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A growing sole proprietorship may eventually reach a point where help from another person becomes essential. For a business owner, hiring the first employee brings a range of new obligations not encountered before. Here, we provide a guide to hiring your first employee: a list of the most important formalities to remember if you decide to take this step.
Before hiring your first employee: choosing the basis of employment – an employment contract or a civil-law contract (mandate contract, specific-task contract)
Remember that working without a contract is illegal! Choosing the basis of employment is therefore essential. This involves important questions about the company's planned future and needs, the nature of assigned tasks, the employee's degree of subordination, flexibility and protecting both parties' interests.
The main options are:
- A probationary employment contract;
- A fixed-term employment contract;
- An indefinite-term employment contract;
- A mandate contract;
- A specific-task contract.
Remember that although an employment contract involves higher costs, it provides the greatest protection and clearly regulates all the parties' rights and obligations.
Civil-law contracts offer lower costs, simpler settlements and greater flexibility, but also less employment security. Where the place and time of work are fixed and the relationship indicates subordination, a mandate or specific-task contract may also be challenged by inspection authorities, such as the National Labour Inspectorate.
Regardless of the chosen form of employment, the contract should contain appropriate provisions concerning, among other things:
- The date and place of conclusion;
- Identification of the parties;
- The subject of the contract;
- Its duration;
- The remuneration and its payment method and deadline.
Detailed guidelines on the content and form of an employment contract can be found in Article 29 of the Labour Code. You can download civil-law contract templates from the TaxCoach website, namely:
- Mandate contracts: https://taxcoach.pl/en/files-to-download/contract-of-mandate-complete-set-of-documents.html;
- Specific-task contracts: https://taxcoach.pl/en/files-to-download/contract-for-specific-work-complete-set-of-documents.html.
Registration with ZUS – registering as a payer (ZUS ZFA or ZUS ZPA) and registering the employee (ZUS ZUA or ZUS ZZA)
Before signing the first contract, you must register with the Social Insurance Institution as a contribution payer. Use form ZUS ZFA if you run a sole proprietorship, or ZUS ZPA if you run a company. The easiest way is through the dedicated ZUS Electronic Services Platform, PUE ZUS.
Register the hired employee with ZUS using form ZUS ZUA if all contributions are payable under the contract, for example an employment contract, or form ZUS ZZA if only the health contribution will be payable. You have only seven days from the hiring date.
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Tax office obligations connected with your first hire
Remember that hiring an employee and paying their salary means having to calculate, collect and remit personal income tax advances on their behalf.
You must therefore register with the relevant tax office as an income tax withholding agent.
Each newly hired employee under an employment contract must also receive a PIT-2 form, allowing them to make voluntary tax declarations.
At the end of the year, remember to submit a tax declaration to the tax office confirming the payments made during the year.
Additional obligations when hiring your first employee: examinations, occupational safety, PPK, GDPR and archiving
Hiring an employee also entails a range of other obligations and formalities, including:
- Informing the employee about employment conditions or work regulations before they start work (as a rule, the obligation to draw up work regulations applies only to employers with at least 50 employees);
- Obtaining the necessary documents from the employee, especially those needed to establish length of service and holiday entitlement;
- Informing the new employee about GDPR rules;
- Referring the employee for an occupational health examination before they start work, and archiving the resulting certificate confirming no health contraindications to the work;
- Onboarding and providing occupational health and safety training, which must be completed before work begins;
- Matters relating to Employee Capital Plans, namely enrolling employees who have not submitted a declaration opting out of PPK contributions;
- Ensuring complete employee documentation and retaining it for the legally prescribed period.
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