Wis es and their role in european policies


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Wis es and their role in european policies

  1. 1. WISEs and their role in European policies National Report - Poland With the financial support of the European Commission
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  3. 3. The Report has been written by Tomasz Sadowski (Barka Foundation for Mutual Help) and Lidia Węsierska (Barka Foundation for Mutual Help). It has been translated by Ewa Sadowska (Barka UK). 3
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  5. 5. CONTENTS A. DESCRIPTION OF TYPES OF WISE 7 A.1 Type of WISE: Limited Liability Company of a non-profit type 8 A.1.1 Brief historical description 8 A.1.2 Statistical overview 8 A.1.3 Supporting umbrella structures 8 A.2 Key organizational features 8 A.2.1 Goals pursued by the WISEs 8 A.2.2 Legal form 8 A.2.3 Types of workers targeted 9 A.2.5 Type of goods or services produced by the WISEs 9 A.1. Type of WISE: Non – governmental organizations 9 A.1.1 Brief historical description 9 A.1.2 Statistical overview 10 A.1.3 Supporting umbrella structures 10 A.2 Key organisational features 11 A.2.1 Goals pursued by the WISEs 11 A.2.2 Legal form 11 A.2.3 Types of workers targeted 11 A.2.4 Mode of integration provided by the WISEs to the worker 11 A.2.5 Type of goods or services produced by the WISEs 11 A.2.6 Types of resources 12 A.1. Type of WISE: Centres for Social Integration and Clubs for Social Integration 12 A.1.1 Brief historical description 12 A.1.2 Statistical overniew 13 A.1.3 Supporting umbrella structures 13 A.2 Key organisational features 13 A.2.1 Goals pursued by the WISEs 13 A.2.2 Legal form 14 A.2.3 Types of workers targeted 14 A.2.4 Mode of integration provided by the WISEs to the worker 14 A.2.5 Type of goods or services produced by the WISEs 15 A.2.6 Types of resources 15 A.1 Type of WISE: Social cooperatives 16 A.1.1 Brief historical description 16 A.1.2 Statistical overview 16 A.1.3 Supporting umbrella structures 17 A.2 Key organizational features 17 A.2.1 Goals pursued by the WISEs 17 A.2.2 Legal form 18 5
  6. 6. A.2.3 Types of workers targeted 18 A.2.4 Mode of integration provided by the WISEs to the worker 18 A.2.5 Type of goods or services produced by the WISEs 19 A.2.6 Types of resources 19 A.1 Type of WISE: Centres for Occupational Activation 19 A.1.1 Brief historical description 19 A.1.2 Statistical overview 20 A.1.3 Supporting umbrella structures 20 A.2 Key organizational features 21 A.2.1 Goals pursued by the WISEs 21 A.2.2 Legal form 21 A.2.3 Types of workers targeted 21 A.2.4 Mode of integration provided by the WISEs to the worker 22 A.2.5 Type of goods or services produced by the WISEs 23 A.2.6 Type of resources 23 A. 3 Supported Employment Enterprises - legal requirements 24 B. ANALYSIS OF POLICIES 26 B.1 Policy overview 26 B.1.1 Specific public scheme 26 B.1.2 Other public support not specially targeted at WISEs 34 B.1.3 Public procurement and WISE 38 B.1.4 Private Sector support (non-profit or profit) 39 B.1.5 Ongoing political debates and trends 39 B.1.6 Coordination of the sector 56 B.2 Programme analysis 60 C. BEST POLITICAL PRACTISES 90 C.1 Act on Social Employment 90 C.2 The act regarding social cooperatives 93 D. CONCLUSIONS 95 D.1 Political debates and trends 96 D.2 Challenges 98 D.3 Recommendations for integrated policies 99 BIBLIOGRAPHY 103 6
  7. 7. Report on Work Integration Social Enterprises (WISE) in POLAND A. Description of types of WISE Summary of chapter A In the chapter A, six types of WISE were elaborated upon: limited liability company of non-profit character, non-governmental organisation, social integration centre, social cooperative and centre for vocational activation. Limited Liability Company of non-profit type does not differ in legal terms from regular limited liability company which is based on a commercial law. It is the objectives included in the Articles of Association as well as the way the funds are used, which make them different. Limited liability company of non-profit type aims at pursuing social goals and it is social goals that financial surplus is used for. Due to the level of founder’s capital (50.000 PLN) this type of WISE is not popular in Poland and there are single cases of it. This is the reason why there is a lack of detailed statistical data on this field. With regards to the second form of WISE which are Non-governmental Organisations, the statistical data on organisations conducting statutory chargeable and economic activity was presented (this is less than 10% of the total number of organisations). The organisations’ target beneficiaries are unprivileged groups of people who are in very difficult life situations. Organisations rely in the first instance on public funds to implement their activities. Income from other sources is only 30%. Social Integration Centres, the third form of WISE, can run commercial and productive activity which is not an economic activity but it is treated as a form of vocational activation of the unprivileged groups. Social Cooperatives, the fourth form of WISE, run economic and re-integration activities for the benefit of its members. Cooperatives do not share the profit as it is allocated in the following funds: resource fund, investment fund and re-integration fund. Fifth form of WISE is Centre for Vocational Activation of the disabled, which run service-oriented, production and economic activity. The profit is allocated in Entrepreneurial Fund of Activation which covers the cost of rehabilitation of the disabled persons, purchase of equipment as well as the cost of accommodation support. Another form of WISE are Supported Employment Enterprises. The status of Supported Employment Enterprise was received by cooperatives of the disabled people which employed no less than 40% of the disabled (including 10% of people with serious mental impairment). Commercial companies can also receive a certificate of supported employment enterprise as long as 40% of they employees are the disabled and under a condition that they operate from appropriate locations and 7
