Consequences of Illegal Employment for a Foreign Business Owner in Poland

One of the most common and costly mistakes made by foreign entrepreneurs in Poland when running a business remotely is illegal employment. When doing business in a foreign country, an entrepreneur faces a complex legal framework in which the boundaries between permissible cost optimization and a direct violation of the law can be rather blurred.

Polish state authorities, including the National Labour Inspectorate (Państwowa Inspekcja Pracy, PIP) and the Border Guard (Straż Graniczna, SG), tighten their controls every year. For a foreigner who has established a Sp. z o.o. (limited liability company) or a Jednoosobowa działalność gospodarcza in Poland, the consequences of illegal employment go far beyond financial penalties: they directly threaten the very existence of the business.

What Is Considered Illegal Employment in Poland?

Legislation (in particular, the Ustawa o promocji zatrudnienia i instytucjach rynku pracy) interprets illegal employment quite broadly. A violation includes not only the absence of an official contract but also:

A foreigner performing work without a valid permit (Oświadczenie, Zezwolenie type A, a single residence and work permit) or during a period when its validity has expired.
Working under conditions that differ from those specified in the permit (a different position, a lower rate, a different type of contract, or fewer working hours without the appropriate notification to the relevant authority).
Starting to perform duties before signing an employment contract (Umowa o pracę) or a civil-law contract (Umowa zlecenie / Umowa o dzieło).
Failure to provide a translation of the contract into a language understood by the foreign worker before it is signed.
Failure to notify the Social Insurance Institution (ZUS) of an employee’s employment within 7 days.

Financial and Administrative Consequences for Businesses

The register of violations in Poland is transparent, and fines for illegal employment continue to increase.

Substantial Fines

For the employer:

The fine for illegally entrusting work ranges from PLN 1,000 to PLN 30,000 for each unregistered or illegally employed worker. In cases of repeated or systematic violations, the amount may increase several times over.

For misleading or inducing someone to engage in illegal employment:

If an employer deceives an employee into engaging in illegal work, financial penalties start at PLN 3,000.

Payment of Outstanding Liabilities and Taxes

When an illegal employee is discovered, the PIP or the Border Guard will require the company to pay:

All undeclared taxes (PIT).
Outstanding ZUS social insurance contributions for the entire period of the employee’s actual work, together with interest.
Compensation for unused leave and overtime hours (if the provisions of the Labour Code applied).

Suspension of Licences and Permits and Loss of Benefits

The company is entered into registers of offenders and loses the right to participate in public procurement and EU grant programmes.
The company is required to repay state subsidies received (for example, for job creation or business support).
For licensed business activities (transport services, temporary employment agencies, construction, and catering), the detection of illegal employment constitutes direct grounds for the suspension or complete revocation of a licence (Cofnięcie koncesji/zezwolenia).

The Role of a Lawyer in Protecting the Business and Its Owner

When faced with an inspection by the PIP or the Border Guard, attempting to resolve the matter independently carries a high risk of making the situation worse. The expertise of a professional Polish lawyer (Adwokat / Radca prawny) is critically important at every stage.

1. Preventive HR Audit

A lawyer conducts a comprehensive analysis of the company’s internal documentation before inspectors arrive:

Checks whether employment contracts and Umowy zlecenie comply with work permits.
Verifies the timely submission of notifications to the relevant authorities (the Praca.gov.pl portal, ZUS).
Identifies concealed employment relationships (where an Umowa zlecenie effectively duplicates an employment contract, Umowa o pracę).

2. Assistance During Unannounced Inspections

The presence of a lawyer during an inspection by the Border Guard or the PIP reduces the risk of procedural violations:

The lawyer ensures that inspectors act within their legal authority (the inspection must not go beyond the scope of the review).
Monitors the questioning of employees, preventing pressure or inaccurate translation of their statements.
Makes the necessary legal observations directly in the inspection report (Protokół kontroli). Including the correct objections in the report is fundamental to successfully appealing a fine in the future.

3. Representation Before Courts and Authorities

If the case proceeds to a report on an administrative offence (Wniosek o ukaranie do sądu) or a decision imposing a fine:

The lawyer helps reclassify the violation as a less serious offence or prove the absence of intent (an unintentional HR error rather than deliberate illegal hiring).
Applies for the fine to be reduced to the lowest possible amount or replaced with a warning (Pouczenie).

4. Protection of the Right to Stay (Temporary/Permanent Residence)

If an inspection places the business owner at risk of having a residence permit refused or being deported, the lawyer handles a separate administrative proceeding:

Appeals negative decisions issued by the Voivode to the Office for Foreigners (UdSKiOR).
Files complaints with the Voivodeship Administrative Court (Wojewódzki Sąd Administracyjny), suspending the enforcement process for the deportation decision.

Summary

For a foreign entrepreneur in Poland, the legality of every employee’s employment is a matter of protecting both the business itself and the owner’s personal status in the EU. Attempts to save money on taxes and employment formalities can lead to disproportionate losses: from fines amounting to thousands of zlotys and the loss of licences to company closure and deportation. Engaging a specialised lawyer makes it possible to minimise risks, protect the company’s interests during inspections, and preserve the right to conduct business in Poland.

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