What are the costs of a mandate contract with a student or student?

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Employing a pupil or student is often an opportunity for a company to fill in staff shortages. Such an employee cannot boast of experience, in return the costs of his employment are much lower than in the case of employing qualified staff. For the employer, this is an opportunity to reduce costs, because sometimes he does not have to pay social and health insurance contributions from the salary of the student or student - this mainly applies to cases when a mandate contract is concluded. Under certain conditions, young people may also use the tax relief without PIT for young people.

Contract of mandate

The mandate contract is governed by the Civil Code. The order taker undertakes to perform a specific legal action towards the principal. In return for its performance, the contractor should receive remuneration, unless he undertook to perform the work without payment for it.

As mentioned earlier, the mandate contract concluded with junior high school, high school and post-primary school students and students (until they turn 26) is exempt from social and health insurance contributions. Until August 31, the status of a student for ZUS is granted to people who:

  • have graduated from school and are not continuing their education,
  • continue their studies at the same school or have left school and start school in the next school year when the school year starts on September 1,
  • continue their studies - the interested party should present a certificate of admission to studies, then the student status will be valid until September 30.

When should a mandate contract with a student be paid?

A mandate contract with a student or student does not constitute the basis for compulsory ZUS contributions. However, there is a situation when such a contract should be paid in fees - when a mandate contract is signed with a student with whom the client has already signed an employment contract. Then the basis for the contribution is the sum of the remuneration under the employment contract and the contract of mandate.

Example 1.

Maciej is a second-year student, employed on the basis of an employment contract and his remuneration is PLN 3,000 gross. He has also signed a mandate contract with the same employer with a gross remuneration of PLN 700. While determining his remuneration, Maciek's employer calculates ZUS contributions from the base of PLN 3,700 (PLN 3,000 + PLN 700).

Student's salary, i.e. the minimum hourly rate

As mentioned, the mandate contract can be performed free of charge. However, if the parties to the contract decide to conclude it for a fee, they must remember to keep the minimum hourly rate. From 2017, the contractor's remuneration may not be less than the hourly rate applicable in a given year. Thus, the client's remuneration is the number of hours worked multiplied by the agreed hourly rate. The remuneration may also include an amount for the execution of the entire assignment, however, in this case, the number of hours worked by the contractor must be shown. The amount of remuneration divided by the number of hours may not be less than the applicable minimum hourly rate. The minimum hourly rate on the mandate contract in 2021 is PLN 18.30 gross. Start a free 30-day trial period with no strings attached!

Standard taxation of the mandate contract

Revenue under a contract of mandate qualifies as revenue from activities performed in person. The payer here is the workplace, so he is obliged to calculate, collect and transfer to the tax office an advance on income tax on the remuneration paid. Taxation of such income may take the form of a lump sum (17%) or taxation on general principles (17%).

If the amount due in the contract concluded with a person who is not an employee of the payer does not exceed PLN 200 gross, the payer is obliged to collect the flat-rate tax (17% of the income). It is levied on income, which is not reduced by tax deductible costs.

The issue of taxation is different if the remuneration specified in the contract exceeds PLN 200. The task of the payer is then to calculate and collect an advance on personal income tax. This means that the income (resulting from the mandate contract), before calculating the advance payment, is reduced by the tax deductible costs (Article 22 (9) of the PIT Act; usually 20% of the income less ZUS contributions), as well as by the contributions deducted in a given month for social security (if any).

If the income has been determined in the above manner, the payer collects an advance tax on it, which is calculated at the rate of 17% or 32%. The higher one is applied only at the request of the contractor. The advance calculated in this way is then reduced by the amount of the health insurance premium (if the taxpayer is subject to such insurance), which is collected from the contractor's funds. Such deduction may not exceed 7.75% of the basis for assessing this contribution.

Taxation of the mandate contract of a student or pupil up to the age of 26

In 2019, new regulations entered into force, stipulating that people who meet the relevant conditions can take advantage of the relief - PIT exemption for young people. This relief is based on the exemption from the obligation to pay advances on income tax for a specific group of people. PIT exemption is available to people who:

  • are under 26 years of age - the relief is available until the date of birth, therefore, income earned after this date will be automatically taxed,
  • are employed on the basis of an employment contract (also applies to homework and business relationship) and on the basis of a mandate contract,
  • achieved revenue in the amount not exceeding PLN 85,528.00 during the calendar year.

Thus, employing a student or apprentice under a mandate contract is very cost-effective, as the gross remuneration is equal to the net remuneration of the contractor, and these amounts are equal to the total costs of the entrepreneur.