  8. 8. use special equipment. The profit of the supported employment enterprises are not subject to a share. Companies which run such enterprises benefit from the State Fund for Rehabilitation of the Disabled (PEFRON), the tax reductions, reimbursement of social insurance premium of the disabled. Supported employment enterprises created by commercial companies are very criticized in Poland. A.1 Type of WISE: Limited Liability Company of a non-profit type A.1.1 Brief historical description Principles of operating Limited Liability Companies were set up in Germany in 1892 (German term “Geselshaft mit beschränkter Haftung”, short: GmbH). The German pattern was adopted in Austro-Hungary in 1906 and in England in 1907 (as a private limited company). In 1925 it was incorporated in legal systems in France, for example. In Poland, the rules for limited liability companies (spółka z.o.o.) were for the first time regulated under the decree dated on the 8th of February 1919. Legal regulations of Limited Liability Companies, which are in effect contemporarily, are relatively convergent in different countries. However, they can significantly differ in very basic details. A.1.2 Statistical overview It is not possible to define number of Limited Liability Companies of a non-profit type. They are registered as Limited Liability Companies. Due to the fact that the nominal capital of the company ought to be minimum 50.000 PLN, this is not a commonly practised form of activity with a social goal. We can estimate that these are single cases in Poland. A.1.3 Supporting umbrella structures It is predicted that development of Limited Liability Companies of a non-profit type is not going to be dynamic due to the level of nominal capital. Non-profit organisations do not posses sufficient capital to set such companies up. Yet it is assumed that it is non-profits which are most interested in such kind of enterprises. Small number of Limited Liability Companies determines the fact that neither now nor in the nearest future the sector is capable of developing a consortium. A.2 Key organizational features A.2.1 Goals pursued by the WISEs The main mission of Limited Liability Companies is to lead socially beneficial activities in the area of public tasks. A.2.2 Legal form 8
  9. 9. Limited Liability Company is based on a commercial law and its operations are regulated by commercial law. It is a liaison of a few subjects (stakeholders) who are held accountable to companies’ creditors only up to the level of their personal shares in the company (with the exception of tax debt). Personal shares are recorded in the company’s agreement. The law does not limit the number of stakeholders which means that a stakeholder can be both a single individual and a thousand individuals. Stakeholder can be a person and a legal entity or an organisation which does not have a legal status (e.g. registered partnership) under the condition that the founder of one- person Limited Liability Company is not another one-person Limited Liability Company. Limited Liability Companies of a Non-Profit type are not regulated by any separate codex and they only differ from other Limited Liability Companies in the following aspects: - The agreement of Limited Liability Company of a Non-Profit type includes social objectives. - Profits are reinvested in social causes defined in the agreement of Limited Liability Company of a Non- Profit type (with a prohibition to pay out the worked profit of the Company to stakeholders or owners). A.2.3 Types of workers targeted This is not defined by regulations. Limited Liability Company of a Non-Profit type can employ any worker no matter what their life situation is. However, the Company agreement can include a clause explaining that the disadvantaged group is the preferable one. A.2.5 Type of goods or services produced by the WISEs Types of services and products produced by this type of WISE are accepted by regulations defining the activity of Limited Liability Companies. A.1. Type of WISE: Non – governmental organizations A.1.1 Brief historical description In Poland, non-governmental organizations, foundations and associations came into existence approximately in the same time as in Western European countries. At first they were occupied mainly with charitable activities, later they also started to conduct commercial, cultural, educational and academic activities as well as activities connected with promoting the idea of a social development and a social solidarity. Some of them were of a religious character while others were entirely secular. In time of II Republic of Poland (1918-1939) the non-governmental organizations were growing very fast. During the II World War and in the time of the domination of communism (which came after the war), the level of social activity and civic engagement had fallen. Some of the non-governmental organizations were closed down (their property was taken over by the state). Others were incorporated in ideological structures. After 1989, non-governmental organizations experienced their resurgence and revival thanks to the 9
