Any day now, remitters will be checking to see whether their service providers are earning money elsewhere, and also how much – to avoid having to correct contributions. However, it seems that they won’t be able to evade that anyway.
Not only new mandate agreements being concluded as of next year will be subject to the amended rules of a so-called “ZUS-ification”, which in many cases will mean paying pension and allowance contributions to the ZUS Social Insurance Institution that are higher than the current ones. Agreements currently in force could also come under the reform and even be the sole basis for determining the amount of those contributions. That depends above all on whether the mandate agreements in force will be continued after 31 December of this year and on the amount of revenues obtained from them.
“The amendment of the Act on the Social Insurance System introduces the general rule that contributions on particular remuneration must be added up to the minimum remuneration for work, as the service provider will necessarily be subject to social insurance on other accounts, until that amount is exceeded”, said Marta Ignasiak, tax advisor at FKA Furtek Komosa Aleksandrowicz.
Convergence of titles
The Ministry of Labour explained in the December information bulletin on its website that this rule would have to be applied to so-called “insurance title convergence”, i.e. when a given person works on a parallel basis in several places irrespective of the form of employment. Currently, a person working on the basis of several mandate agreements is necessarily subject to pension and allowance insurance on account of the agreement that person concluded earliest of all. However, a service provider can voluntarily apply to be covered by such insurance for the other (all or selected) mandate agreements, or can change the insurance title, irrespective of the amount of remuneration determined by the parties for performing that agreement. The consequence of this is that a great deal of abuse occurs, as government administration representatives have long been warning, and now this has been stressed once again in the Ministry of the Family, Labour and Social Policy’s (MFLSP) information bulletin.
As the Ministry points out, to avoid paying high contributions, companies would conclude two agreements with service providers, but with a considerable differentiation of remuneration. Contributions were paid to the ZUS Social Insurance Institution on an agreement for a low amount. The agreement with the higher amount would not have any contributions paid on it. The amendment will end that practice, putting into order the rules of ZUS-ifying revenues of persons performing work on the basis of a mandate agreement at the same time as other wage-earning activity or several mandate agreements also concluded with the same ordering party. This also applies to work performed on the basis of agency agreements or other service provision agreements, to which the same rules as for mandate agreements apply, in accordance with the Civil Code.
PLN 1,850 – this will be the minimum wage in 2016.
Those people will necessarily be subject to insurance on each such agreement until the moment of reaching (after adding up) revenue in the amount of at least the minimum wage.
Agreements from the turn of the year
This also has specific significance for orders undertaken before the amended rules came into force and carried out after that date. Compared with the next agreements of that kind, they will be the first to be taken into account when determining the contribution basis. In a special guide on its website, ZUS explains that the joint contribution basis for deciding insurance title convergence must be determined according to the order in which those insurance titles arise. Consequently, it is already possible to take into account a mandate agreement concluded before 1 January 2016, when determining the contribution basis, at the payment of remuneration in January for December 2015. If the amount for the service provider specified in it is at least equal to the minimum remuneration, the remitter should not take other agreements into consideration.
What is also important is whether, before January, the service provider was necessarily subject to social insurance, and not only to health insurance, for instance. There are quite a few more conditions, and ZUS gives detailed examples of such situations in its extensive guide. It shows the effects of an insured person concluding several mandate agreements with the same remitter and with several remitters – both current agreements and those signed as of next year. It discusses in detail situations in which the insured cooperates with the service provider, with a person conducting business activity, and also when the insured is employed on a permanent employment contract or for a specific period of time, full-time or part-time, or conducts business on a single-person basis. The reform does not mean that the contribution basis must be exclusively revenue corresponding to the minimum wage.
“The service provider may be interested in paying contributions over and above that amount, though at the most up to an amount of limitation of the basis for calculating the contributions. One should remember that, according to ZUS, contributions are due only on remuneration actually paid”, said the FKA advisor. However, in her opinion the new rules are not simple and could cause quite a few problems. The easiest task will be faced by companies concluding several agreements with the same person, with only the amount of contributions collected changing. “Such a company will be able to review the amount of the remuneration paid and will be able to add it up for ZUS’ purposes. In the case of agreements with persons performing orders for various companies, the problem will be greater. Ordering parties will not know either about other agreements concluded by their service providers, or about the amount of remuneration due on that account, or – and this is the most important thing – about remuneration actually paid”, says Marta Ignasiak.
If insurance documents submitted by a remitter do not correspond to the new rules of deciding pension and allowance insurance title convergences, the remitter is obliged to correct them appropriately – on its own or after being summoned to do so by ZUS. Corrections are also required if irregularities concern a retroactive period. ZUS explains that it is of no significance whether a remitter has based itself on documents (declarations) submitted by the insured person.
