On December 7 in Olivia will take place another event from the “Strategic HR” series. The main topics of the meeting: “Revolutionary changes in taxes and social security for employees and employers since 2018. What can you do to remain an attractive employer?” and “Crowdsourcing as a modern way to engage candidates and employees in online challenges related to employer branding. How do you win the battle for talent?”
Presentations and workshops will be conducted by Eliza Skotnicka, Senior Manager in the EY Personal Tax Team and Tomasz Socha , Associate Partner, Leader of the EY Tax Advisory Team in the Tri-City.
We invite you to participate in the meeting and to read the interview with Eliza Skotnicka from EY, conducted by Monika Bogdanowicz (Olivia Business Centre). The interview is another one carried out by us as part of the “Olivia’s Conversations” series, presenting experts and guests of Olivia Business Centre.
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Monika Bogdanowicz (Komunikacja Olivia Business Centre): What are the biggest changes in taxes and social security that await employees and employers in 2018?
Eliza Skotnicka, Senior Manager, People Advisory Services, EY: The abolition of the limitation on pension and disability pension contributions is one of the most talked about changes, and at the same time the most significant for employers and employees. For employees earning more than 10,000 gross per month, this may mean a loss of one net salary, and for some large companies, personnel costs will increase by up to PLN 20 million per year! As we speak, it is not yet clear whether the change will come into force from 2018. But even if it doesn’t happen now, the legislature will most likely introduce it from next year anyway.
A beneficial change awaits creative employees providing research and development activities or in the field of computer programs. They will be able to take advantage of a calculable 50% of the costs in relation to the higher income limit under their employment contracts, and consequently earn up to PLN 26,000. PLN more per year.
Preference will also be given to long-term forms of remuneration based on shares of companies from countries with which Poland has concluded double taxation treaties. So far, only shares of companies from the European Union and the European Economic Area have been favourably taxed (19%). Now, companies belonging to e.g. American or Swiss capital groups have the opportunity to offer such a beneficial solution to their employees and board members. It is important to remember to meet all the formal requirements of such an incentive program.
MB: How can we prepare for the forthcoming, revolutionary changes in these areas?
ES: First of all, you need to be aware of them, calculate the predictable increase in costs and decrease in net income. I recommend that you take a look at the types of positions and responsibilities that exist in the company. It often turns out that an employment contract is not the form that best suits the nature of work and duties.
1) The Management Board and proxies:
A board member does not only work from 8 a.m. to 4 p.m., and his or her responsibilities extend far beyond what the Labor Code provides for an employee. Therefore, they can be remunerated for their additional functions in a separate stream – on the basis of a corporate act. In such a case, such remuneration of a member of the management board is not subject to social security contributions. You can also consider introducing an incentive program based on granting shares in a foreign company – the manager will tax them only when he sells them, at the 19% PIT rate and without ZUS.
2) Creative IT and R&D/R&D employees:
Creative employees whose activities are related to computer programs or research and development may be remunerated for these activities by receiving a separate royalty under their employment contract. In such a case, half of this fee will not be taxable, as the so-called “Royalty” can be deducted from the income. 50% tax deductible costs. Even companies in which IT activities have occurred, and which have not yet identified and reported the fact of creative activity of employees, should now be interested in this solution. An additional benefit for companies may also be the CIT relief available in the case of research and development activities (up to 150% of eligible costs).
3) Experts:
More and more companies are introducing flexibility in their relationships with their staff. If the company employs experts who advise, independently shaping the effects of their work, i.e. de facto acting as entrepreneurs, they may become independent contractors conducting business activity, invoicing their contractors, deducting costs related to their business for tax purposes. In such a case, their income may be taxed at a flat rate (in order to make this possible, they cannot perform the same services as part of their business activity as for their previous employer, and their services cannot be related to management), and they can take advantage of preferences in social security contributions.
4) Foreigners:
If they are non-tax residents in Poland, they may be remunerated on the basis of such relationships, the income from which in Poland is taxed at a 20% flat rate. And on top of that, it is worth analysing whether they can pay contributions in another country (e.g. their home country) instead of in Poland. Such a solution may turn out to be cheaper.
MB: Will it be possible to continue generating savings in the company by revising the costs of social security and PFRON contributions on the employer’s side?
