Employment Contract vs. Contract of Mandate: Key Differences and Benefits
In the dynamic reality of the job market, choosing the right form of employment is crucial for both the employee and the employer. An employment contract and a contract of mandate are the two most common forms of cooperation in Poland. Although they may seem similar at first glance, they differ in many significant aspects. Understanding these differences allows you to make an informed decision that will impact your professional and financial future. In this article, we will take a detailed look at both forms of employment, compare them, and help you understand which one may be more beneficial for you.
Table of Contents
- Definition and Legal Basis
- Rights and Obligations of the Parties
- Remuneration and Working Time
- Leaves and Social Benefits
- Social Security and Health Insurance Contributions
- Taxes
- Termination of the Contract
- Benefits and Risks Associated with Each Form of Employment
- How to Make an Informed Choice
Article Plan
We will start by presenting the definitions and legal bases of both forms of employment to understand their essence. Then, we will discuss the rights and obligations arising from each contract, highlighting differences in remuneration, working time, leaves, and social benefits. We will address issues related to social security and health insurance contributions, as well as differences in income taxation. We will look into the procedures for terminating the contract in both cases. Finally, we will compare the benefits and risks associated with each form of employment to help you make an informed choice.
1. Definition and Legal Basis
Before we delve into the details, it’s essential to understand what exactly an employment contract and a contract of mandate are and what laws regulate them.
Employment Contract
An employment contract is the primary form of employment regulated by the Labor Code. Under this agreement, the employee commits to performing specified work under the employer’s supervision, at a place and time designated by the employer.
Contract of Mandate
A contract of mandate is a civil-law contract regulated by the Civil Code. The contractor commits to performing a specific task for the client but without employment subordination.
Comparison
| Criterion | Employment Contract | Contract of Mandate |
|---|---|---|
| Legal Regulation | Labor Code | Civil Code |
| Subordination | Yes | No |
| Working Time and Place | Set by the employer | Determined by the contractor |
2. Rights and Obligations of the Parties
Each contract brings specific rights and obligations for both parties. Let’s look at the key differences in this regard.
Obligations of the Employee and Contractor
An employee under an employment contract is obliged to follow superiors’ instructions, adhere to work regulations, and safeguard the company’s interests. The contractor has more freedom in how they perform the task and is not subject to the client’s supervision.
Obligations of the Employer and Client
The employer must provide safe working conditions, pay remuneration on time, and make social security contributions. The client is obliged to pay remuneration according to the contract but is not required to provide working conditions or social benefits.
Comparison
| Criterion | Employment Contract | Contract of Mandate |
|---|---|---|
| Employee/Contractor Obligations | Follow instructions, adhere to regulations | Perform the task with due diligence |
| Employer/Client Obligations | Provide working conditions, contributions, benefits | Pay remuneration as per the contract |
3. Remuneration and Working Time
Remuneration and organization of working time are key aspects of any contract. How do they differ in the case of an employment contract and a contract of mandate?
Method of Calculating Remuneration
- Employment Contract: Remuneration is fixed and cannot be lower than the statutory minimum. The employee is entitled to overtime pay and other benefits.
- Contract of Mandate: Remuneration is freely agreed upon by the parties. A minimum hourly rate applies, but there are no overtime bonuses.
Working Time
- Employment Contract: Defined working time norms (8 hours daily, 40 hours weekly). Work beyond these norms is additionally paid.
- Contract of Mandate: No defined working time norms. The contractor decides how to organize their time.
Comparison
| Criterion | Employment Contract | Contract of Mandate |
|---|---|---|
| Remuneration | Fixed, statutory minimum applies | Freely agreed, minimum hourly rate applies |
| Working Time | Legal norms, paid overtime | Flexible, no paid overtime |
4. Leaves and Social Benefits
The right to leave and additional benefits significantly affect work comfort.
Right to Leave
- Employment Contract: The employee is entitled to paid annual leave (20 or 26 days per year) and special leaves.
- Contract of Mandate: The contractor is not entitled to paid leave. Any breaks are unpaid unless otherwise specified in the contract.
Social Benefits
- Employment Contract: Access to social benefits such as vouchers, vacation subsidies, medical packages.
