A body leasing agreement is a contract under which an IT company (service provider) provides its employee or subcontractor to a company seeking an IT specialist (service recipient). What to consider when drafting a body leasing agreement ? Haw can the risk of having a body leasing contract reclassified as a temporary employment be minimized ?
What is a body leasing agreement ?
It is an unnamed agreement that is not directly regulated in the Polish Civil Code and is based on the principle of freedom of contract. Provision concerning mandate contracts are applied accordingly, as this agreement typically has a nature of a service provision contract. The popularity of body leasing results from numerous benefits. The service recipient avoids the need of recruitment, handling payroll and personnel matters, and does not have to worry about reallocating the specialist after the project concludes. The service provider undertakes to supply a person with appropriate qualification, but in a typical setup, does not bear responsibility for the outcome of the specialist’s work or for the final project results.
What to consider when drafting a body leasing agreement ?
When creating a body leasing agreement, it is worth including the following key points:
- Replacement in the event of the specialist’s absence (e.g. illness, job change).
- The specialist’s time availability.
- The possibility for the service recipient to request a change of specialist.
- Liability for any damages resulting from improper task performance.
- The project location where the specialist will work.
- Defining who provides the necessary work tools.
- The procedure for ordering specialists for specific tasks.
- The renumeration – Time & Material or Fixed Price.
- Rights to the created code and other works – transfer of copyrights or license granting.
- Confidentiality rules.
- Protection against the specialist being hired by the service recipient (e.g. contractual penalty or hiring fee).
- The term of the agreement and termination conditions.
- The preferred means of communication between the parties.
Body leasing versus temporary employment – risk of reclassification.
A body leasing agreement has certain similarities to a temporary employment contract, which creates the risk that a specialist may demand recognition of the employment relationship. This may depend on both terms of the body leasing agreement and the actual way tasks are carried out. When the nature of body leasing resembles an employment relationship, there is an increased risk of this arrangement being questioned by the Social Insurance Institution (ZUS) and the National Labour Inspectorate (PIP).
The key element distinguishing service outsourcing is the lack of direct and ongoing subordination of the specialist to the service recipient. The specialist is subject only to indirect supervision at the service location, while in a employment relationship there is a long-term and strick subordination. The service recipient should avoid giving the specialist direct instructions on task execution and monitoring their work process, focusing mainly on the final outcome. It is also worth paying attention to the “integration” of the specialist with the service recipient’s employees.
If body leasing meets the criteria of temporary employment, it may be regarded as an attempt to circumvent the restriction arising from the Temporary Employment Act, which can lead to negative consequences for both parties. If a labor inspector determines that the service provided meets the characteristics of temporary employment, they may request that the service provider be fined up to 100,000 PLN for failing to register as a temporary employment agency.