ES: Interestingly, our many experiences show that many companies approach certain cost areas in their companies too cautiously or even inappropriately, unnecessarily overpaying public levies. I am referring here primarily to the area of employer’s social security contributions (primarily accident and labour fund contributions) and the State Fund for the Rehabilitation of Disabled People, but also the Social Insurance Institution (ZUS) on employee benefits. These are usually very high cost items in companies, especially those based primarily on people, such as shared service centers. Once in a while, it is worth conducting an audit of the company’s systems and the provision and exchange of information that is crucial for the amount of these burdens – there is often an undiscovered, great potential for savings. EY offers such a review at no cost – only when the identified savings materialize, we share the fruits of this joint success.
MB: What actions can we take in our companies, what can we do concretely to remain an attractive employer?
ES: First of all, in the face of the planned changes, it is worth fighting to maintain the levels of net remuneration of employees in companies and, where possible and justified from a business point of view, to properly reflect the reality by applying the preferences provided for by the legislator.
Secondly, there is more and more talk about the atmosphere in the company in the context of the employer’s attractiveness. New generations are entering the labour market: millennials and representatives of Generation Z. These young people expect the employer to understand, listen and engage in interesting projects, support in the development of their talents. But they also want to pursue their passions, dreams, fulfill themselves as parents and in other roles related to social involvement, they want to have an impact on reality. Concepts such as “digitalization strategy” are artificial for them, they simply grew up and live in the digital world. This is certainly a big challenge for managers who entered the job market at a slightly different time, and quick promotion was their main priority.
Modern employers must take care of the relationship with students and future candidates, directing interesting communication to them and inviting them to the world of their brand.
MB: Why do you recommend crowdsourcing as a modern way to engage candidates and employees on a digital platform? What does this mean for employer branding activities for companies?
ES: Because it is the answer to these challenges. Research shows that in the next 2 years, at least 75% of the most dynamically developing companies will use crowdsourcing. On the market, it is something distinctive, but natural and effective at the same time.
Crowdsourcing is the process of outsourcing tasks outside the organization, to specially built and engaged communities. No matter how thriving an organization we are, most smart and creative people are outside of that organization. Crowdsourcing allows you to take advantage of this “wisdom of the crowd”. Such large and globally recognizable brands as Facebook or YouTube (the largest media platforms based mainly on foreign content), Uber (a successful taxi company that does not have its own fleet) or Airbnb (one of the largest real estate rental platforms that does not own real estate) are nothing more than examples of the use of crowdsourcing. Wikipedia also owes its relevance to the use of crowdsourcing.
Crowdsourcing helps to achieve the intended results through the use of IT tools – an engagement platform and a system of motivators, specially developed for a given target group. All this is complemented by proper and, what is even more important, sufficiently frequent communication.
Innovators on the MillionYou platform is a new EY Crowdsourcing project. Thanks to it, students can participate in interesting tasks, face real life, professional or business challenges. On the platform, the needs of business meet the creativity of young people, who can earn references, win awards, and pursue their passions. Lecturers from business schools, universities and polytechnics as well as foreigners are involved in the functioning of the platform (the platform is bilingual, also in English). It is the first initiative of this type in Poland.
Employer branding of the 21st century is one that engages potential candidates in the long term, through interesting, rather than self-interested activities, including them in the life of the employer’s brand and taking an interest in their lives, i.e. conducting a dialogue with them, long before they become the addressees of job offers. When making a decision about choosing a future employer, they will be aware, familiar, and perhaps even know their future employer very well, because they were involved in their lives already during their studies. Crowdsourcing is a tool for this dialogue. In addition to dialogue and engagement and a kind of loyalty, it also allows you to achieve a large reach, effectively reaching the recipients of our message where they are, primarily through social media, Instagram, YouTube and student organizations.
MB: Where is this method used?
ES: The application possibilities are virtually endless. For example, the concept of open innovation – global corporations use it primarily to gain a competitive advantage, inviting a wide range of scientists and students to submit innovative ideas for new solutions and products.
In Poland, crowdsourcing is most often used in communication with city dwellers, as a tool for social participation used to collect ideas in the concept of building smart cities;
in brand communication, as an alternative or complement to ideas for promoting products or services created behind the doors of creative agencies. Such projects involve a wide range of independent creators, often consumers of the product. All this is done so that they can tell them how they would like the brand to communicate with them, how it should advertise its products. The goal is to create a communication that the recipients will identify with (branded content creation)
MB: What gives?
