Nature of the two contracts:

Under an employment contract, the employee provides his/her labour force in terms of continuity and repetition against remuneration. Such a contract is subject to the regulations of the labour legislation and must include mandatory provisions defined in the law.

On the other hand, under a civil contract the assignee provides a specific result (e.g. a service, the manufacture of a product) at his/her own risk and responsibility against remuneration. The parties to such a contract do not have the capacity of employee and employer and are not bound by the mandatory regulations of the labour legislation. Their relationship is governed by civil law and the principle of freedom of contract.

Key differences between the two types of contracts:

1. Subject of the contract: Typical of the employment contract is that the employee must perform his/her obligations within established working hours, at a specific workplace and in compliance with the conditions laid down by the employer. In return for the work performed by the employee, the latter is entitled to receive remuneration which is of a permanent nature and is payable periodically. Under a civil contract the assignee organises his/her own work process and is not bound by a specific working hours or workplace. The remuneration under a civil contract is payable in respect of the result achieved.
2. Rights and obligations: The employee is entitled to more rights guaranteed by the law – e.g. paid annual leave, health and safety working regulations, protection in case of dismissal, limited proprietary liability, etc. On the other hand, the assignee under a civil contract does not enjoy the protection provided by the Labour Code, and his/her rights, liability and obligations are determined as agreed between the parties and in accordance with the general rules of civil law.
3. Hierarchy: The employee is hierarchically subordinated to his/her employer and is obliged to observe the labour discipline and the established internal work rules. The employer may impose disciplinary sanctions in case of violations. In contrast, the parties to a civil contract are equal – the assignee is independent of the assignor. The latter may disapprove and not accept the result of the assignee’s work, but cannot impose disciplinary sanctions, nor exercise control over the assignee.
4. Termination: Typical of an employment contract is that the employer may not unilaterally terminate the contract except on the grounds explicitly provided in the law and in compliance with a specific procedure. In a civil contract, the parties are free to agree on certain grounds and procedures for termination – e.g. by written notice, upon occurrence of certain circumstances, etc. Outside of what is agreed between the parties, a civil contract may be terminated under the rules of civil law, e.g. unilaterally by the non-defaulting party upon failure of the other party to perform its obligations, upon expiry of the agreed term of the contract, etc.
5. Administration: The employer under an employment contract carries more administrative burden than the assignor under a civil contract. For example, the employer is obliged to submit information to the National Revenue Agency in connection the conclusion, amendment and termination of an employment contract, to issue supplementary internal acts, to keep employment record for each employee, to keep certain documentation, etc. In comparison, the assignor is not obliged to register the civil contract, nor to keep specific documentation beyond that required for tax and social security purposes. The main obligations of the assignor are to pay the remuneration and to deduct and pay the tax and social security contributions due on behalf and at the expense of the assignee.
6. Social Security Implications: Employees are subject to mandatory social security for all social security risks, whereas the due social security contributions are divided between the employer and the employee in a 60:40 ratio and are paid by the employer. The assignees under a civil contract who are not secured on any other ground and who receive remuneration above the minimum wage or assignees who are secured on any other ground during the respective month are subject to mandatory social security only for the risks of disability due to general sickness, old age and death, whereas the social security contributions are paid entirely at their own expense but are deducted and paid by the assignor. The assignees under a civil contract are not secured for occupational accidents and occupational diseases, neither for unemployment.

In view of the above it is clear that there are significant differences between an employment contract and a civil contract which employers and assignors, as well as potential employees or assignees, should consider. It is very important to conclude the right type of contract depending on the specifics of the activity and the relationship between the parties. The mixing of the two types of contracts could result in serious consequences for the parties.

The above text does not constitute legal advice or consultation and should not be considered sufficient to resolve specific legal issues and cases. We hope the information is useful, and we would be happy to provide further details upon request.

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