Employer of Record – the structure of the model and the legal risks involved

by Dominika Dudek

Employer of Record – the structure of the model and the legal risks involved

The ongoing globalization of business activities and the growing prevalence of remote work have led companies to increasingly engage specialists in jurisdictions where they do not maintain their own corporate presence. This trend is particularly visible in sectors relying on highly specialized work, such as the IT industry and the technology services sector, in which employees are able to perform their duties remotely for foreign entities.

In such circumstances, there arises a need to identify a solution that allows for the lawful employment of workers in compliance with the regulations applicable in a given jurisdiction, without the necessity of establishing a local subsidiary or branch. One of the models used in practice for this purpose is the structure commonly referred to as Employer of Record (EOR).

An Employer of Record is an entity that formally employs a worker in a given jurisdiction and acts as the worker’s employer in the legal sense, while the employee performs work in practice for another entity – the EOR’s client.

The Employer of Record model typically involves three parties:

• Employee – performs work in a given jurisdiction.
• EOR Client – the entity for whose benefit the employee performs work.
• Employer of Record – the entity that formally employs the employee in the relevant jurisdiction and acts as the legal employer, while the employee performs work for another entity, i.e., the EOR client.

Why businesses use the EOR model

The EOR model is primarily used by international companies seeking to employ workers in a given country without establishing their own subsidiary or branch there.

The most common reasons for using this solution include:

• No need to establish a local legal structure (such as a subsidiary or branch).
• Ensuring compliance with local regulations – the EOR is responsible for ensuring that employment arrangements comply with local labour law, tax regulations, and the applicable social security system.
• Rapid market entry – the EOR model allows companies to employ workers quickly, without having to complete lengthy corporate registration procedures. It is often used when testing new markets.
• Reduction of administrative costs – payroll administration, employee documentation, tax settlements, and relocation processes may be handled by the EOR.
• HR support – the EOR may assume certain HR functions, such as preparing employment contracts, administering remuneration, and managing employee benefits.
• Local and compliant employment for workers – employees are formally employed under the labour laws of the relevant jurisdiction.

Legal risks associated with the EOR model

Despite its practical advantages, the Employer of Record model may give rise to a number of legal risks that should be assessed on a case-by-case basis, taking into account the specific structure of cooperation and the applicable legal framework.

1. Lack of explicit legal regulation

Under Polish law, the Employer of Record model is not expressly regulated. In practice, it operates through legal structures that may resemble employee outsourcing or temporary agency work.

As a consequence, the legality and safety of a particular arrangement do not depend solely on the wording of contractual documentation, but primarily on the manner in which the relationship is performed in practice.

2. Risk of the EOR client being considered the actual employer

One of the primary risks is the possibility that the entity benefiting from the employee’s work – rather than the EOR – may be considered the employer for the purposes of labour law.

This risk increases in situations where the EOR client independently organizes the employee’s work, issues binding instructions, supervises the performance of duties, and exercises day-to-day control over the employee.

In such circumstances, regulatory authorities or courts may conclude that the client is in fact acting as the employer. In practice, the issue of employee subordination is one of the key elements analyzed when assessing structures of this type.

3. Tax and social security risks

The use of the Employer of Record model may also give rise to uncertainties concerning the proper determination of the place of taxation of the employee’s income, the identity of the withholding agent, and the correct settlement of social security contributions.

Furthermore, where the entity benefiting from the employee’s work is a foreign company, there may be a risk that its activities give rise to a permanent establishment in the relevant jurisdiction.

The assessment of these issues typically requires an analysis not only of domestic legislation but also of applicable double taxation treaties and social security coordination rules.

4. Risks related to the scope of EOR rights and obligations

It should also be noted that an Employer of Record assumes not only a significant portion of administrative obligations related to employment but also certain rights and privileges arising from its status as the formal employer.

This may be particularly relevant in the context of employee-created works and the acquisition of intellectual property rights in the results of an employee’s work. In the absence of appropriate contractual provisions, doubts may arise as to whether such rights are acquired by the EOR client or by the EOR itself.

5. Risk of being treated as temporary agency work

In certain circumstances, the Employer of Record model may be considered similar to temporary agency work.

This may occur in particular where the formal employer merely “provides” personnel while the entity benefiting from the employee’s work effectively directs and supervises the employee’s activities. In such cases, there is a risk that the arrangement may be considered as operating in breach of the regulations governing temporary agency work, including the requirement to obtain the appropriate registration as a temporary work agency.

