Using a company car for private purposes
Agreement on entrusting the employee with company property
In Poland, in order for an employee to use a company car, the parties to the employment contract should conclude a separate property entrustment agreement. In the contract, the parties should specify the details of the vehicle that is entrusted to the employee, the rules for using the property belonging to the employer by the employee, the method of settlements for the maintenance of the vehicle and the rules of the employee’s liability for the entrusted property.
Increased liability of the employee
Entrusting an employee with business property is associated with greater responsibility of the employee. As a rule, the employee is liable for damage to business property on the general terms of Art. 114 – 122 of the Polish Labor Code, which are beneficial to the employee. Under the general rules, the burden of proving the employee’s fault lies with the employer, and the employee is usually liable only up to the amount of three months’ salary.
As for the property entrusted to the employee, in accordance with Art. 124-125 of the Polish Labor Code the employee is responsible for the damage to property in the full amount – regardless of whether it was caused intentionally or unintentionally. At the same time, the regulations assume in this situation the presumption of the employee’s fault and it is the employee who bears the burden of proving that the damage was caused by other independent reasons.
Company car for private purposes
The use of a company car for private purposes is possible only if the employer has previously given his consent – usually through a provision in the property entrustment agreement. Using a company vehicle for private purposes without the consent of the employer may lead to disciplinary dismissal of the employee.
The possibility of using a company car constitutes an income for the employee, which is subject to taxation and contributions to the Social Insurance Institution (ZUS). Due to the fact that the monetary value of this gratuitous benefit would be difficult to calculate, the legislator established its flat-rate amount in the Personal Income Tax Act. The value of the lump sum is PLN 250 or PLN 400 monthly, depending on the engine power of the used car.
The latest tax interpretations assume that the fuel provided by the employer is included in the lump sum set by the legislator for the use of a company car for private purposes, which means that the cost of fuel is not a separate benefit for which the employee would have to pay additionally to the tax office.
Obligation to return the company vehicle
The property entrustment agreement usually stipulates the employee’s obligation to return the car in the event of termination of the employment contract or at the request of the employer. According to the jurisprudence of the Supreme Court, the employer is entitled to demand the return of the vehicle at any time, even when the employee is currently on sick leave. The Supreme Court emphasizes that the employee should be notified in advance.
It is important to remember that the employee only uses the property that belongs to the employer at all times. The parties should stipulate in the contract the rules for returning the company vehicle, for example, they may provide for the need to inform the employee in advance so that the employee can prepare to return the vehicle.
A refusal to return a company vehicle at the request of a company vehicle may be treated as a serious breach of employee duties and may be grounds for disciplinary dismissal.
To sum up, the use of a company car for private purposes is possible and widely practiced, but it requires precise regulation of the rules of such use – so as to avoid misunderstandings with the employee in the future. Both parties bear certain risks here – the employer in the form of an increased possibility of loss or destruction of company property, while the employee must take into account increased liability and additional settlements.
You if want to learn more about employment law in Poland – check our online guide: Employment Law in Poland.