We already know the government’s first proposals aiming at ending, to use the Prime Minister’s wording, “the disgraceful era of trash contracts”. Instead of revolutionary changes, only a few careful tweaks were proposed. Is this matter really so complicated that there was no other way?
The problem of trash contracts has two opposite features. On one hand, it pertains to low-income earners who can only work on the basis of civil law contracts with no chance for a full-time job. Their position in negotiations with employers is, for a variety of reasons, very weak.
What is the government planning? Fixed-term contracts almost like full-time ones.
The main effect of this situation is the lack of social benefits (paid leave, regulated working time, etc.) despite the fact that these labor market institutions are particularly significant for this group of people. Many opponents of “trash contracts” believe that without the support of the state, setting up the general terms of the contract in advance, this group of employees would never attain both a satisfactory salary and some minimum amount of social security necessary to raise children or take a mortgage.
The second feature of the problem is the people who are relatively well-off but purposefully use civil law contracts to reduce their tax and social contribution burdens. One part of this group are the exceptionally wealthy (IT specialists, lawyers, members of supervisory boards) who, e.g. by using specific-task contracts, are able to reduce their annual payments to government institutions by several tens of thousands zloty. They intentionally refrain from paying high tribute because they don’t see any connection between their scale and the standard of public services or the quality of social security they can count on.
Everyone who ever had to fight for the payment of his / hers rightly awarded sickness, maternity or disability benefit in a court of law, because ZUS questioned their eligibility on the basis of fictional work or fictitious sickness (and in reality – because the benefit was too high in the bureaucrats’ assessment), will have no trouble understanding why the well-off Poles are reluctant to give away their money to the state. The advantages the others will incur are smaller and partly illusory, as the lack of social security contributions will have a side effect of a very low pension or lack thereof in an extreme case. The reluctance to pay social security contributions is not always a thought-out choice and can be a symptom of myopia, as it negatively affects living standards in the future.
Those two problems are very difficult to solve, especially in a way that would ensure that solving one wouldn’t make the other worse. Several labor unions are promoting a naïve solution that consists in banning “trash contracts” completely but this has all the possible disadvantages. Had we forced the employers to employ on the basis of full-time contracts only, some employees (especially those working in foreign-owned firms) would gain additional social rights without a meaningful reduction in income. Their employers’ surpluses are big enough to be able to accommodate such an increase in costs. For many smaller firms the additional burden would be impossible to bear, so that their employees would be presented a choice – lower net wage or unemployment. The latter would disproportionally affect the young and those returning to the labor market after a pause (maternity leave for example), because there wouldn’t be any transitional form of employment capable of reducing risk on the employers’ side. Lower net wage would also be an additional incentive for the low earners to emigrate.
Negative effects of banning civil law contracts (or a drastic reduction in their role) would be felt also by their wealthy beneficiaries and, indirectly, the whole economy. On one hand, it is difficult to imagine that architects, writers, movie directors or some IT specialists would be forced to work “for someone else” or set up firms only to issue an invoice once a year (or even less frequently). Enforcing a rigid form of employment would block the development of industries where creators are playing a principal role. One can suppose that, given the low quality of social security services in Poland, seen e.g. in discretionary treatment of law by ZUS, thousands of court cases being lost by this institution or the latest proposals from the Ministry of Labor and Social Policy aiming at destroying the indexation mechanism’s role of guaranteeing the purchasing power of pensions, a fair share of those who use civil law contracts to reduce their contributions, will continue to do so. The way they’ll do it will be much more destructive for the Polish state, though. It is not difficult to set up a firm abroad. It is an increasingly more popular form of employment for those, from whom the state will eagerly take a contribution but will be less eager to support proportionally.
Full article available on the wyborcza.biz webpage (in polish).