  10. 10. regained right to associate and establish associations. Some of the non-governmental organisations started extensive chargeable and economic activities. These organisations and their profile are described below. A.1.2 Statistical overview According to the data in the Registrar of Companies dated May 2007, there are over 78.000 non- governmental organizations in Poland, herein around 70.000 associations and around 8.500 foundations. Out of those, approximately 4.000 organisations meet the criteria described in the EMES (European Research Network) definition, which makes up for almost 10% of all organisations. Statistical data presented below refer exclusively to non-governmental organisations defined as an acronym SEE (Social Economy Enterprise). The number of SEE employing paid staff: approx. 2400 which are 60%. The number of SEE employing workers through employment contract: approx.: 2000 which is 50%. There is a lack of data with regards to the number of those employed in organisations which met the EMES criteria. In the whole sector there are 120.000 employees (64 full time jobs). One can assume that at least 10% from them are employees of SEE, which are over 12.000 people. The number of SEE using voluntary support: approx.: 2000 which 50%. 45% used “permanent” voluntary engagement (volunteers engaging on regular basis). Revenue: In 2005 85% of SEE had a budget exceeding 10.000 PLN. 45% of SEE declares that they have some financial reserves which could be used in a situation when the up-till-now income is cut off. For 50% of SEE, the average yearly dynamics of budget accrual in the last few years was approx. 115%. 10% of SEE gains more than 20% of their income thanks to formally registered economic activity or chargeable activity. A.1.3 Supporting umbrella structures During 2001-2003, 25% of all non-profit organisations were created. At that same time 34, 9% of SEE-s were registered. This indicates that the organisations being newly established rely increasingly on acquiring at least a part of resources on their activities on the basis of their own economic ventures. This is partly a consequence of the enforcement of the Act on Public Benefit Activity and Volunteerism. Thanks to this Act non-profit organisations were enabled to lead their chargeable projects not for profit which were different from traditional economic activity. In Poland there are no networks which would consist of SEE-s only. 10
  11. 11. There are many networks however, associating non-profits including SEE-s. The SEE-s sector did not unite enough nor became autonomous therefore there is no need to create larger SEE-s structures. A.2 Key organisational features A.2.1 Goals pursued by the WISEs The mission of SEE-s is to lead public benefit activities in the area of public tasks. A.2.2 Legal form Legal form of non-profit organisations is defined by Act on Public Benefit Organisations and Volunteerism dated on 24th of April 2003. Non – profit organisations are entities which do not belong to public finances sector - according to regulations on public finances. Non-profit organisations do not act in order to maximise profits. They are legal entities or those which do not have legal status and are established based on legal acts’ regulations including associations and foundations. A.2.3 Types of workers targeted The exemplary groups : long-term unemployed, those taking advantage from social welfare, the handicapped, the mentally ill, the addicted, the homeless, prisoners, youth leaving orphanages/group homes, youth entering labour market, individuals aged above 50 years old, individuals who desire to combine children’s care with professional career, immigrants and refugees. A.2.4 Mode of integration provided by the WISEs to the worker Social and professional reintegration: engagement of beneficiaries in being professionally active; creation of work places for people at risk of falling into difficulties on the labour market; providing members/workers with services adopted to their needs and economic potential; economic co-operation between members, common production/activity in the area of business/trade ensuring the provision of financial help to members in case of crises, treating each worker as a subject and ensuring their profound participation in the process of management and organisation of work conditions. A.2.5 Type of goods or services produced by the WISEs Economic activity of SEE-s is first of all about providing training services (up to 45% of SEE-s) and educational services. Services on social care, organisation of leisure activities, domestic services (e.g. cleaning), building and construction, gardening, environment are a bit less popular. Area of activities appointed by SEE-s as most important: - Sport, tourism, recreation, hobby (31, 9% of SEE-s) - Culture and art (18, 3% of SEE-s) 11