Employer of Record in judicial practice – emerging disputes

Although Polish case law has not yet developed a consistent line of decisions directly addressing the Employer of Record model, disputes involving structures of this type are beginning to appear in practice.

An example is the judgment of the Voivodeship Administrative Court in Gdańsk of 10 December 2025 (I SA/Gd 674/25). While the case did not directly concern the legality of the EOR model, it illustrates how disputes may arise in situations where the formal employer is separated from the entity that actually manages and directs the employee’s work.

In that case, the applicant attempted to demonstrate that the relationship with the foreign entity benefiting from the employee’s work in fact bore the characteristics of an employment relationship, whereas the EOR acted merely as the formal employer. The case therefore demonstrates that separating the formal employer from the entity that exercises actual managerial authority may lead to disputes not only under labour law, but also in the field of tax law.

Summary

The Employer of Record model may constitute a practical solution for businesses seeking to employ workers in foreign jurisdictions without establishing a local corporate presence. In many cases, it enables companies to enter new markets quickly while ensuring compliance with local labour law, tax regulations, and social security systems.

At the same time, practical experience shows that the key factor is the proper structuring of the relationship between the EOR provider and the entity benefiting from the employee’s work. In many instances, it is the practical organization of the arrangement – rather than the model itself – that determines whether the solution will be legally secure from the perspective of labour law, taxation, and social security regulations.

If you are considering implementing an Employer of Record model in your organization, evaluating alternative workforce structures, or reviewing the compliance of existing arrangements, it may be advisable to conduct a prior legal assessment of the proposed structure.

We invite you to contact our Employment Law team, who will be pleased to assist with assessing potential solutions and designing a workforce model tailored to the specific needs of your business.

Joanna Czajor – Bondarchuk

attorney-at-law | senior counsel

Aneta Żuradzka

attorney-at-law | senior counsel

by KBZ Legal

Amendment to the Act on the National Labour Inspectorate – commentary by Attorney-at-law Dr Aneta Żuradzka in Polsat News

12 March 2026 in Polsat News, Aneta Żuradzka, PhD, commented on the amendment to the Act on the National Labour Inspectorate adopted by the Polish Parliament and its implications for businesses.

“From a business perspective, it is important that the final version of the amendment softens the most controversial solutions from earlier drafts,” says Dr Aneta Żuradzka. “Among others, the automatic immediate enforceability of labour inspector decisions and the possibility for inspectors to recognise an employment relationship with retroactive effect have been removed. However, the new regulations may in practice lead to an increase in disputes, particularly in the context of B2B relationships.”

The amendment also significantly increases sanctions for offences against employee rights:

• the maximum fine increases from PLN 30,000 to PLN 60,000,

• in some cases even from PLN 45,000 to PLN 90,000,

• the maximum fines imposed by labour inspectors have also been increased – from PLN 2,000 to PLN 5,000, and up to PLN 10,000 in case of repeated offences.

We are aware that the new regulations raise concerns among businesses. In particular, there is a perceived risk of excessive administrative discretion in matters that have so far been primarily assessed by labour courts in practice.

Listen to the full commentary:
https://lnkd.in/dvbcbjE3

If you have any questions regarding the impact of the new regulations on your employment structures, please feel free to contact Dr Aneta Żuradzka, Head of the Employment & GDPR practice at KBZ Law & Tax.

by Agnieszka Plucińska

KBZ Tax Alert: CbC-P Notification for FY 2025 — obligations and deadlines in 2026

An important compliance deadline is approaching for entities belonging to multinational enterprise (MNE) groups. Entities whose financial year corresponds to the calendar year (1 January – 31 December 2025) are required to submit the CbC-P notification for FY 2025 to the Head of the Polish National Revenue Administration (KAS) by 31 March 2026.

Failure to comply with this obligation may expose taxpayers to administrative penalties of up to PLN 1 million.

What is the CbC-P notification?

The CbC-P notification forms part of the Country-by-Country (CbC) reporting framework, introduced under the OECD BEPS initiative to enhance transparency regarding the global allocation of income, taxes and economic activity within multinational enterprise groups.

The CbC-P notification allows tax authorities to determine:

• which entity within the group submits the CbC report (CbC-R); and
• the jurisdiction in which the report will be filed.

