Legal and tax advisory – the risk of reclassification
Case study
Tax
In 2021, ALTO team provided legal and tax advice to a large entity in the elder care industry (“Company”) to confirm that individuals engaged to work through outsourcing companies should not be considered employees of the Company.
The “employee market”, prevailing in this sector for several years now, contributed to the occurrence of staff shortages. Therefore, the Company decided to cooperate with entities specializing in employee outsourcing services, which delegated their employees to work at the Company’s facilities. As a result, the Company had two parallel models of employing caregivers – persons employed by the Company on the basis of employment contract/ contract of mandate/ contract for specific work and persons managed by outsourcing entities. At the time, the Company had concerns about the ability of government authorities to reclassify outsourced caregivers as Company employees. The client wanted to understand how to manage this risk and what actions / procedures should be implemented to reduce or eliminate it.
The Company turned to ALTO for assistance. After an in-depth analysis of the facts, ALTO experts estimated the aforementioned reclassification risk level, identified the legal and tax implications of such reclassification (financial and related to additional obligations) and proposed implementation of additional procedures to further mitigate this risk.
Thanks to cooperation with ALTO the Company obtained:
- information on obligations towards tax offices and social security institution resulting from possible reclassification,
- information on the effects of failure of outsourcing companies to verify whether foreigners have valid residence permits in Poland,
- information on potential claims against the Company by persons reclassified as the Company’s employees,
- information on risks associated with the effects of reclassification from the perspective of persons responsible for the Company’s tax settlements,
- recommendations as to how to further reduce the reclassification risk.
Legal and tax support in terms of risk assessment of reclassification of outsourced workers is an area in which ALTO has extensive experience.
We strongly encourage entities outsourcing their employees to verify their situation, with help of an experienced tax advisor or independently.
Do not hesitate to contact us if you need more information.
Check how we can help your company!
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Paweł Fałkowski
Partner & Tax Advisor
Paweł is the firm’s co-founder and partner at ALTO. He is head of the accounting and payroll services department (ALTO Accounting).
Kamil Lewandowski
Partner & Tax Advisor
Kamil is a co-founder and partner at ALTO. He is responsible for the development strategy of the ALTO group. Additionally, he oversees activities in the area of business development and marketing.
Piotr Orczykowski
Partner & Attorney-at-law
Piotr is one of the founders of ALTO and a partner in the firm. Previously, he headed the legal team in one of the largest investment fund companies operating on the Polish market.
Sylwia Kulczycka
Partner & Tax Advisor
Sylwia Kulczycka is a Managing Partner of the TAX business line at ALTO. She specializes in tax advisory services for the life sciences, IT and professional services industries.
Aleksandra Bońkowska
Partner & Tax Advisor
Aleksandra is a partner at ALTO. Before joining ALTO team, she worked in one of the big four companies. For many years, Ola has been advising clients in the financial industry, including in particular insurance companies, payment market institutions ...
Daniel Banach
Partner & Tax Advisor
Daniel is a partner at ALTO. He specializes in tax advisory for financial investors (mainly private equity funds) and for clients from the real estate industry.
