose one of three forms of taxation: the tax scale, a flat-rate tax (19 per cent) and a lump-sum tax on recorded income (rates ranging from 2 per cent to 17 per cent depending on the business profile).

In B2B arrangements, it is possible to achieve a higher net salary, particularly where there are significant tax-deductible expenses and where income exceeds the first tax threshold. Contractors receive ‘gross-gross’ remuneration and have the right to decide independently on investments and accounting methods.

Flexibility and professional development

The B2B model allows for complete autonomy in organising one’s work, taking on additional assignments and building one’s own expert brand. Many specialists view this stage as a natural step towards setting up their own agency, working internationally or developing digital products.

Disadvantages and challenges

• No holiday entitlement or benefits: You must negotiate your own time off, and sick pay depends on the amount of contributions paid.
• Financial liability: The entrepreneur is liable for debts with all their assets, both business and personal.
• Administrative burdens: Keeping accounts, filing tax returns and dealing with social security (ZUS) requires regular effort or working with an accountancy firm.

Alternative options and support tools

For those who are reluctant to deal with the formalities involved in registering a business, solutions such as business incubators (e.g. ‘Firma dla Każdego’) are available, which allow invoices to be issued without registering a company, by utilising the platform’s legal personality. This is an attractive option for those who wish to test a B2B model without risk or fixed costs; however, the terms of the arrangement and the scope of liability should be analysed carefully.

Summary and expert recommendations

Making the switch from an employment contract to a B2B arrangement can mean a significant increase in income and freedom of action, but it requires a thorough assessment of the situation, careful planning and professional drafting of the contract. It is crucial to understand the tax and social security (ZUS) restrictions when working with your current employer. It is also extremely important to avoid bogus self-employment, which carries serious legal and financial risks. Those who are ready to take full responsibility for their own business and are capable of managing their time and finances independently can build their own brand through B2B work and open themselves up to new opportunities for growth. I recommend consulting a legal or tax adviser and making use of modern accounting tools and platforms designed to support freelancers in managing their business.