In Polish law, there are a great many forms of employment - from employment contracts to commission contracts to agency contracts. However, more and more people are choosing to set up their own business. Self-employment is an alternative to the employment contract. What advantages and disadvantages does it offer? What is worth knowing about it?
The desire of every employee is to have a well-paid and stable position, allowing for continuous development. From the employer's perspective, it is the low cost of employee retention that becomes most important, directly linked to increased profit for the company. There is no denying, therefore, that in some situations the goals of one side and the other diverge.
More and more people are therefore opting for the solution of starting their own business. This means abandoning a job in favour of self-employment.
What is self-employment?
As the name suggests, self-employment involves taking on the role of one's own boss by opening a business. In a nutshell, it means that the employee stops performing his or her duties under an employment contract and starts performing them as a company, invoicing the employer for the work done. A person who uses this form of employment works with a principal on the basis of a so-called B2B (businness-to-businness) contract. This is nothing more than a transaction between two (or more) entrepreneurs.
Benefits of self-employment
The plethora of advantages of self-employment is leading more and more people to switch to this form of employment. Although the financial benefits usually play a decisive role, the list of pluses has many other items:
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Greater earnings
Self-employment proves to be a beneficial form of employment primarily for the employer. It means that he incurs fewer costs than if he took on an employee with an employment contract. It can therefore offer better financial conditions to the employee.
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Flexible form of employment
Freedom and independence in the market is one of the main advantages of self-employment. It involves not having to belong to one company and being subordinate to a supervisor. Flexibility of employment also often refers to the ability to decide where and when the self-employed person does the work.
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Developing your own business
A self-employed person is not restricted in any way. He/she decides for himself/herself with whom and on what terms he/she works. Unlike salaried employees, the self-employed person has the opportunity to earn an income from the additional activity.
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Reduction of income tax
The self-employed are obliged to account for expenses related to the running of their own business. Consequently, they can also account for transport costs (conditional on the need to commute daily to the premises of the company with which they are working) or expenses related to the purchase of necessary equipment.
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Buying without VAT
A self-employed person may also enjoy the privilege of making purchases without VAT. However, it is essential that the goods or services purchased are directly related to the business activity.
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Payment of taxes on a quarterly basis
Another advantage of being self-employed will be that there is no need to pay taxes on a monthly basis, which is a burden on salaried employees. A self-employed person can decide to pay taxes on a quarterly basis. This will not only keep contact with the tax office to a minimum, but also allow him or her to allocate the funds to another purpose.
Disadvantages of self-employment
The transition to a form of self-employment is also associated with certain disadvantages:
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Additional costs and responsibilities
When deciding to become self-employed, it is worth bearing in mind that this is tantamount to running one's own business and, consequently, performing a number of duties. These include, above all, bookkeeping, invoicing and record-keeping. A self-employed person must also take into account additional costs - the payment of social security contributions and taxes.
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Non-binding labour law
The self-employed are also unable to enjoy the privileges that full-time employees enjoy under employment law. The disadvantage is therefore the inability to have paid holidays or sick leave, as well as the lack of protection against dismissal from five years before retirement or in the event of pregnancy. The desire to exercise all rights under the Labour Code must therefore be discussed independently with the company with which the self-employed person works.
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No consumer privileges
When wishing to make a 'business' purchase, the self-employed person must take into account the loss of consumer rights. These mainly concern the right to return goods without stating a reason.
Is self-employment viable?
The transition from full-time to invoice is certainly a very profitable one for many - especially if both employee and employer are happy with the contract. However, when making the decision to switch to this form of employment, the financial benefits should not be the only consideration. First and foremost, the self-employed person must answer the question of whether he or she will be able to cope with all the responsibilities that come with being self-employed.
