Kamil Markiewicz (FXMAG): What are the biggest changes occurring in companies run by your clients?
Dr Iwona Jaroszewska‑Ignatowska (Managing partner at People & Law): Clients are currently dealing with a wide range of topics. First, the trend of reducing remote work and returning to the office is still ongoing. Companies are not abandoning remote work entirely. Everything points to it becoming a permanent fixture. Its scope is, however, being limited. This requires not only appropriate changes in documents and consultation with employee representatives or trade unions, but also very good communication.
Almost every organization is sorting out salaries. We are in the lead-up to the adoption of Polish regulations implementing the transparency of remuneration directive. Preparing for this regulation is a huge project. In every company, especially large ones, the topic of equal pay for equal work or work of equal value must be addressed. Determine which jobs are of equal value and must be paid equally. What composes that remuneration? Check whether employees are paid in accordance with that principle, and if not, how to remedy it in the financial realities of the company. Employers must prepare for the fact that if the regulations come into force on June 7 of this year, as announced, they will have to provide every employee with answers to questions about the level and structure of their remuneration, as well as, among other things, the average remuneration among employees performing the same work or work of the same value, broken down by gender. Large companies will have to report the pay gap. Sorting out salaries is a complex, difficult, time-consuming and also obviously very emotional project. It touches an issue important to every employee. This is the second group of topics that employers are dealing with today.
The third group consists of issues related to civil law contracts: commission contracts, work contracts and B2B. Their organization is underway because the Sejm passed a law increasing the powers of labor inspectors, who will be able to issue administrative decisions and transform these contracts into employment contracts. For companies that use such contracts in large volumes, such as the creative, publishing or entire IT industry, these are current priority projects.
The fourth group of topics we are currently dealing with is the organization of company structures. The market is undergoing very large changes related, among others, to mergers, acquisitions, closing enterprises, moving some businesses to other parts of the world. This is closely linked to what is happening in the global market. It also affects the Polish market. It leads to employee transfers or individual or group layoffs.
Work is also underway on annual evaluation processes that just finished in companies. They separate employees who received low performance ratings in previous years. These are changes that happen every year.
The fifth group of matters concerns mobbing.
We still observe an increase in the scale of complaints about mobbing, less so discrimination. Employers conduct investigative procedures, which heavily involve HR and business teams. Only some complaints are justified. Investigations sometimes confirm that there was improper communication, but not mobbing under the Labor Code. Work is underway to change the definition of mobbing and impose new obligations on employers related to this topic.
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Looking at your clients, what are entrepreneurs most worried about regarding the conversion of civil law contracts into employment contracts?
Companies were most worried that the inspector's decision to convert a civil law contract into an employment contract would be immediately enforceable. The original draft, which allowed such a possibility, was eventually discarded, which is good news for enterprises and people who provide work in this form. According to the law just passed by the Sejm, the inspector first issues a recommendation to convert a civil law contract into an employment contract, and if it is not carried out, can issue an administrative decision. It can be challenged. Ultimately, the court will decide. This is good news for the market.
The second concern of entrepreneurs and contractors was that in the event of a PIP inspection, the parties' intent accompanying the conclusion of a civil law contract would not be taken into account. That is, even if we consciously agree to a B2B contract, it would not matter. In the final stage of parliamentary work, judicial precedent in such cases was taken into account and a provision was added that clearly emphasizes this. It was also clearly stated that, as the Supreme Court pointed out, in these cases it is necessary to determine which elements – employment contract or civil law contract – have a prevailing character. This is also good news for entrepreneurs and contractors.
As before, and after the regulations come into force, the decision about which type of contract we are dealing with is not only based on its content but also on how it is performed. The content of the contract usually poses no challenges. Contracts are prepared by specialized law firms or available from trusted sources. The way they are performed, however, leaves much to be desired. Entrepreneurs know this. While preparing for this change, hearing about planned inspections, they began to verify how they manage contractors and contractors, how they are compensated and what benefits they are granted. Until now, the practice was to treat these people as employees. The same expectation also existed among contractors, especially in the area of settlements and benefits. It happened that the same tasks were performed by an employee and a contractor in the same way, which should not happen. However, the market forced it. Candidates, especially in industries where it was difficult to find specialists, such as IT, dictated the form of cooperation that the entrepreneur had to agree to in order to acquire these experts from the market.
Companies fear increased inspections, and consequently the conversion of contracts, because it will mean a huge financial and administrative burden for companies. First, there will be a need to pay, even for five years back, ZUS contributions. This may affect both the company and the person who provided the service. It is not entirely clear what will happen in the tax sphere. Usually, a person working on B2B has a leased car and a phone purchased as part of the business activity. They include them in the costs of running the business. In some cases, they may settle with a flat tax rate. We can only imagine how far-reaching the tax consequences for contractors may become in the future when the contract is converted into an employment contract. Both parties have an interest in sorting out these matters today. It is not an easy topic.
For many years, to attract contractors for cooperation, the market used similar or the same benefits for them as for employees. Full‑pay breaks in service provision such as employee leave, “bonuses” or additional remuneration for extra hours calculated as employee overtime were common. Contractors were also provided with other benefits such as medical care or life insurance financed by the service provider.
