Profitability of Self-Employment in Poland after the Introduction of the Polish Deal Regulations Compared to Other EU Countries

Purpose: The primary objective of the study was to analyze the cost-effectiveness of self-employment as a strategy for optimizing labor costs in Poland, with a particular focus on the impact of changes introduced as part of the Polish Deal reform. In comparative terms, the objective of the study was to benchmark the level of labor taxation and preferences for the self-employed in Poland against other European Union (EU) countries. Design/Approach/ Methodology: The analysis was based on secondary data from publicly available statistical sources (including the Central Statistical Office, Eurostat, and the OECD), as well as industry reports, academic publications, and normative acts regulating the taxation and social security system in Poland. The following indicators were employed to ascertain the comparative profitability of various forms of employment: total cost of employment, annual net income and effective tax rate. Findings: The study indicates that the disparities in net income between the self-employed and those employed under a contract persist, though their extent has diminished. In the tax and contribution structure subsequent to the implementation of the Polish Deal, there has been a partial equalization of the profitability of employment between forms for low-income earners, while self-employment remains fiscally more favorable for higher income groups (especially under the lump-sum tax regime). These changes can influence decisions regarding the form of employment and strategies to optimize labor costs. However, the structure of self-employment in Poland exhibits significant disparities compared to the patterns observed in Western and Northern European countries. Practical implications: The analysis conducted and the results obtained should prompt the authors of tax regulations to consider, when drafting new legislation, the need to equalize the tax and contribution burden between employment under a contract of employment and self-employment. This measure has the potential to contribute to the reduction of the phenomenon of false self-employment.