In effect, remitters should, for safety’s sake, collect contributions on each case of remuneration paid. This is proved in the new Article 34 par. 6 of the Act on the Social Insurance System (ASIS) – if more than one remitter is obliged to pay contributions, each of them deducts a contribution. However, there is one exception. Contributions do not have to be collected on each agreement if the insured person submits documents to the remitter showing that the insurance basis on account of earlier agreements is at least the minimum remuneration. In other words, those documents show that there is no need to pay contributions. In practice it will not be easy to meet this condition.
“The biggest problem is that the rules don’t state precisely which documents are involved. If the service provider doesn’t submit them, the remitter will have to deduct contributions”, says Iwona Porczak, deputy director of the Information and Promotion Team of the Polish Craft Association (PCA). According to the association, it would be enough to have a declaration by the service provider that the insurance basis from earlier agreements is at least equal to the minimum remuneration. That was the case previously – for example, with an insurance title convergence in the case of an employment contract and business activity, or a mandate agreement with an employment contract.
“Never were there any problems due to that”, stresses the PCA representative. Companies are afraid that an imprecise statutory requirement could complicate the settlement of mandate agreements. Remitters will face a constant correcting of application and settlement documents from ZUS. A service provider will be able to ask the ordering party to issue a certificate concerning the conclusion of a mandate agreement, the period, and the contribution basis under that agreement. The Ministry of Labour says he will also be able to send the agreement for another remitter to review.
According to Marta Ignasiak, potentially companies could base themselves on declarations of service providers submitted every month, stating that they have concluded other agreements. However, such a declaration would have to state the actually paid remuneration and whether, in a given month, social insurance contributions were collected from him. Some companies pay amounts due only in the next month, which could influence the correctness of the service providers’ declarations.
“However, even such a declaration does not protect a company, because it is hard to regard it as a document from which it follows that there is no need to pay contributions. One can imagine that, after submitting a declaration, some ordering parties will realise they have collected excessively high contributions, e.g. by mistake or after adding up contributions collected by other ordering parties, and correcting some settlement documents will absolutely have an impact on the settlements of other ordering parties”, says the advisor.
Verification by ZUS
Article 34 par. 6 of the ASIS also introduces the possibility that at the remitter’s request ZUS will examine the correctness of service providers’ social insurance contributions shown by the remitter and will provide information about any irregularities. The Ministry of Labour also gives a reminder of this. At the same time, however, it cautions that the remitter is responsible for settlements, as before. Nevertheless, from 2016, should such a need arise, ZUS will help verify the correctness of settling contributions.
“Verification will, however, be made after the settlement period ends and will not be of much help to remitters who made erroneous assumptions”, says Marta Ignasiak. She believes that clearly the provisions should contain more unequivocal rules of priority in burdening with obligations, e.g. such as at present, in other words depending on the date of signing an agreement and the priority resulting from it in correcting settlement documents.
“Article 9 par. 2 of the Act on ZUS regulates that issue only in part, leaving the service provider to decide on insurance with regard to a basis exceeding the minimum remuneration. Such a service provider can voluntarily, on request, be covered by insurance from the remaining (all or selected) titles or can change the insurance title. Total responsibility for exceeding this amount rests with the remitters paying remuneration, and ZUS might contact them with a claim towards each of them”, says FKA’s advisor.
At the same time, she admits that while the new regulations do not indeed exclude the rule of being covered by insurance above all from the title which arose at the earliest, its application in problematic cases could be a subject of dispute.
Applications to ZUS to examine settlements
An ordering party will be able to ask ZUS to examine the correctness of pension and allowance insurance contributions shown by it, of a service provider or person cooperating with a service provider. If mistakes are confirmed, ZUS will immediately inform the remitter of the contributions and the insured person via the remitter of the contributions. ZUS’ task is to check whether the remitter has correctly determined the convergence of insurance titles and to indicate whether a mandate agreement or cooperation mentioned by the remitter entail an insurance obligation in a given month. ZUS will be able to decide on this after receiving monthly reports from all remitters of a given insured person for the month stated in the application, and after acquiring other information necessary for determining convergence (e.g. choice of title for obligatory pension and allowance insurance in the event that those titles arose on the same day). Consequently an application submitted in advance, i.e. for a month for which the deadline for submitting settlement documents has not yet passed, will await the possibility of being considered. ZUS will not deal with confirming the correctness of determining the amount of the contribution basis, taking into account all components of revenue which must be taken into account. The application is not formalised but a specimen application will be prepared and made available on ZUS’ website. However, no one will have to make use of it. ZUS gives a reminder that remitters should, in their applications, state their and the insured person’s identification data and should also indicate the settlement periods which the application concerns. ZUS’ reply to the application will be valid solely as on the day on which it is prepared.