  12. 12. - Education and children’s upbringing (15, 5% of SEE-s) - Social services, social care (5, 2% of SEE-s) - Health care (5, 8% of SEE-s) - Local development in the social and material dimension (2, 3% of SEE-s) - Labour market, employment, professional activation (3, 5% of SEE-s) - Environment protection (3, 2% of SEE-s) - Professional issues, workers’ rights etc. (6, 4% of SEE-s) - Scientific research (3, 5% of SEE-s) - Support of institutions, non-profit organisations and civic initiatives (1, 1 % of SEE-s) - Other activity (3, 3 % of SEE-s) A.2.6 Types of resources The main source of SEE-s income is resources granted by public authorities (up to 40,6 %), secondly contracts with public bodies (26,8%) and resources received by donors (5,4%), income from sales of commodities and services (4,5%), financial donations as well as donations in kind from private individuals (2,2%) and others (20,5%) are members’ fees, legacies, capital investments, exemplary damages/smart money/vindictive damages/punitive damages and added damages (regulations of the penal code allows the ability to predicate by tribunals added damages as well as command a financial contribution for non-profit organisations. A.1. Type of WISE: Centres for Social Integration and Clubs for Social Integration A.1.1 Brief historical description Centres for Social Integration and Clubs for Social Integration function on the basis of the Act on Social Employment from June 13, 2003. The Act looked up to the experience of Barka Foundation during 1989 – 2002. The justification to the Act’s existence was a description of activities run by Barka School whose aim has been to integrate socially excluded individuals and groups. The initiator of the Act was the contemporary Deputy Prime Minister and Minister of Labour and Social Policy professor Jerzy Hausner. In the Act a conception of social exclusion occurred for the first time. The Act contributed to discontinuation of previous practice of social assistance being based on passive and relief programs only. The legislation came into existence during the time when the level of unemployment in Poland was over 20% and in some regions reached 30%. The opponents of the Act were groups connected with a traditional model of social help such as the Polish Agency to Solve Alcoholic Problems. The Agency did not wish that the Centres for Social Integration were financed from the resources allocated for alcoholism-prevention projects. In July 2007, amendment to the Act on Social employment was made. New regulation brought in some 12
  13. 13. important changes which facilitated the implementation of programs of social and vocational reintegration run by Centres and Clubs of Social Integration. The pack of social impact elements such as an incentive bonus was enlarged. Also, some changes in class discipline were made (e.g. limit of days on medical leave). The amendment extended the list of individuals, who qualified participate in activities of Centres of Social Integration adding disabled people as well. Also there were new regulations made which allowed the Clubs of Social Integration to organise local programs of public benefit activity. A.1.2 Statistical overniew There were 55 Centres of Social Integration in Poland by the end of 2007, among which 60% were created by non-governmental organizations, and 40% were run by local governments. In 2007 the number of the participants of Centres of Social Integration amounted in approximately 2500 people. Moreover, in 2006- 2007 there were over 300 Clubs of Social Integration created in Poland. The income of Centres of Social Integration formed as follows: 25 % of CSI had budget not more than 10.000 PLN 44 % of CSI had budget between 100.000 – 500.000 PLN 19 % of CSI had budget between 500.000- 1.000.000 PLN 12 % of CSI had budget over 1.000.000 PLN A.1.3 Supporting umbrella structures There were many different actions undertaken in favour of building common understanding of social and vocational integration of the excluded groups of people. In 2002 Barka Foundation established an Alliance of Organisations for Social Employment, whose aim was to lobby in favour of the Act on Social Employment and promote creation of Centres of Social Integration. 23 organizations joined the Alliance, which put the Act on Social Employment to vote in Parliament on June 13, 2008. Another initiative came from organizations and institutions which run the CSI. In 2006 the Alliance of Centres for Social Integration was established in the City of Torun. Among them there were 21 Centres whose role was to represent all CSI and lobby in favour of building system-based solutions of financial support for Centres of Social Integration. However the Alliance is not active and it is the first Centres of Social Integration created in Poland in 2004 which are most active in integrating associations and institutions which run the CSI. A.2 Key organisational features A.2.1 Goals pursued by the WISEs The mission: social and vocational reintegration of socially excluded groups and those endangered with 13
  14. 14. social exclusion. The support of socially excluded people is led by realising individual programs of social employment and running classes organized by CSI. Up-till-now experiences proof a high effectiveness of active forms of support which allow reaching an indicator of a new employment of 60%-70% achieved by those at a special risk of social exclusion. Individuals aged 45 – 50 are a dominant group of participants of CSI. There are several to several dozen workers employed in CSI. There are around 3-5 participants per one worker. Each year 2500 participants on average attend activities of CSI. It is said that between the years of 2008 and 2010 the number of CSI will increase to 100, and that CSI will be attended by 7500-1000 participants from groups socially excluded involved in this form of activation. A.2.2 Legal form CSI is a financially and essentially separate institution, created by a non-governmental organization or by a representative of a local government (village-mayor or leader of the council). The status of the Centre for Social Integration is given by a regional governor for a five-year-period and it is the governor who supervises and controls it. 60% of CSI are currently run by non-governmental organisations and religious groups. The