Taxes and formalities

Fleet partner or sole proprietorship? Differences, advantages, disadvantages (Part 1)

Kuba

March

2022

Uber, Glovo, Wolt and other apps - how to get started? We explain what is the difference between a fleet partner and sole proprietorship.

Gone are the days when working in Uber Eats, Glovo, Stuart and other apps only required a download and registration. Today, working through apps as a driver or courier is subject to many employment and tax regulations. And because these issues are crucial for you as a driver or courier, we have prepared 2 detailed articles, one on each topic. Here’s the first one.

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Fleet partner vs. sole proprietorship - everything you need to know about how these work:

- Why are you hired by a billing partner and not the app?

- How do you get started with the apps (fleet partner / sole proprietorship)?

- What are the advantages and disadvantages of fleet partners and sole proprietorships and for whom are they intended?

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- Glovo partner

- Wolt partner

- Uber Eats partner

- Bolt Food partner

- Stuart partner

- Xpress Delivery partner

- Uber partner

- Bolt partner

- Free Now partner

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Why are you getting hired by a fleet partner and not Glovo, Wolt, Stuart and other apps?

Glovo, Wolt, Stuart and other work apps describe themselves as an 'intermediary' between the customer and the driver/restaurant for a reason. This is because they do not employ drivers or couriers directly - when working through an app of this type you are always a 'partner' of the app, never an 'employee'. These apps simply do not want to have their own employees, and the reason for that is very simple: costs. Working with another company is simply more beneficial for the platforms because of tax optimisation.

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This is why platforms such as Stuart, Glovo and Bolt Food do not employ, but offer cooperation either through the so-called fleet partners (a.k.a. billing partners) or through sole proprietorship. In this article, we will describe both options as well as the key differences in terms of contracts, paperwork and obligations. Let's start with how fleet partners work.
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Fleet partner(billing partner) - how does it work?

Fleet partners are the companies that take care of the formalities which Stuart, Glovo, Bolt Food and other apps don't want to deal with. They sign contracts, hire employees, onboard them, pay their social security contributions, calculate taxes and more. In short, billing partners take over most of the formal duties from the app and from you - for a fee, of course. To a large extent, therefore, they act like an employment agency.
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Fleet partner (billing partner) - advantages

Being employed by a fleet partner has a key advantage: you don't have to set up your own business to start working for Uber Eats, Bolt Food, Glovo and other apps. You are formally employed by a billing partner and your only job is to transport goods and people. Fleet partners use different provisions in their contracts, so there is no set template - some go for simplicity, others prefer a very detailed description of the rules. A contract of mandate is considered the standard, which has several advantages for both you and the partner:

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A contract of mandate with a billing partner means flexibility for both parties

A contract with the partner states that the contractor (driver/courier) is free to decide where and when to carry out the activities referred to in the contract. Billing partners also often do not charge for periods in which the contractor has not worked or has not reached a given quota, e.g. 10 trips, although there are exceptions. Such provisions are not possible on an employment contract, where the working hours, scope of duties and remuneration must be precisely defined,

A contract of mandate with a fleet partner means lower taxes for you

A contract of mandate is generally cheaper than an employment contract. In addition, it allows for tax optimisation so that you earn significantly more, i.e. a combination of a contract of mandate and a private vehicle hire contract. We describe this mechanism in the second part of the article.

Billing partner provides you with a taxi licence faster and cheaper

Billing partners that have a passenger transport app (Uber, Bolt, Free Now) MUST have a licence, which means that if you are employed by a partner you can use their licence - you don't have to get your own, so you save some time and money.

When you sign a contract with a fleet partner, you will be covered by health insurance

If you do not have health insurance (you’re not a student and you’re not already working for another company), signing a contract of mandate with your partner will cover you.