The notification must be submitted by all Polish constituent entities of an MNE group, including both the reporting entity and non-reporting entities belonging to the group.

In 2026, the rules governing CbC-P notifications remain unchanged. However, large multinational groups will for the first time also be required to prepare a public Country-by-Country report. The public CbC report will be made available in the commercial register and on the company’s website, with the first reports covering FY 2025 to be published by 31 December 2026.Importantly, the new public reporting requirement does not replace the existing obligations related to CbC-R or CbC-P filings.

Who is required to submit a CbC-P notification?

The CbC-P notification must be submitted by entities that are members of multinational groups subject to CbC-R reporting but are not themselves the reporting entity (i.e. neither the ultimate parent entity nor a designated surrogate reporting entity).

The obligation arises where, in the preceding financial year, the consolidated group revenue exceeded:

• PLN 3.25 billion – where the consolidated financial statements are prepared in PLN; or
• EUR 750 million, or the equivalent of this amount in another currency.

What information must be included in the CbC-P notification?

The CbC-P form is relatively straightforward. A constituent entity is required to indicate:

1. The reporting entity for the entire group (typically the ultimate parent entity or a designated reporting entity), together with its identification details.
2. The jurisdiction (country or territory) where the CbC report (CbC-R) will be filed.

Filing deadlines

The notification must be submitted within three months after the end of the group’s financial year.

For groups whose financial year coincided with the calendar year (1 January – 31 December 2025), the filing deadline is 31 March 2026.

How should the notification be submitted?

The CbC-P notification must be submitted electronically:

• via the e-Declarations system, or
• through the e-Tax Office (e-Urząd Skarbowy) platform.

The official CbC-P form is published by the Polish Ministry of Finance,

Consequences of non-compliance

Failure to submit the CbC-P notification, or submitting it with incorrect or incomplete information, may result in an administrative monetary penalty of up to PLN 1 million.

Although the form itself is relatively simple, in practice certain issues may raise interpretative doubts, including:

• identification of the ultimate parent entity in the case of group reorganisations,
• determining whether the group revenue threshold triggering the CbC obligation has been exceeded,
• filing obligations of Polish branches of foreign enterprises operating in Poland,
• obligations within a Polish Tax Capital Group (PGK) – whether the notification should be submitted by the PGK as a whole or by each member individually,
• situations where an entity belongs to more than one capital group.

Our support

If you have any questions regarding:

• determining which entities within the group are required to submit a CbC-P notification,

• proper identification of the reporting entity,

• completing the notification in complex or non-standard situations (e.g. reorganisations, PGKs, foreign branches),

• preparing for the new obligation to publish a public Country-by-Country report,

our tax advisors will be pleased to assist you.

We can support you in assessing your reporting obligations, mitigating the risk of penalties and ensuring timely compliance with CbC requirements.

Agnieszka Plucińska

tax advisor | partner

Jakub Włosek-Buczyński

tax advisor

by Krzysztof Żuradzki

KBZ in WTR 1000 2026: Bronze in EU (EUIPO) and China trademarks

by KBZ Legal

Navigating Legal Changes in 2026

Dear Sirs,

We are pleased to share with you our report “Navigating Legal Changes in 2026 Implications for Entrepreneurs”, which provides a practical and business-focused overview of the key regulatory developments that will affect companies in the coming year.

The report covers major changes across multiple areas of law, including employment and HR, immigration and global mobility, taxation, digitalisation and cybersecurity, construction and public procurement, restructuring, and intellectual property. We focus on regulations that have a direct impact on costs, risk exposure and operational decisions, and therefore require early assessment and preparation.

We support businesses not only in understanding new legal obligations, but above all in translating regulatory changes into concrete actions – from risk identification and legal audits to tailored recommendations and practical implementation aligned with business objectives.

The full report in PDF format is available at the following link:

ENG: Navigating Legal Changes in 2026 Implications for Entrepreneurs

PL: Raport: Zmiany w prawie 2026 – przewodnik dla przedsiębiorców

Should any of the topics discussed in the report be particularly relevant to your organisation, or if you would like to assess how the 2026 changes may affect your operations, we would be pleased to discuss this with you.

We are happy to propose dedicated advisory support, tailored to the specific needs of your business.

Best regards,

KBZ Legal & Tax Team

by Marcin Barczyk

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From April 1, 2025, e-delivery compulsory for companies

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Implementation of the European entry/exit system in Poland

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