remaining ones are managed by local authorities. A.2.3 Types of workers targeted The following groups qualify to participate in the program of Centres for Social Integration and Clubs for Social Integration: - Long-term unemployed (12 months of unemployment which occurred in two-year period); - The homeless who follow an individual CSI program for overcoming homelessness; - Alcohol and drug addicts who completed rehabilitation; - Ex-prisoners; - Refugees; - Disabled people; - Mentally ill individuals. A.2.4 Mode of integration provided by the WISEs to the worker Centres for Social Integration realise processes of social and vocational integration for the period of 12 months. (In exceptional cases this period can be prolonged to 18 months). In social reintegration the emphasis is placed on the ability to play social roles, manage earned resources and learn team-working. In vocational reintegration on the other hand, the focus is training, up-grading skills and building up new qualifications as well as requalification. Participant’s stay in CSI is legally treated as a time of employment and it counts for the retirement. It is in the form of so called, social employment. 14
  15. 15. A person attending the CSI program has a status of a participant. The choice of the activities and workshops is made on the basis of Individual Program of Social Employment. Besides the participation in activities and courses, a participant can receive an integration benefit which equals 100% of an unemployment benefit (120 EURO per month), and they can additionally receive a bonus of 20% of integration benefit for some extraordinary engagement. While taking part in CSI, a participant gathers work experience in companies and enterprises (hands-on-training). A participant, who has successfully gone through a probation period, can end up with being employed. Employer, who provides a job opportunity to a dysfunctional group representative, is entitled to receive a refund of insurance contribution for a 12 months’ period. The participants of the programs are represented in a management of CSI. A.2.5 Type of goods or services produced by the WISEs Centres for Social Integration can be compared to Italian cooperatives type A. It provides training services as far as a general and vocational education for excluded groups of people is concerned. It also sells products made by participants in vocational workshops and runs different types of services for support to the local community. The staffs of CSI consists of instructors, psychologists, pedagogues, social workers, who are very good qualified professionals. A.2.6 Types of resources The monthly cost of training and education of a single participant equals approximately 1000-3000 PLN; it also depends on the quality of the offer and the size of CSI, etc. The number of participants is between 25 and 200 people in largest Centres of Social Integration. Centres of Social Integration gain their funding from the following sources: - Marshall Office (funding can be received for the first 3 months of the activity and the adaptation of the workrooms); - Grants from resources of the Commune (the ratio of the amount agreed by Local Council to be spent per each participant and the total number of participants & employees); - European Social Fund; - Trade and service-oriented activity run by CSI are not legally considered to be a commercial activity (with the exception of alcohol, tobacco and fuel production as well as coloured metals) - Commercial activity, which should be separated from the activities run in favour of social and vocational reintegration - Labor Fund which covers reintegration benefits for the participants of CSI. 15
  16. 16. A.1 Type of WISE: Social cooperatives A.1.1 Brief historical description In Poland the cooperatives’ movement came into existence when Poland did not exist as a country and territory. The initiation of the cooperatives’ movement was perceived as a sign of regaining identity and defending sovereignty as well as a counteraction to the social injustice. The first cooperative was established in 1816 by a priest Stanislaw Staszic. The cooperative was called "Rescue from Misery Cooperative". In Poland, the cooperatives’ movement is being perceived negatively. This is a heritage from the communism period. The cooperatives’ movement was then incorporated in a system of centrally governed economy and it became the tool of the State. It was an opposition to rebuilding civic society and arising democracy after 1990. A new type of cooperatives, so called social cooperatives came into existence on the 20 of April, 2004, together with the Act on Employment Promotion and Labour Market Institutions. The inspiration was Italian social cooperatives and the activities run by some non-governmental organisations. In 1995 Barka Foundation representative brought a copy of the Italian Act on Social Cooperatives dated 1991 to Poland. The Act pointed out possible directions of development. In April 2006 Poland adopted own Act on Social Cooperatives which was patterned after the Italian Act. A.1.2 Statistical overview The research indicates that by the end of 2007 there were 156 social cooperatives operating in Poland. They had about 1000 members and the number of employed staffs was 699. The remaining persons worked as volunteers awaiting an employment opportunity. The majority (60%) were men. According to the Act on social cooperatives, 80% are people from groups socially excluded: unemployed people (12 months of unemployment which took place during a two-year period), people who completed the social and vocational reintegration in CSI and disable people. So in most cases the employed people come out of dysfunctional groups. The turnover in social cooperatives in 2007: - 44 % of social cooperatives did not gain any income, which means that they did not undertake any activity; - 42 % of the cooperatives report the turnover between 10.000 PLN to 100.000 PLN - 14 % of the cooperatives report the turnover more than 100.000 PLN. The majority of social cooperatives do not have savings (only 3, 5% of the cooperatives reported that they 16