Billing partner (fleet partner) - disadvantages. Part-time vs. full-time job

Contract of mandate will not be equally beneficial for everyone because of social security contributions and income tax. Three main situations can be distinguished:

Employing a person under 26 on a contract of mandate - such people do not pay any contributions and are exempt from income tax,
Hiring an employee of another company on a contract of mandate basis - if someone is already employed by another company, this means that they already pay pension contributions. The salary of the other company is important here:

if such a person's income is at least the statutory minimum wage (3010 PLN gross per month), they already have pension contributions paid in full; therefore, the billing partner does not have to deduct it from their salary. The driver or courier will therefore receive a larger amount,
if the income of such a person is less than the statutory minimum wage (3010 PLN gross per month), the fleet partner will have to pay the person's pension contributions in full. The driver or courier will therefore receive a smaller amount.

The above options only apply to ZUS Social Security contributions. In both cases, the billing partner will, in addition, have to mandatorily pay the contractor's health contributions. There will also be income tax.

Employing a person who is not employed anywhere else on a contract of mandate basis - in this situation, the fleet partner will have to pay all contributions for the contractor. Income tax cannot be avoided here either.

So if you are under 26 years old or already employed by another company and your income is at least the minimum wage, and you see working for Glovo, Uber Eats or Stuart as an opportunity to make some extra money, you will pay lower social security contributions. If, on the other hand, in your current job your income is below the minimum wage, or working for Glovo, Stuart, Bolt Food and other apps is your only source of income, your contributions will be full.

Billing partner (fleet partner) - disadvantages. Lack of own vehicle

You will face another disadvantage if you do not have your own vehicle. Usually, fleet partners, in addition to a contract of mandate, also offer to sign a rental contract for your vehicle. In such case, they formally employ you while renting your vehicle from you. The contract of mandate is signed for a smaller portion of your total revenue (for example, let's say 30%). Your earnings are therefore paid in such a way that the first 30% of your income is settled on the basis of the contract of mandate, while the entire excess over this amount (the remaining 70%) is paid to you under the rental contract. This trick allows you to significantly reduce your income tax, so that you get paid more. So, if you don't own a vehicle, you won't be able to rent it, and thus your income tax will be higher. We also cover this topic in detail in the second part of the article.

It is worth mentioning here that the vehicle does not necessarily have to be your own. You can rent someone else's car to your partner, provided that you sign a legal lending agreement with the owner. You can thus, for example, borrow a car from your parents or friends. You can use the same manoeuvre if you rent a car yourself or if you have a leased car - such vehicles can be subleased to your partner as long as the car owner agrees. A good billing partner will help you with the details.

Sole proprietorship instead of a fleet partner - how does it work?

Working for Uber Eats, Bolt Food, Wolt and others is also possible through sole proprietorship. You do not sign a mandate or rental agreement with a fleet partner. Instead, you invoice the app for specific amounts depending on the revenue you have generated and the type of services you have provided (passenger transport is taxed at 8% VAT, courier services at 23%).

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Sole proprietorship has many good aspects. Your business means your rules - you don't have to sign contracts with a billing partner, keep an eye on deadlines, and you don't pay them service commissions. You can also account for the costs of your business, e.g. fuel, parts to repair your car, and the loss of value of your car due to your business activity. You account for the costs yourself or an accountant or your billing partner does it for you. Fleet partners specialise in this type of work and are therefore clearly cheaper than accountants. See the second part of the article for details.

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Sole trader instead of a billing partner - advantages. Reduced ZUS contributions to get started

Newly-opened businesses can also enjoy preferential social security rates for 2.5 years, which significantly increases income. After this time, they can continue to pay reduced contributions, provided that they apply for the so-called 'Small ZUS plus' and that in the previous year their income wasn’t more than 120 000 PLN. Assuming a monthly income of 5 000 PLN (17% tax scale) and zero costs, your income will be higher by 850 PLN for the first six months, and by more than 650 PLN for the next two years. It will later be higher by less than 350 PLN in relation to standard contributions, thanks to “Small ZUS plus”.

In each of these cases, the social security contributions are fixed and do not depend on income. The opposite is true on mandate or employment contracts, where the higher the income, the higher the social security contributions. In other words, the higher your income, the more favourable sole proprietorship will be for you.

