Poland: Workations are at the employer’s risk

Each case is unique

Employers often raise no objections from the business perspective to work being performed from abroad, however the issue becomes complicated due to the risks involved when applying the laws of the country where the work is performed.

Therefore, employers must decide on a case-by-case basis by considering the following factors:

• country where the work is performed,
• planned period of work,
• type of work, and
• employee’s nationality.

Unfortunately, there are no universal rules here except for one general principle. Namely, the longer the period of work from abroad, the higher the risk that at least some portion of the requirements prescribed by the law in place in the country where the work is performed will apply and be enforced in practice by competent authorities.

Relocation check list

Below we present a check list for employers to consider before giving their consent to working remotely from abroad. In certain jurisdictions or in specific cases some other issues will also be relevant. In addition, appropriate internal regulations must be in place to render remote working possible, even without a cross-border component, and accordingly the employer’s general obligations in this respect continue to apply.

A different situation occurs also when an individual working remotely from abroad performs work on a legal basis other than an employment contract (e.g. self-employed persons), but we do not discuss such instances here.

Immigration law

Even if the employee has obtained a tourist visa or is entitled to visa-free travel, they may require an appropriate permit to stay or perform work remotely in a given country or may be subject to certain other restrictions. A risk exists that the consequences of a potential breach may be borne by the Polish (foreign) employer.

What about social security contributions?

As a rule, social security contributions are due in the country where the work is performed. The applicable law of the country in which remote work is performed may oblige the employer, as early as on the very first day of remote work, e.g., to register with the foreign equivalent of the Social Security Institution (ZUS), as well as deduct and pay the relevant contributions that apply in that country.

For some countries, EU regulations or international agreements on social security resolve this issue to some extent (a list of relevant agreements concluded is available on the ZUS website). In certain cases when work abroad is only temporary, such regulations make it possible to continue the payment of social security contributions in Poland only.

Even if an employee performs work remotely in a country subject to EU regulations or a country bound by a relevant social security agreement concluded with Poland, it is usually required to present an appropriate document issued by ZUS (e.g. an A1 certificate for work performed in another EU member state) to confirm the possibility of continuing to pay contributions in Poland and the absence of the obligation to pay them in the country of work. Usually, one should obtain such document before commencing work abroad.

Some countries impose fines for failing to present a similar document (a failure to apply for one before commencing work abroad) even if the abovementioned conditions are met to continue to pay contributions in Poland only. Also, it is not obvious that a similar document will be obtained. No clear-cut practice has been established regarding the legal basis and the manner of handling cases of working remotely abroad temporarily.

Tax residence is not the only trouble

Usually, an employee intends to work remotely from abroad only as a temporary measure and for a short period, and so they retain their residence status in Poland for tax purposes. However, not all doubts are resolved thus far.

Work performed from the territory of a state which is not a party to a double taxation treaty (DTT) with Poland is a significant issue. In such a case, one should analyse the effects of work performed in that state exclusively based on the applicable laws of that state. The analysis might indicate that income from work performed in that country (even from the very first day onwards) is subject to taxation in that country and, for example, the Polish employer is required to register and act as a taxpayer.

Even if Poland has a DTT concluded with the country in question, one should check the conditions for potential tax exemptions in the country of remote work performed on a temporary basis. Such exemptions are usually not granted, i.a., when:

• the employee is recognised as a tax resident within the meaning of the DTT by the country in which they perform remote work (which is unlikely in standard cases of remote work abroad episodes with an intent to return to Poland), or
• the employee’s stay abroad exceeds 183 days (counted in a different manner and in a different period, depending on the DTT), or
• when the remuneration is borne by the tax establishment of the Polish employer in the other country.

Tax establishment

The next issue the employer needs to examine is whether the remote work performed by the employee abroad will not lead to creating a tax establishment for the employer in the country where the employee performs their work. This involves, i.a., the need to account for the CIT equivalent for the income generated by such establishment in the country where the employee performs their work.

While work abroad performed on a temporary basis will not usually result in the employer creating a tax establishment, the issue is more complicated. The final conclusion will depend on, i.a., such factors as:

• the duration of work abroad,
• whether the employee negotiates and/or concludes contracts on behalf of the employer or otherwise represents the employer,
• whether the employee is the sole employee performing remote work from that country or a larger group of individuals is involved,
• the definition of the tax establishment in the relevant DTT and the treatment of this concept in the practice and case law of the country in which the work is performed.

