Secondment (personnel outsourcing) as a special form of delegation

This article will answer the following questions:

• What is the definition of secondment and what legal uncertainties are associated with it?
• What is the purpose of secondment?
• What are the tax consequences of an interdepartmental secondment?

With technological progress, the popularisation of remote work and the increased emphasis on the principles of work-life balance, forms of employment are evolving. Although full-time employment still enjoys the greatest stability, the labor market is increasingly filled with less popular (or completely new) forms of employment. What makes the number of such offers grow and more and more people give up traditional working conditions and decide on a professional revolution? Such factors are certainly flexibility, the possibility of development, or the current trend. It is thanks to them that self-employment, employee posting, temporary work and the so-called secondment are gaining popularity.

What is secondment and what does it involve?

Secondment – personnel outsourcing – combines the features of outsourcing and temporary work and involves hiring an employee and then seconding them to another department of the same company or even to a completely different company. 

The location scope of such a service is huge and may concern both internal structures in an organisation and a completely external entity. Importantly, the scope of tasks is also not predetermined in the secondment. Since personnel outsourcing usually concerns managers and specialists in the engineering and technology industry, secondment most often consists of delegating an employee to perform a specific task or an extensive project. As for the typical duration of secondment, here too there is complete freedom, since secondment can be both short- and long-term. 

All the above-mentioned circumstances and features of this form of employment mean that secondment opportunities attract primarily young employees – although of course there is no rule for this either. 

Benefits of secondment

Personnel outsourcing may be attractive both for the employer and the employee. 

Thanks to secondment, the employer does not waste time on employee training or planning human resources in the company, because it immediately has access to people with specific qualifications. The employee that the company receives is "tailor-made", both in terms of substantive knowledge and current staffing needs. In turn, this form of employment gives the employee the opportunity to work on various projects, with any frequency of their changes, and this can contribute to faster gaining of professional experience and thus gaining value on the labor market. In addition, travelling (also abroad) and frequent change of environment or even industry may attract people to choose personnel outsourcing.

Personnel outsourcing in Poland

Although the secondment service has been popular for years all over the world, it has not yet been legally regulated in Poland, which in practice gives rise to a number of doubts regarding the proper accounting for this form of work.

First of all, labour law does not exclude the possibility of an employer transferring its rights towards an employee to another entity for a specified period of time and then returning to the previous state. 

The basis for this is Article 174¹ of the Labour Code, which allows for the granting of unpaid leave for the period of work for another employer. Importantly, the period of this unpaid leave is included in the period of work on which the employee's rights with the previous employer depend.

Opponents of secondment, however, point out that such a solution is illegal because it is based on the assumption that the employee will perform work for and under the management of a third party (and not a formal employer). And this type of employment relationship structure is reserved in the Polish legal system exclusively for temporary employment agencies, subject to entry in the appropriate register. 

This means that the model of operation of entities from the external employment sector may be qualified by the Polish authorities as an attempt to circumvent the regulations on temporary work agencies.

Secondment and tax settlement

Regardless of the doubts regarding the admissibility of secondment, we should ask ourselves about the place of taxation of the income of employees working in this model.

Assuming that secondment is a special form of delegation, in the case of personnel outsourcing leading to sending an employee abroad, the answer should be sought in the provisions of the Personal Income Tax Act and international agreements binding Poland on the avoidance of double taxation. Of key importance - similarly to delegation - will be the place of residence, determining the center of the employee's personal and economic interests, and the length of their stay abroad. It will also be important to determine the appropriate method of avoiding double taxation, resulting directly from international agreements concluded by Poland. 

Due to the numerous legal and tax aspects, each secondment case requires a separate analysis. For this reason, we encourage you to consult our specialists, who will explain the issues important for your tax settlements in a comprehensive and accessible way.