Poland’s crackdown on the B2B model

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.

New plan

The backlash to the proposed reforms prompted direct intervention by Poland’s prime minister, who put the project on hold. However, the Polish government is constrained by its earlier commitments, as strengthening the powers of the Labour Inspectorate was included as one of the milestones in Poland’s Recovery and Resilience Plan agreed with the European Commission.

Three months after the initial reforms were presented, the government returned to Parliament with a new revised proposal which retained the most controversial element of the original draft, namely, the possibility of converting a civil-law contract into an employment contract by way of an administrative decision. However, the government has abandoned the earlier proposal for automatic immediate enforceability, and has dropped the possibility of retroactive effect of the administrative decision. The labour law reform is expected to come into effect within the next 3 months following the President’s approval.

EU standards

For international business, this may mean that Poland gradually loses some of the advantages of a flexible and cost-efficient labour market. At the same time, these developments may be seen as part of a broader alignment of the Polish market with prevailing European standards. The benefits of B2B models can still be preserved through appropriate compliance frameworks and internal due diligence practices. Independent contracting is likely to remain a viable option for highly skilled professionals, particularly where there is no business need to integrate them closely into the corporate hierarchy.

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Jeremiasz heads the Penteris compliance department. He spreads his work across compliance, employment, corporate, M&A, and risk management.