The "employee" creates a single-person company in Poland (or any other EU country, I guess) and sends invoices monthly. Honestly, it's trivial to set up. I'd say it's even easier than the standard employment process in the EU.
Not sure about France, but in Poland, if you’re sending invoices to an entity that has no presence in Poland, is not incorporated there, has no offices etc, it can hardly be legally seen to be a legal “employment” relationship.
But, assuming the situation above, even if it is illegal (which I strongly doubt), so what? What can the system do here to you? Will it jail you or fine you, or otherwise stop you, the worker, for “illegally” working on a wrong type of contract? After all, it cannot do anything to the company, as it has no jurisdiction over it.
In France (and Germany too apparently), if you are found out - usually by a random tax audit - they will ask you to back-pay employee and employer contributions on the money that you received (so about 60% total)
the issue isn't really the company, as you pointed out, they are not in France, they're not subject to French law. The issue is that as a French tax resident, if you are meeting the criteria for employment (single company representing more than 80% of your revenue, everyday work relationship that is based on subordination etc etc), then you have to pay employment contributions
Why? For the same reason as every other mandatory insurance. If everyone who has a stable, well-paying job is skipping out of employment contributions, it makes the contributions for the others even higher, pushing more people out of the system etc until you have no-one left with employee protections
It sounds like if the single member company invoices the foreign company and then pays you as an employee, with all the payroll deductions, that's fine?
That seems reasonable, the only thing is that you have to compare the foreign company invoice rate as a gross payment to salaries offered by domestic companies which are generally quoted as net payments? As I understand it, European salaries are usually quoted fully net --- you get exactly that amount, in contrast to US salaries which are mostly gross, there are a lot of deductions that start from the quoted amount, but some that are employer side and not usually quoted.
european salaries are usually quoted "semi-gross" (or semi-net, according to your optimism). there is an arbitrary distinction between employer contributions and employee contributions, the figure you will be given is after the former, before the latter. and always before income tax of course (because that isn't solely based on your salary)
What could happen to the company: is that the Polish government or courts could deem the foreign company to be illegally operating in Poland (by virtue of employing you through a hidden contract), and require the company to set up a local legal entity, make corporate filings, pay taxes, etc. Or else pay fines. Or else get banned from operating in your country. You may also be entitled to rights under local employment laws regardless of what it says in your contract, which could also lead to the company being fined or banned.
What could happen to you: you get billed for the unpaid taxes and payroll contributions you should have been making. And possibly charged penalties or even fined for tax evasion.
Depends on the country’s specific laws and their government’s willingness to pursue things like this.
> require the company to set up a local legal entity, make corporate filings, pay taxes. Or else pay fines.
They can require it all they want, but if the company has no presence in Poland, they cannot actually make them do so.
> Or else get banned from operating in your country
Which is fine with many companies.
> You may also be entitled to rights under local employment laws regardless of what it says in your contract, which could also lead to the company being fined or banned.
Sure, but entitlement under local employment law is worthless against company in a different jurisdiction.
Sorry, I’m not really sure what you’re trying to add here?
Yes, the foreign company can obviously decide to ignore the Polish government. As a consequence they will have to stop employing all their “contractor” employees in Poland. If they’re happy with that situation then… congrats to them?
They will not have to do anything of the sort. The can continue to buy services of the Polish resident, and pay their invoices. The Polish government cannot and will not do anything to the company.
What it can do, however, is that it can go after the worker. Is the government of Poland so vindictive to actually go after individuals who commit a crime of working for a foreign company?
Based on many of my friends having this exact arrangement for years, I think the answer is, in fact, no: they happily send invoices every month, get paid, and (less happily) pay taxes and ZUS contributions. It all works out just fine.
> What can the system do here to you? Will it jail you or fine you, or otherwise stop you, the worker, for “illegally” working on a wrong type of contract?
It can charge additional taxes and pension/healthcare contributions (which is how it works in Croatia).
How is it solved in France then? I dont' think it's possible to have an trans-national employment contract (which labor laws would the contract observe? The French ones or the US ones?). So, how do French people work remotely for US companies? I don't think most countries' laws are set up for a situation where a company employs a worker that does not live in the same country.
I wouldn't take namday's comment at face value without some kind of citation.
It could be that it works similarly to Croatia - it's not illegal, but if you are found to be "a hidden employee" you simply owe taxes and retirement/healthcare contributions as if entire income of your single-employee company was your salary.
It could be that it's actually illegal in France. But many people are confused about how it works here in Croatia, so it wouldn't surprise me if it were the case in France too.
I completely agree with what you say, it depends on the specific setup (specifically, whether a judge will consider that it was an employment relationship). My statement was in response to someone who was clearly describing an employment relationship:
> The "employee" creates a single-person company in Poland
Yes, I was also referring to a scenario where you create a single-person company and have a single source of revenue from a de-facto employer.
Is it really illegal in France or do you just owe more taxes/contributions than if you had multiple clients (which would allow you to take part of the revenue as company profits, instead of having to channel it all as a salary)?
Looking at your comment [0] it sounds like it might not be illegal (provided you pay the required taxes/contributions)?
It would be illegal in France to do it without declaring yourself as an employee, and therefore paying contributions . “Illegal” as in if you get caught you’ll get a fin and back-taxes, not jail or anything
OK, so it sounds like it’s possible in France too, you just need to employ yourself (and then pay employment-related contributions). In Poland, this is a little simplified, as there’s a company structure called “single-person company” (I’m sorry, this is my own translation of the term, it’s probably not the best) which combines these two things (i.e. after creating this type of company you pay social security for yourself, without any extra employment contract).
1) The company opens a branch in France, with as director and sole employee the person in question. Employment contributions are collected on the money that the French branch pays to its (sole) employee. Very simple to set up, does require a bit of work from an accountant for the yearly accounts (I'd say to budget about 1kE/year)
2) The employee joins an IT contracting company that already has a commercial presence in both countries, they will take 10% of the take (known as "portage salarial")
> I dont' think it's possible to have an trans-national employment contract (which labor laws would the contract observe? The French ones or the US ones?)
Those contracts are of course possible and exist - although rare due to paperwork hell you need to go through. The labor law of the employee's country is observed and they usually need to handle pension/health contributions on their side. In most of EU at least.
It is true though that most EU countries also demand that you open a local subsidiary once you have a certain amount of employees there (~5-10).
As a datapoint, in Germany it is not considered "hidden employment contract" unless it is more than 80% of your income. I could imagine some similar rules in France, but I do not know.
An alternative way that probably works in France too is to have a limited company and invoice from that.
ah yes of course, if it really "one of many" jobs it's fine in France too. What I understood from the conversation was people trying to do this for a "100% job"