  17. 17. had some savings). The earnings in social cooperatives are maintained on the level of the minimal wages which is around 970 PLN gross per month; the highest salary is 1500 PLN gross per month, and the lowest – 450 PLN gross per month. A.1.3 Supporting umbrella structures Social cooperatives in Poland are not incorporated in the sector of cooperatives’ movement. This is a reason why social cooperatives did not automatically enter into already existing structure of cooperatives’ movement in Poland and are subordinate to support structures of non-governmental organizations. 77 % of social cooperatives do not belong to any networks. 22 % of cooperatives belong to alliances of non- governmental organizations. Until now there was one attempt to establish an alliance of social cooperatives. In 2006 the Social Cooperatives’ Scrutiny Alliance came into being. The Alliance’s aim is to support social cooperatives and control their functioning in financial aspects every three years and make sure that the cooperatives follow the rules of the Act on Social Cooperatives. Only 22% of social cooperatives joined to the Alliance. Despite the fact, that another 60% of social cooperatives would be willing to join the Alliance, the tendency to integrate was meagre in the sector. This is a consequence of the fact that the cooperative movement is still very weak: in some regions of Poland social cooperatives were not established at all, in others they are struggling with many difficulties (i.e. management issues, concentration on the running activities). In the projects of EQUAL Community Initiative, many different forms of support for social cooperatives were tested. A model which brought positive results was local partnerships’ creation. A partnership consisted of local community representatives and representatives of social cooperatives. Those examples of partnership brought positive results such as social cooperatives’ creating local services and market of products to support the local community. During 2005-2006 Regional Funds to Support Social Cooperatives were established which provided training, advice and financial support to set up social cooperatives. During 2006 – 2008 Centres of Support to Social Cooperatives were established by those non- governmental organizations which provided training and advice and had a grant-fund to support to social cooperatives. Previous support structures were built more by non-governmental organizations and local partnerships than by social cooperatives themselves. Further development of social cooperatives in Poland may facilitate creation of a platform of cooperation of social cooperatives which would resemble Italian consortiums. A.2 Key organizational features A.2.1 Goals pursued by the WISEs 17
  18. 18. Mission: Social cooperatives run economical and social activities through individual work of members. As a result representatives of underprivileged groups rebuild their qualifications and abilities as well as relationships with society. An unemployed person becomes a worker as a result of self-employment. A.2.2 Legal form Social cooperatives are registered in the Registrar of Companies as social enterprises, but in accordance with the amendment of the Act on Public Benefit Activity and Volunteerism they are going to be transformed into non-governmental organizations. Social cooperatives can run social activities in the area of public tasks, which bring benefit to the public. They can also apply for grants for social reintegration projects likewise non-governmental organizations. One must bear in mind that clause of the Act which allows social cooperatives to run activities similar to the activities of non-governmental organizations are an additional element. These activities cannot replace the aspect of running economic activity. A.2.3 Types of workers targeted The social cooperatives can be established by: - The long-term unemployed (12 months of unemployment which occurred in the period of two years), - The homeless realizing individual program of overcoming homelessness, - Individuals who completed the reintegration program in CSI (the homeless, the addicted to alcohol and drugs, ex-prisoners and refugees), - The disabled people. There can be as well highly qualified individuals employed, but their number cannot exceed 20% of a general number of social cooperative employees. A.2.4 Mode of integration provided by the WISEs to the worker Social cooperatives were to be an intermediate form of employment for beneficiaries on the pathway from the social exclusion to the open labour market. In the process of reintegration of socially excluded groups the emphasis is placed on various kinds of co- ownership, among others the co-ownership of a social cooperative which all cooperative members should aim to achieve as stated in the Act on Social Cooperatives. This aspect often makes the cooperatives to be perceived as a place of a target employment. At the current stage of social cooperatives’ development, it has not been reported that members move to others forms of employment at the open labour market (besides few exceptions). Cooperative members perceive the cooperative as their property. Despite of many difficulties which the members face and often low salaries, they prefer to invest in and develop economic activity in their social cooperatives rather then enter an open job market. The majority of the members are employed through an employment contract. The Act on Social Cooperatives says that 18