For this reason, last year and this year are devoted to audits. Companies check both the contracts entered into and how they are performed. Sometimes contractors themselves ask for verification, saying directly that they fear tax consequences. There are many people in the market who consciously chose B2B and do not want their contract to be converted into an employment contract. Especially since the consequences can affect both parties in the relationship. Of course, there are also pathological situations where civil law contracts should not be used at all. This is a good moment to look at this phenomenon in the company.
Regarding salary transparency. What risk does it pose for entrepreneurs?
This is a very complex and complicated topic. We see that companies have pay gaps. The reasons vary. First, we are a young economy. Companies were developing rapidly. There was a labor market. Employers had to buy competencies from the market. They competed with each other on the level of offered remuneration to attract the best candidates. Candidates openly said they would change jobs only if they received a higher salary than they currently receive. Over the years, companies hired more employees, simply paying them as much as they demanded. At the same time, they did not keep up with raises for previously hired employees, even if they performed the same work. It is also no secret that due to maternity leave, women were excluded from raise processes, especially those tied to annual performance reviews. In short, we do not have organized market remuneration. Companies have differences in the salaries of people performing the same work or work of equal value, and sometimes they are defended, sometimes they require change. We now need to diagnose what they stem from. First, we must value job positions. Determine what value each position has for us, which positions form groups of the same work or work of the same value for a given employer, and then determine what other objective criteria we take into account when building our remuneration system. Do we follow the ones indicated in the directive, i.e., consider skills, effort, scope of responsibility and working conditions? This is a large project that requires the involvement of many experts. It also requires the inclusion of trade unions, and if they do not operate in companies, employee representatives. Remember that soon large companies will report publicly the pay gap between men and women, which will affect their positioning in the labor market. They will also have to internally answer employees about the average salary of employees performing the same or same value work by gender. The scale of such inquiries can be huge. Companies must be ready for it.
How does the situation look with hiring and firing employees in your clients' companies? Are there also group layoffs among them, which we hear more and more about in the market?
We have individual layoff processes for reasons unrelated to employees, as well as group layoff processes. This is because companies are constantly reorganizing their structures, making budget adjustments. Business sometimes changes its type of activity. It then looks for new competencies, abandons those it already has. Enterprises also undergo global mergers. Some industries are affected by stagnation in the global market, which reflects in the Polish market. That is why there are many layoffs. It is visible in publicly available statistics. For the second year we are dealing with a wave of layoffs that is sweeping Poland. I did not notice fewer layoffs. They are still the same number. New companies keep appearing that say they need support in this area. The goal is to change structures or simply improve cost efficiency. Salaries have been rising in recent years. That also means that the number of employees must be adjusted.
Is the issue of increasing cost efficiency the main reason mentioned by entrepreneurs during layoffs? Do they also provide other arguments that justify such decisions? A common reason that appears in the public space is the implementation of artificial intelligence in companies, which is supposed to push employees out of the market. As studies show, it is often just a pretext from entrepreneurs to conduct layoffs, including group layoffs. According to Boston Consulting Group research, only 5% of companies and organizations worldwide can harness the potential of artificial intelligence. Yet 60% despite financial investments, often huge, do not notice a significant difference after implementing AI solutions.
We have companies that point to reductions due to the introduction of AI solutions. These are companies that hire employees whose competencies AI can replace. But whether AI can replace a particular employee or an entire group of people depends not only on the quality of AI, which is still debated, but also on the openness of the decision maker to such a change. I remember a year when I was laying off entire recruitment departments in some companies because AI was supposed to replace them. At that time, there were also companies that said they would not do it and still did not. So now there are those who introduced this move and those who still use a recruitment‑based model with people working. Both are satisfied.
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You mentioned that for the past two years there has been a trend of group layoffs. Do you have knowledge about whether the companies you collaborate with planned further large layoffs this or next year? Such actions are always planned in advance.
I see that there is a constant flow of these orders. I cannot say whether there are more or a decline. It is a constant, steady process in which we have such projects. But it is clear that the market is very dynamic. There are companies that hope they have finished these projects and have closed the topic, then after 2–3 months they need another adjustment. They then proceed to further reductions, sometimes in another area of the company, sometimes in another location, sometimes simply in another number.
Why are there so many group layoffs in companies?
This is the result of what is happening globally. We are part of the entire economy, so if companies around the world are being acquired, merged, reorganizing structures, these actions also reach Poland. The entire corporate structure must be more efficient and effective. Companies therefore say outright that they must reduce operating costs because the expected profits are not achieved.
Part of these layoffs also result from the fact that in some industries we have become an expensive country in terms of costs, including labor costs. This concerns especially the manufacturing and service center industries. Some production lines and service centers are moved from Poland to other countries that are less costly. In our country, over the last few years we have seen wage increases and other key costs for entrepreneurs, which had a significant impact on business results. Corporations often make decisions based on Excel table numbers. They look where it is simply cheaper. Especially if they can obtain similar quality competencies in a given market.
Thank you for the conversation.
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