President Bronisław Komorowski signed an amendment, which assumes obliging people working on the basis of on freelance agreements to pay social security contributions up to the amount of minimum wage and supervisory board members’ to pay contributions on the pay. In the course of legislative work, we drew attention to the negative consequences of these solutions for the labour market and the economy. Moreover, contributions on civil contracts is not the way to fight abuse of agreements of this kind, such action is merely of a fiscal nature.
As a result of imposing those contribution obligations, Social Security Fund revenues will initially increase. The Ministry of Finance estimates that the changes will bring proceeds on the level of 650 million zlotys (a year). However, in the longer term, the Fund’s situation will not improve. Contributions differ from taxes because they are of returnable nature – the state will have to payout as much as it now gets. And because of the increasingly dramatic demographic situation its ability to meet additional liabilities, which it now incurs, will be much smaller in a few decades. As a result, in a few decades the problem of the Fund’s deficit will reappear and again it will be necessary to look for solutions to reduce it. It's a vicious circle. Ad hoc solutions will not heal the social security system, it is necessary to make complex changes.
Moreover, those contributions will increase non-wage labour costs. In this case, entrepreneurs may decide on wage cuts, downsizing or some of them on transferring activities to informal economy. Thus, the amendment rather than improve, may worsen the situation of persons working under civil law contracts.
Instead of looking for the cause of increase in the number of civil contracts, the government has as usual decided to take up the fight against the effects. We should rather strive to provide employers with the appropriate regulatory environment that will stimulate the creation of new jobs and encourage concluding contracts of employment. Increasing labour costs is the worst possible solution. Fortunately, changes in contributions come into force as of 1 January 2016. We will see whether this bad scenario comes true - hopefully not.
Arkadiusz Pączka, Director of the Legislation Monitoring Centre of Employers of Poland