"Can I hire you on a civil contract to save on social security?" This is a question many employers ask themselves, and many employees hear. The difference between a Labor Contract and a Civil Contract is enormous – not only in taxes, but also in rights, protections, and legal risks.
Warning: Disguised Employment Contract
If you work at a desk, have working hours (e.g., 9 to 6), and a boss who tells you what to do every day – this is a Labor Contract. If you sign a civil contract for such work, the Labor Inspectorate can fine the employer up to €7,670, and the contract can be declared a labor contract retroactively.
1Labor Contract
This is the standard form of employment. You are selling your work time.
Characteristics
- Full protection: You have the right to paid leave (min. 20 days), sick leave, severance pay and unemployment benefits.
- Stability: You receive a salary every month, regardless of whether the company has orders or not.
- Seniority class: You receive additional % for experience (0.6% per year).
2Civil Contract
This is a contract for delivering a result. The client doesn't care when and where you work, they want the finished product (e.g., a translated book, written code, painted wall).
Characteristics
- No protection: You have no right to paid leave. If you get sick – you receive nothing (unless you're self-insured).
- Higher net income: With a civil contract, you have 25% "standard recognized expenses". This means taxes are only charged on 75% of the amount.
- Freedom: You have no working hours. You are your own boss.
3Financial Comparison
Example: The company allocates €511 (gross). What do you receive?
| Indicator | Labor Contract | Civil Contract |
|---|---|---|
| Recognized expenses | 0% | 25% (not taxable) |
| Insurance income | €511 | €384 |
| Net Amount | ~€397 | ~€432 |
| * Calculations are approximate. With a civil contract the amount is higher due to recognized expenses, but you lose social rights. | ||
Use Our Calculators
See the exact differences in taxes and social security between the two types of contracts.