- Contract of Mandate: No entitlement to social benefits unless specified in the contract.
Comparison
| Criterion | Employment Contract | Contract of Mandate |
|---|---|---|
| Right to Leave | Yes, paid | No |
| Social Benefits | Yes | Usually no |
5. Social Security and Health Insurance Contributions
Paying contributions affects your future pension and access to healthcare.
Obligation to Pay Contributions
- Employment Contract: Mandatory social security and health insurance contributions paid by the employer.
- Contract of Mandate: Contributions may be mandatory or voluntary, depending on the contractor’s situation (e.g., student status).
Consequences
- Employment Contract: Full health and social insurance coverage, right to sickness benefits, pension.
- Contract of Mandate: Possible limitations in access to benefits, lower contributions affect future pension benefits.
Comparison
| Criterion | Employment Contract | Contract of Mandate |
|---|---|---|
| Social Security Contributions | Mandatory | Depends on the situation |
| Health Insurance | Yes | May not be paid |
| Right to Benefits | Full | Limited or none |
6. Taxes
Income taxation is an important aspect affecting your net remuneration.
Taxation of Employment Contract
- Income is taxed according to the tax scale (17% and 32%).
- The employer withholds advance tax payments.
- Possibility to use tax allowances and the tax-free amount.
Taxation of Contract of Mandate
- Possible to apply 20% tax-deductible costs, reducing the tax base.
- For low contract amounts, a lump-sum tax may be applicable.
- The client withholds advance tax payments.
Comparison
| Criterion | Employment Contract | Contract of Mandate |
|---|---|---|
| Tax Scale | Yes | Yes or lump-sum |
| Tax-Deductible Costs | Standard | Possible 20% costs |
| Advance Tax Payments | Employer | Client |
7. Termination of the Contract
Procedures related to contract termination differ in both cases.
Employment Contract
- Notice Period: Depends on the length of service (from 2 weeks to 3 months).
- Obligation to Justify: The employer must provide a reason for termination.
- Employee Protection: In some cases (e.g., pregnancy, maternity leave), the employee is protected against dismissal.
Contract of Mandate
- Termination: Possible at any time unless the contract states otherwise.
- No Notice Period: Parties can set their own terms.
- Consequences: Possibility to claim compensation if termination occurred without a valid reason.
Comparison
| Criterion | Employment Contract | Contract of Mandate |
|---|---|---|
| Notice Period | Yes, depends on length of service | Usually not applicable |
| Obligation to Justify | Yes, by the employer | No such obligation |
| Protection Against Dismissal | Yes, in certain cases | Not applicable |
8. Benefits and Risks Associated with Each Form of Employment
Before making a decision, it’s worth considering the pros and cons of both options.
Employment Contract
Benefits:
- Stability of employment and income.
- Full social benefits and right to leave.
- Legal protection of the employee.
Risks:
- Less flexibility in work organization.
- Higher tax and contribution burdens.
- Longer notice period.
Contract of Mandate
Benefits:
- Flexibility in time and place of work.
- Possibility of higher net remuneration.
- Freedom to take on other assignments.
Risks:
- Lack of employment stability.
- Limited social rights.
- No paid leave and benefits.
9. How to Make an Informed Choice
The decision on choosing the form of employment should be thoughtful and tailored to your individual needs.
What to Consider:
- Professional Priorities: Is stability and social protection more important to you, or flexibility and independence?
- Financial Situation: How will the form of employment affect your net remuneration and future benefits?
- Future Plans: Do you aim to build a career in one company or seek diverse experiences?
Steps to Take:
- Needs Analysis: Determine what is most important to you at work.
- Consult a Specialist: Seek advice from a lawyer or career counselor.
- Compare Offers: If you have a choice, compare specific conditions proposed by the employer or client.
- Long-term Thinking: Consider how the decision will impact your professional and financial future.
Summary
Choosing between an employment contract and a contract of mandate is a significant decision that will affect many aspects of your professional and personal life. Knowing the key differences, rights, and obligations associated with each form of employment will allow you to make an informed decision that best meets your needs and expectations. Remember that every situation is different, so it’s worth carefully analyzing all the pros and cons before signing a contract