ES: We don’t hit the fence with the proverbial bullet, because the task is performed by a group of committed people, similar to those we want to reach. It is no longer a one-way communication, but involving the customer, consumer or resident in the process of searching for causes and drawing conclusions. This builds a two-way relationship, dialogue and trust.
Measurable results are a mass of fresh, authentic ideas presented in an engaging way, which can be used, for example, to power social media. Consumers generally don’t like to be sold something. On the other hand, he likes it when someone tells him a story that is interesting to him. Crowdsourcing allows people to talk to people, as opposed to the typical approach to brand promotion, where the brand or product is trying to communicate with them.
Experts on the subject say that there is no future for companies that do not use this type of tool.
MB: What is the key in employer branding activities? A lot of companies boast that they already have such strategies.
ES: It’s true. It has become fashionable lately. But are these strategies followed by actions and the use of specific tools, or are they just multi-page documents suggesting specific actions that everyone is already using?
I absolutely do not think that traditional activities such as strategy games, ambassadors at universities or presence at trade fairs have become a thing of the past. I’m not saying that these targeted actions don’t work. But in my opinion, they are no longer enough to gain a competitive advantage in the employee’s market. In this context, it is worth quoting the English-language title of marketing guru Jack Trout’s book “Differentiate or die”.
After all, an employer’s brand can and should be built in a similar way to a product brand – i.e. using the right communication and having a long-term strategy. Brand recognition or reach and an authentic message consistent with the organization’s DNA allows you to attract the best candidates. When I talk about the best candidates, I don’t mean only the top students. I’m talking about candidates whose values, interests and aspirations will be consistent with what the future employer requires, and who will find themselves in the new workplace and become its ambassador.
MB: And can this method also be used in relation to current employees?
ES: Absolutely. I often hear from employees that their voice doesn’t matter to the employer. And the truth is that maybe even managers would like to hear something, but they don’t know how to go about listening effectively. And what is the result? Posters advertising “submit an idea and get rewarded” programs are ignored, idea boxes are empty, and employees don’t ask questions at annual communication meetings. And employee satisfaction surveys are recording lower and lower results and everyone is wondering how this is possible.
MB: What can be done about it? After all, employees have been given the opportunity to express themselves, but they do not use it.
ES: You can be offended by this. But it won’t do anything. The truth is that just giving the floor doesn’t solve anything. The essence is to gain engagement, to make people want to speak, without huge financial outlays or time for such processes. After all, business has to move forward. And for that, you need engagement and communication specialists. The days of employee surveys are long gone.
MB: What motivators will work best to encourage people to get involved?
ES: A different stimulus can work for everyone. The most important thing is to know the main motivators to gain the commitment and voice of representative groups. It’s not even about financial motivators anymore.
MB: In what spheres can employees have a voice? How do successful companies do it?
ES: It is worth using internal platforms that support innovation. Why? It often happens that the employees closest to the customer (e.g. operating the cash register or working on the production line) have brilliant ideas for improvements – be it the product, the production process or the way of customer service, but they have no one to tell about them. Because their direct supervisor may not appreciate such creativity for various reasons or may simply not know what to do with such an idea.
Crowdsourcing encourages conversations within the company, involving colleagues in the process and submitting ideas. However, not all of them are inventive, some are better at criticizing. And this is also appreciated and rewarded, because it can and often does lead to the improvement of ideas. It is very important to select the best ideas and submit them for implementation.
However, such a task should be entrusted to specialists in this field, who can already boast of measurable successes in effective employee engagement. Otherwise, it is very likely that we will end up with another dead process within the company, which we will not be able to boast about.
MB: That sounds encouraging. Is it enough to set measurable goals for the right people and then it will definitely be achieved?
ES: This whole process, the so-called idea management has a chance to succeed only if the incentives, communication, IT platform and all stages of the process are properly planned, implemented and synchronized, and if the message is also appropriate from a marketing point of view. The whole thing must be preceded by an understanding of the DNA of a given organization and its employees, and what the employer wants to achieve, what effects similar actions have had in the past, etc. It’s a good idea to plan a pilot project. That’s a job for community engagement professionals. Only then can you even be tempted to set the right people in your financial organization goals for generating additional revenue through internal innovation processes.
MB: Are there any other possible areas of application that are important for HR?
