Poland suspends work on labour reform, risking billions in EU funds

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Notes from Poland is run by a small editorial team and is published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Polish Prime Minister Donald Tusk has suspended work on a reform that was intended to strengthen employment rights by granting greater powers to the National Labour Inspectorate (PIP).

The decision could expose Poland to losing European Union funding, as the measures were one of the milestones agreed with Brussels to unlock billions of euros in post-pandemic recovery funds. It has also caused tension within Tusk’s ruling coalition, as the reform was strongly supported by The Left (Lewica).

On Tuesday, Tusk announced the suspension of work on the legislation, which would have given PIP inspectors the power to reclassify business-to-business (B2B) contracts or so-called “junk contracts” (umowy śmieciowe) as employment contracts (umowy o pracę) in cases where a worker is effectively treated as an employee, despite being formally hired as a contractor.

Employment contracts come with stronger rights and benefits for workers, as well as more obligations for employers, than B2B contracts or junk contracts, a type of agreement that does not provide employment protection, wage protection and the right to holidays.

The planned reforms had been welcomed by PIP itself as well as trade unions. But they sparked anger among employers, particularly over a proposal that would have required businesses to pay up to three years of backdated employee social security contributions if a contractor was reclassified as an employee.

Justifying his decision to suspend work on the reform, Tusk said that granting “excessive power for officials who will decide how people are employed would be very destructive for many companies and could also mean job losses for many people”.

Polish law defines employment as work performed under the supervision of a manager, at a place and time designated by the employer. Replacing an employment relationship with a B2B contract is unlawful.

However, B2B contracts have nevertheless become a popular way for businesses to avoid employment contracts and cut labour costs.

Moreover, people with sole-proprietorship (jednoosobowa działalność gospodarcza) status benefit from preferential health insurance contributions for new businesses and can deduct some taxes, allowing workers to keep more income.

This form of work, however, also brings greater job insecurity, as it falls outside labour law protections, and often results in lower pensions due to reduced contributions. It also reduces income tax revenues and health insurance contributions to the state, at a time when Poland is facing rapidly rising debt.

Work on the PIP reform followed an agreement with the European Commission reached at the beginning of last year, after Poland abandoned plans to introduce social security contributions for “junk contracts” that had been agreed with the EU under the former government.

The proposed PIP reform went beyond expanding inspectors’ powers. It also included provisions for data exchange between the state Social Insurance Institution (ZUS), PIP and National Revenue Administration (KAS), streamlining inspections through remote controls and electronic documentation, and introducing new fines for violations of workers’ rights.

In early December 2025, the standing committee of the Council of Ministers, a key inter-ministerial body, approved a draft PIP reform bill prepared by the family, labour and social policy ministry.

Although the full draft bill was not made public, Gazeta Wyborcza reported that inspectors could decide whether a worker had been an employee up to three years in the past, which could force businesses to retrospectively pay social security contributions and taxes.

Tusk’s decision now to abandon the plans has prompted concern from his coalition partners over both the protection of workers and the fact that Poland could lose EU funds.

Włodzimierz Czarzasty, one of the leaders of The Left and the speaker of the Sejm, the lower house of parliament, said that, if the necessary reforms are not implemented, Poland could lose 11 billion zloty (€2.6 billion), reports the Interia news website. He announced that he would be meeting with Tusk this week to discuss the matter.

The minister for funds and regional policy, Katarzyna Pełczyńska-Nałęcz of the centrist Poland 2050 (Polska 2050), likewise warned of “multi-billion costs”.

She told the Polish Press Agency (PAP) that Poland may try to revise its agreement with the EU, but that this would be difficult given that funds have to be allocated this year.

Meanwhile, labour minister Agnieszka Dziemianowicz-Bąk, also from The Left, expressed her willingness to work on a new solution.

“If there is an expectation to discuss other tools, we are ready for such a discussion. Everyone is entitled to their opinion, but the goal remains the same, because we want to protect Polish workers,” she said.

Tusk’s decision was criticised by Piotr Ostrowski, chairman of All-Poland Alliance of Trade Unions (OPZZ), who told broadcaster TVN that it appears “the prime minister doesn’t know what he’s talking about”. He suggested that Tusk was effectively “allowing noncompliance” with existing labour law.

However, Marek Kowalski, head of the Federation of Polish Entrepreneurs (FPP), welcomed the fact that the prime minister had “listened to the voice of business owners”.

He argued that labour inspectors lack the expertise to determine employment status and warned that the reform could raise costs for businesses, ultimately harming workers themselves.

But the head of PIP, Marcin Stanecki, defended the proposed reforms, saying that they would be “very beneficial for both business owners and the National Labour Inspectorate”, reports PAP. He expressed his readiness to help clarify any doubts around the proposed measures.

A survey by IBRiS for the Rzeczpospolita daily published this week found that over 60% of Poles support giving PIP the power to convert B2B and junk contracts into employment contracts.

Notes from Poland is run by a small editorial team and published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Main image credit: Israel Andrade/Unsplash

Alicja Ptak

Alicja Ptak is deputy editor-in-chief of Notes from Poland and a multimedia journalist. She has written for Clean Energy Wire and The Times, and she hosts her own podcast, The Warsaw Wire, on Poland’s economy and energy sector. She previously worked for Reuters.