it depends on the EU country. this would be illegal in france for example, considered a "hidden employment contract" (which it is)
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.
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
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 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.
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.
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?
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.
It can charge additional taxes and pension/healthcare contributions (which is how it works in Croatia).
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.
> The "employee" creates a single-person company in Poland
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)?
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")
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).
An alternative way that probably works in France too is to have a limited company and invoice from that.