Overriding mandatory provisions

In general, the private international law of the country of the adjudicating court will determine the governing law of the contract. Thus, it is not possible to predict what rules will apply in determining the law applicable to an employment contract if it is performed abroad on a temporary basis.

However, it is most likely that the rules will be like those set out in EU law (Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations; Rome I). So, the temporary performance of work abroad by an employee whose standard work is performed in Poland will not, in most cases, exclude the continued application of Polish law to their employment contract. However, it is quite likely that certain provisions of law prevailing in the country where work is performed will still apply, including those of a public law nature. The competent authorities (e.g., the foreign equivalent of the National Labour Inspectorate) in the country where the work is performed may carry out inspections in this respect and impose penalties.

It is not possible to determine which rules stemming from the law in effect in the state of temporary remote work may apply, but they are likely to be those concerning, i.a., minimum wage, rest periods, minimum annual leave, calculating overtime, limits on working hours, work on Sundays or public holidays, the protection of pregnant women and work performed immediately after childbirth, employment of children and minors, equal treatment, occupational health and safety regulations, keeping the relevant employee records, disclosure obligations and registrations, etc.

Extra health care insurance

The employer should confirm the rules that apply to the employee's access to medical care in the country of work. Depending on whether the employee is subject to registration with the relevant insurance institution abroad or whether a European Health Insurance Card (EHIC) (or its equivalent) has been obtained, the employee's access to public health care services may differ.

Moreover, even if the employee is entitled to such care, it may be provided on different terms than in Poland. The employee may have to bear a larger share of the related costs. Thus, the employer should consider taking out separate medical insurance.

Additional obligations

The law of the remote work country may also impose other obligations on the employer, which are difficult to foresee and confirm without knowing the specific circumstances. Some additional complications may also arise when performing work in another country.

For example, these may include the following:

• requirements related to business activity carried out in that country (if the employee's remote work is deemed to result in their employer carrying out business activity in the country of remote work) in the absence of a business entity set up for that purpose in such country, for example; various registration and filing requirements may apply;
• the employer should check the contracts concluded, e.g., the insurance in place (e.g., covering the employer’s civil liability, accident insurance, or insurance for the property made available to employees) which may fail to cover incidents abroad;
• since the employee will have remote access to the employer’s systems and databases, the work performed abroad will result in data processing in another country with respect to the personal data entrusted to the employer as data controller or processor. So, it should be confirmed that such access does not reduce the level of data security, and the employer does not have any contractual restrictions governing the area where personal data may be processed, or that the remote access will not be considered a data transfer within the meaning of data protection legislation;
• depending on the type of work performed by the employee, some other broader compliance and information security issues may also apply;
• in the event of any accident at work, in terms of practicalities, it will be highly problematic for the employer to fulfil its statutory obligations;
• one cannot utterly rule out that an employee working remotely abroad would be considered as an employee posted to that country (or being on a business trip), which would require complying with the relevant regulations.

Finally, working abroad should be considered when calculating PIT withholding and Social Security contributions in Poland. The employer should establish rules that allow the employer to collect information in this respect and to forward it to the relevant department or payroll service provider accordingly.

Current employer practice

Due to the abovementioned concerns and given employees’ expectations as to their ability to work remotely abroad, we note the following three market approaches:

1. A priori ban on remote work abroad and no consent given to work remotely outside the country. This is the simplest solution and the safest one in legal terms, but it may lead to employees being dissatisfied their employers’ decisions.
2. Consent dependent upon a detailed case-by-case analysis. The process involves consulting foreign lawyers which can be time consuming and expensive.
3. Accepting that working remotely abroad will always involve certain legal risks, and while the risks cannot be fully excluded, they must be accepted and accompanied by measures to partially mitigate them (e.g., that remote work can only be performed in EU member states, or the maximum period of such remote work is 30 days per year).

Some employers also allow their employees to work remotely from abroad without any limitations or special rules provided it is acceptable businesswise. At the same time, such approach does not typically stem from any in-depth analysis of the issues, but is rather due to ignorance of the potential legal consequences or the assumed lack of control by the relevant authorities in that respect.

This is the English version of the article published in the guide 'Remote working in the Labour Code' in the Polish daily Rzeczpospolita on 22 December 2022.