Employment or Self-Employment? Starting a Business While Working Full-Time

Although full-time employment remains the most popular form of work, more and more people are opting to start their own businesses in search of better earnings. Many new business owners choose to keep their current employment while simultaneously running their own business. How can you start a business while working full-time, and is it worth it? In this article, we address this dilemma.

Self-Employment and Full-Time Work – Legal Aspects

Current legal regulations allow running a business while being employed under a full-time contract. However, combining full-time work with your own business requires adherence to labor laws and employer obligations. Before taking this step, you must ensure that your business does not conflict with your employer’s interests or breach non-compete clauses often included in employment contracts.

Do You Have to Inform Your Employer About Starting a Business?

Generally, there is no legal obligation to inform your employer about starting your own business. However, in practice, people registering a business often have to do so for tax reasons—you cannot claim the tax-free allowance twice.

Double Social and Health Insurance

If you earn income from multiple sources, such as running a business while working full-time, you may encounter the issue of dual insurance coverage. What does this mean in practice?

If you work full-time and simultaneously run a business, your business insurance is based on your salary from full-time employment. If you earn at least the minimum wage (which will be 4,300 PLN gross starting July 1, 2024), you are not required to pay social insurance contributions for your business. These are only deducted from your full-time salary.

However, if you work part-time and your salary is lower than the minimum wage, you are required to pay social insurance contributions both from your business and your employment.

On the other hand, health insurance is mandatory and must be paid from both sources—your full-time job and your business. The amount of the contribution depends on the form of taxation chosen by the entrepreneur.

Flat Tax: Running a Business While Working Full-Time

The flat tax is one of three available forms of taxation for business income. In addition to the flat tax rate (19%), there are also lump-sum taxes on registered income and general taxation based on a tax scale (12% and 32%).

It’s important to note that individuals running their own business while also being employed typically cannot use the flat tax option. The personal income tax law excludes this method of taxation if the taxpayer receives or will receive any income from providing services to their current or former employer. In such cases, you must opt for lump-sum taxation or the general tax scale.

Example

Mr. Jan left his full-time job at a marketing company to start his own business in the same field. However, he continues to provide services to his former employer, so he cannot use the flat tax option.

B2B or Full-Time Employment – Which to Choose?

Deciding between full-time employment or a B2B contract is a common choice for those seeking better income opportunities. The answer is not always clear-cut—both traditional employment and B2B contracts have their pros and cons. What should you consider?

Full-time employment is often seen as more stable, offering benefits such as paid vacation, sick leave, and social protections that don’t apply to B2B contracts governed by civil law. In full-time employment, the employer handles all social security contributions and related formalities. However, full-time employment often involves fixed working hours, lower pay, and more oversight from employers.

One of the main advantages of a B2B contract is the potential for higher earnings. By taking on the responsibility of paying your own contributions and taxes, you can often negotiate higher pay. It also provides more flexibility in organizing your work schedule and location. However, B2B contracts are often less stable and shorter-term, posing a higher risk of losing income suddenly.

Can an Employer Encourage You to Become Self-Employed?

While an employer may suggest transitioning to self-employment under a B2B contract, they cannot force you to do so. This decision should be made carefully and voluntarily, considering your personal circumstances.

How to Start a Business While Working Full-Time

First, check that your employment contract does not contain clauses preventing you from starting your own business. If there are no restrictions, you can register your company with the Central Registration and Information on Business (CEIDG) online. You’ll need to provide details such as the company name, address (which can be a virtual office), and the appropriate business classification (PKD code).

As an entrepreneur, you are responsible for paying social security contributions (including mandatory pension, disability, and accident insurance), as well as health insurance. New entrepreneurs or those who closed a previous business more than 60 months earlier and do not plan to provide services to their former employer within the first six months can benefit from the “Startup Relief” (Ulga na Start).

You are also required to keep financial records, either through simplified bookkeeping or full accounting.

Preparing to Quit Your Job

Leaving a full-time job to work for yourself involves some risk. Proper preparation can minimize that risk.

Before quitting, build up a financial cushion—enough savings to last several months—to cover your expenses while your business is not yet generating significant profits. This will allow you to focus on growing your business without financial pressure leading to hasty decisions.

Verify your business idea by researching whether there’s market demand for what you plan to offer. Analyze the competition and identify ways to stand out.

Develop a detailed business plan, including market analysis, a marketing strategy, financial planning, and both short- and long-term goals.

Is a Virtual Office Beneficial for Self-Employed People?

A virtual office can be a cost-effective solution for new entrepreneurs, offering a prestigious business address and additional administrative services. This is especially valuable for those working remotely, allowing them to focus on their business while maintaining a professional image.

Full-Time Employment or Self-Employment – Which Is More Profitable?

Use online tax calculators to simulate which employment form—full-time or self-employment—would be more financially advantageous for you.

While B2B can be attractive, it may not always be the best choice, especially if you plan to continue working for your previous employer in the same capacity, as you may lose certain tax benefits. It’s essential to analyze the options carefully before making a decision.

Jutta Hutsch-Kasprzyk

Jutta Hutsch-Kasprzyk is an experienced Chief Operation Officer who has focused on optimizing business processes and reducing operational costs throughout her career. She is a talented negotiator, building strong relationships with key contractors and customers. Her skills in managing company affairs, organizing team work, and developing strategies have contributed to the success of IdeaPlace on the business map of Wrocław.