  19. 19. members personally conduct the works in their cooperatives and are represented in the cooperatives’ authorities. Besides the vocational reintegration social cooperatives plays also role of social reintegration for the members and their families. A.2.5 Type of goods or services produced by the WISEs Social cooperatives deliver all kinds of services, among which the most popular are: catering, recycling, gardening, taking care of the Elderly and disabled people, construction, cleaning, training, printing, etc. A.2.6 Types of resources The financial support to establish a social cooperative includes an opportunity to receive a grant from the Employment Fund. The grant is up to 300 % of the average of the national wage per each unemployed person who is a founder-member of a social cooperative. Additionally the members of social cooperatives can be exempt from the fee for registration in the Registrar of Companies as well as for reporting their registration to the Judicial and Economic Monitor. The legislator allows supported employment for all social cooperative members. In practise, this provides a refund for social insurance contribution for the first 12 months employment period. Social cooperatives received also the support from EQUAL Community Initiative, where each social cooperative could gain on average 100.000 PLN. Other grant opportunity for social cooperatives was provided by the Centre of Support to Social Cooperatives where grants amounted around 15.00 0 PLN per social cooperative. A.1 Type of WISE: Centres for Occupational Activation A.1.1 Brief historical description Along with Supported Employment Enterprise and open labour market entities, Centres for Vocational Activation are a very significant element in the system of vocational rehabilitation for disabled people. They create a link between the process of social & vocational rehabilitation and employment. In the first Act on rehabilitation for disabled people from 1991, there were only Supported Employment Enterprises (Zaklady Pracy Chronionej) mentioned. In the Act on vocational and social rehabilitation and employment of disabled people from August 27th 1997, Centers for Vocational Activation (Zakłady Aktywizacji Zawodowej) were introduced. The first agreement with the organizer of Centers for Vocational Activation (the organizer were non-governmental organizations) was signed by the State Fund of Rehabilitation for the Disabled. First agreements were signed by the State Fund with 9 Centres for Vocational Activation from which one did not start to work. Other 8 Centres for Vocational Activation are one of the largest and the best prosperous 19
  20. 20. Centres in Poland. The first organization which opened the Centre for Vocational Activation was the “Polish Association to Support the Mentally Ill” in August 2000. Another Centre for Vocational Activation was created by „Support to the Blind Foundation” in Stanislawow. The first organization which opened the Centre for Vocational Activation was the “Polish society to support the mentally ill” in August 2000. Another Centre for Vocational Activation was created by „Support to the Blind Foundation” in Stanislawow. Since 2002 the agreements with organizers of the Centres for Vocational Activation have been signed on the level of voivodship (before they were signed on the central level). A.1.2 Statistical overview So far there have been 47 Centres for Vocational Activation established and most of them came into existence in the last 3-4 years. The Centres for Vocational Activation are mainly created by non- governmental organizations but also by the Communes. The Centres employ on average 30 staffs. The smallest Centre for Vocational Activation employs 9 staff members and the largest one employs 60 staff members. According to the data from the All-Polish Forum of the Handicapped, Centres for Vocational Activation employ 1.529 staff members which makes up for 731 full-time jobs. Activities of Centres for Vocational Activation are supported by the work of around 62 volunteers in all Centres for Vocational Activation. The incomes of Centres for Vocational Activation are as follows: - 11 Centres for Vocational Activation report turnover between 150.000 - 500.000 PLN; - 15 Centres for Vocational Activation report turnover between 500.000 – 1.000.000 PLN; - 9 Centres for Vocational Activation report turnover between 1.000.000 -2.000.000 PLN; - 5 Centres for Vocational Activation report turnover between 3.000.000 PLN. A few Centres for Vocational Activation did not provide information on what their turnover was. A.1.3 Supporting umbrella structures Centres for Vocational Activation can be established by non-governmental organizations whose mission is to help the disabled. They can also be established by authorities of districts/regions and local communities. Non-governmental organizations working in the field of supporting the disabled people create networks and forums such as the All-Polish Forum of the Handicapped. Networks and alliances of organizations, which establish Centres for Vocational Activation, are not being established yet. Although 10 years had passed since the Act on social and vocational rehabilitation and employment of the disabled people was introduced, the service of a number of Centres for Vocational Activation is still unsatisfactory and they do cater for the needs. Creating alliance of Centres for Vocational Activation would be desired to promote this form of WISE in different regions of the country, and as a platform for exchanging experiences and support. 20