In each of these cases the social security contributions are fixed and do not depend on income. The opposite is true on mandate or employment contracts where the higer the income, the higher the social security contributions. In other words, the higher your income, the more beneficial sole proprietorship will be for you.

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Sole trader instead of a billing partner - advantages. No additional contributions if you are already running a business

If you already have another business (e.g. a shop) and you want to make money after hours while working for Uber Eats, Glovo or Wolt, then it will be quicker and more convenient to use your already established business for this. You will avoid signing contracts with a partner and controlling the billing, and you will also save more on costs. If you have another (any) business, you already pay social security contributions, so you won't have to do it twice - you just register in the app, take care of the formalities, get in and drive, and then invoice for the services provided.

Becoming a sole trader can also be a good option for people who don't have their own car. If you're thinking of renting or leasing a vehicle, taking it on as a sole trader will be an expense for you, meaning you'll save a lot in taxes. See the second part of the article for details.

Sole proprietorship - disadvantages. Necessary knowledge of regulations and accounting nuances

Being a sole trader brings duties and responsibilities. There is no one to count your paycheck and pay your taxes to the tax office (unless you use an accountant). You have to do it all yourself. In the event of an audit, if errors are found, you must be prepared to take responsibility, e.g. to pay the outstanding tax you miscalculated a year ago.

Operating as a sole trader also requires more knowledge about working through apps. Some apps display revenue together with VAT (e.g. Uber and Uber Eats), others display net revenue to which VAT will only be added (e.g. Wolt). It doesn't matter much as long as you work on one app, but you need to be aware of such nuances when driving on several apps interchangeably, in order to get everything right with the tax authorities.

Tax laws in Poland change frequently, so when being a sole trader you also need to keep track of announcements and changes in the law once in a while. An alternative is to use accounting services, but this will be an additional cost of approx. 200 PLN net per month. Interestingly, accounting services for drivers and couriers are also offered by fleet partners - often cheaper than classic accountants. So if you only care about accounting for work in Glovo, Bolt Food or Stuart, the partner's services will suffice. Accountants, on the other hand, can also help you with other topics such as depreciation or leasing.

Sole proprietorship - disadvantages. Even if you are not working, you will still pay ZUS contributions!

It is very important to note that a sole proprietorship is, by definition, a continuous business. While with a fleet partner there’s often no consequences when you don’t work for a while (some partners charge for inactivity, but not all), as a sole trader you have to pay social security contributions even if you have not worked any hours in a given month. You can suspend your business (min. 30 days, max. 24 months), but if you do this, you cannot work and you have to submit an application, so there is even more paperwork.

Fleet partner or sole proprietorship? Summary

Setting up a sole proprietorship is therefore a more long-term solution, great for people who work through apps full-time, have a high monthly income, are familiar with working through platforms, know the basics of tax accounting and treat such an occupation as something permanent. For those just starting out in Glovo, Bolt Food or Wolt or wanting to make a flexible extra income, a fleet partner will be a much quicker and safer solution.

Remember, that if you already have a company, you can work through apps on that basis. It will take you less time than signing contracts with a partner, and you will also be completely independent.

Below is another summary in the form of a table:

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	Fleet partner	Sole proprietorship
For whom?	For those wishing to make a living and those who do not want to deal with formalities	For app "full-timers" who don't mind the extra paperwork, and for those already running a business who want to earn some extra income
Formal basis of employment	Contract of mandate + vehicle rental agreement for those wishing to do so	Self-employment
Taxi licence	You use your partner's licence, you do not need to get your own	You have to get your own licence
Health insurance	Yes, through a contract of mandate	Yes, you pay for it yourself
Withdrawal commissions	Yes, the more apps, the higher the commission	No
Inactivity fees	Depending on the partner (often none or very little)	Yes - you have to pay ZUS contributions every month (unless you suspend your business, but then you can't work)
ZUS contributions	Depending on your age, employment in another company and salary level	Fixed (possible discounts for new sole traders)

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In this post, we explained the differences between being employed by a fleet partner and being a sole trader. In the second part, we explain the tax issues of both solutions - be sure to see it if you’re thinking about working through apps and considering becoming a sole trader to do so!