Editorial: The fiction of self-employment

Poland has one of the highest rates of self-employment in Europe. However, the truth is that many of these people actually work for companies that either can't or won't offer them full-employment contracts because the related costs are so high.

Companies have a fair bit to gain by employing workers on self-employment contracts. In order to employ a worker on a gross monthly salary of, for example, zł.5,000, a company would have to pay zł.995 in social security payments. The employee pays an additional zł.1,690 on top of taxes. On the other hand, if a worker is "self-employed," the social- security bill comes to about zł.770, paid by the worker. This is great for the company, but gives the worker only the minimal pension, which is little better than nothing. Some employers even treat an employment contract as a perk, only available after some years' work. It usually goes hand in hand with a pay rise, otherwise a worker is likely to see her take-home pay fall as a result of the whopping additional bill she has to pay.

The Sejm is currently considering two draft bills on the subject. They aim, broadly, to make the same rules for self-employment as for employment, as well as bring in additional fines for companies caught employing workers on a fictitious self-employment contract. This fine could be as high as zł.30,000, and would be paid by both the employer and the worker.

It is fair to say that the government is losing a lot of potential revenue as a result of these gray economic practices. However, it is wrong to penalize companies for avoiding paying excessive employment charges. With Poland's high levels of unemployment and worker emigration, the government should do everything in its power to encourage Polish firms to employ more people. The only way they will achieve this is by cutting the costs of employment to a level employers can afford. Threatening companies with fines is sure to backfire. Rather than risk being caught, companies will simply decide not to expand their workforces, or hire workers on under-the-table wages, with no contract or national insurance at all.

The good news is that last week Finance Minister Zyta Gilowska announced plans to reduce accident insurance payments. The reform envisages lowering them from 6.5 percent to 1.5 percent for employees and from 6.5 percent to 4.5 percent for companies. This is a commendable move, but hardly more than a drop in the bucket. We must hope it is the first of many related reforms.