ES: Yes, there is no closed directory here. But crowdsourcing will also work well in corporate social responsibility (CSR) activities. It is also irreplaceable for those companies that plan to change their office space to a more modern one, but also adapted to the needs and style of work of their current employees and future generations. Engaging them to gather ideas will allow them to become true ambassadors and beneficiaries of change. It will also work well in companies that strive to ensure that the offer of non-wage benefits or company events meets the needs and requirements of individual groups of employees. I want it to satisfy them, and not become a dead complicated catalogue of misguided “attractions”.
Crowdsourcing should also be used for internal communication (to employees) or externally (to candidates) to create attractive photo or video content in companies that do not have interesting ideas for it, and creating them with the help of specialized companies is too expensive for them.
MB: There has been a lot of talk recently about the idea of introducing an obligation to run employee capital schemes in companies. Is it up to date?
ES: The legislator, motivated by the deteriorating demographic situation and the desire to provide us with funds to live in retirement, is preparing another requirement for employers – Employee Capital Programs (PPK). Work on the final shape of the regulations is still ongoing, and the date of their entry into force has not been decided. It is crucial for employers to start preparing now, to consider what the options are. Because then it may be too late to act. For example, the high interest of all companies at the same time will exhaust the capacity of specialized companies providing these solutions and drive up prices.
MB: What exactly can be done right now?
ES: According to the proposed regulations, the requirement to run an ECP would not apply to companies that already have an Employee Pension Scheme (PPE) in place. It may turn out that PPK is a more attractive option to consider. But you also need to spend about a few months to implement this solution in your company.
MB: And what about the changes in the area of personal data protection – GDPR? What does everyone need to know about this law and what new requirements does it impose on/on employers?
ES: This is the biggest change in personal data regulations in 21 years! It will come into force on 25 May 2018 – the transition period must be used to analyse and prepare for the challenges ahead. In the area of HR, the main changes are related to the employer’s obligations in the field of personal data protection, both in recruitment processes and in the collection, storage and processing of employee data.
The scale of the introduced changes will have a significant impact on a number of areas related to the processing of personal data in the organization, both in the legal sphere and in the sphere of IT systems. In addition, the reform introduces severe fines that will be imposed on data controllers. Fines can be as high as €20 million or 4% of the company’s total annual worldwide turnover from the previous financial year.
We recommend our clients to take measures to mitigate reputational risk and the risk of delays in the implementation of solutions resulting from the Regulation and the imposition of penalties on the processor of personal data for improper processing.
MB: What are the benefits for employers of employing foreigners and apprentices?
ES: Foreigners are a valuable resource of job candidates and qualified specialists, especially in the face of the observed shortages of certain skills on the Polish market. We have been observing an upward trend in this area for a long time.
When deciding to employ foreigners, it is certainly necessary to remember to address such important issues as meeting the relevant requirements of the migration law, support in tax settlements and social security (an experienced company that is part of a global network of tax and immigration advisors will help with this). It is also a good idea to provide them with an appropriate catalogue of required information and ensure that they are integrated into the new country and circumstances.
Apprentices, on the other hand, help companies provide potential candidates and future employees with succession in rotating positions. Properly constructed internship programs are also an opportunity for closer cooperation between business and schools and universities and influencing the appropriate adjustment and modernity of curricula, so that they respond to the needs of the market and business.
MB: Thank you for the interview.
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Eliza Skotnicka, Senior Manager in the personal tax team at EY. Working in the Warsaw headquarters of EY for over 10 years, she has been supporting corporations and companies from the SME sector in the field of effective remuneration structures, taxation of internationally mobile people and modern Employer Branding activities using social media and digital platform.
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ABOUT EY
EY Polska (www.ey.com/pl/) is an international advisory firm specializing in business, tax and legal advisory, as well as audit and transaction services. The company’s experts help in creating an effective HR strategy, remuneration and employee motivation programs, as well as designing employer branding (www.ey.com/pl/pas) activities. EY Poland has offices in the largest Polish cities (Warsaw, Krakow, Poznan, Wroclaw, Katowice, Gdansk, Łódź).
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Eliza Skotnicka, Senior Manager, People Advisory Services, EY: One of the planned changes that is talked about most frequently and, at the same time, the most significant one for employers and employees is the lifting of constraints regarding the retirement and disability pension contributions. For employees earning more than 10 thousand gross per month, this change can entail the loss of one net salary and, for certain large firms, personnel costs will increase even by 20 million PLN yearly! As we are talking, it is not yet known whether the change will eventually come into force as of 2018. But, even if it does not, the legislator will most likely introduce it as of the following year.