  21. 21. A.2 Key organizational features A.2.1 Goals pursued by the WISEs The mission of Centres for Vocational Activation is vocational rehabilitation including job advisory, training and “supported employment” that aims at helping to find a job on the labour market and maintain it. The long-term objective is to support a disabled person to reach and maintain a suitable employment through taking advantage of vocational counselling and training. A.2.2 Legal form According to the legislation, local communities, magistrate regions’ authorities, foundations and/or other non-profit organizations (whose target is the vocational and social rehabilitation of the disabled) can establish a financially and organisationally separate entity and receive the status of the Centre of Vocational Activation. Receiving such status is possible if the following conditions are fulfilled: a. Adequate percent of disabled individuals in proportion to non-disabled employees; b. Another condition is connected with the infrastructure of Centre for Vocational Activation and certain services which should be provided for the disabled. For example: rooms have to be in line with regulations and health and safety rules and must take into account the needs of the disabled. Moreover, Centres for Vocational Activation must provide medical care, counselling and rehabilitation services. c. The third condition which guarantees the status of Centres for Vocational Activation is to allocate some income to Entrepreneurial Fund of Activation (Zakladowy Fundusz Aktywnosci), which is used to support different forms of activities for the disabled workers of Centres of Vocational Activation. d. The last condition is to receive a positive opinion from the regional governor, proper to a place, where a particular Centre for Vocational Activation is located. A.2.3 Types of workers targeted Centres for Vocational Activation run social and vocational rehabilitation programs and employ disabled individuals who come under an appreciable and moderate degree of disability. These are mostly individuals disabled both physically and mentally, but also the long-term unemployed within so called “public works” (the cost of employment of those persons is for 12 months cover by Job Centre). 1. Centres for Vocational Activation must employ persons who are rate to appreciable level of disability in adequate relation to non-disabled employees (this indicator depends on the kind of activity): 21
  22. 22. 2,5 disabled persons falls on 1 non-disabled (in a situation when the Centre runs productive activities) 3 to 1, if the Centre runs service activity 2,75 to 1, if the Centre runs productive and service activity On July 30, 2007 first amendments to the Act on vocational and social reintegration were introduced. The amendments referred as well to changes in the employment law for the disabled individuals. The main difference regarded the employment indicator. The most significant aspect concerns an opportunity for employing individuals with the moderate degree of disability and including them in the employment indicator. The status of Centre of Vocational Activation can be received by those entities whose disabled employees will make for at least 70% of all employees. (The disabled employees should be referred through Regional Job Centres). They must be diagnosed with an appreciable level of disability or a moderate level of disability (in particular those diagnosed with autism, mental handicaps or mental illness). This group includes individuals who were assessed by Supported Employment Workshops (Warsztaty Terapii Zajeciowej) as individuals who ought to undertake vocational reintegration process through the supported employment in Centres for Vocational Activation. However, the number of persons with a moderate level of disability cannot exceed 35%. A.2.4 Mode of integration provided by the WISEs to the worker Disabled individuals are employed in Centers of Vocational Activation based on an employment contract and the majority does not work fulltime (this requires the Act on rehabilitation and employment of disabled people and they receive an integration benefit connected to their disability. Centres for Vocational Activation are a specific employment institution which is exempt from taxes and fees. The resources gained from the exemption as well as the income from running economic activity are allocated to Entrepreneurial Fund of Activation. Resources from the fund are destined for tools and additional instrumentation of workplaces, which allows the disabled to function more independently in an employment work institution. This also allows purchasing equipment which helps a disabled person to run an independent social and private life. The funding is used to refurbish and renew the workshop rooms as well we to equip the individual and collective housing. It is also spend on the participation of the disabled individuals in leisure, cultural activities, etc. The work of Centres for Vocational Activation aims at educating and rehabilitating the disabled. It is expected in the Act fully prepares the disabled for employment in the labour market. However, this function of Centres for Vocational Activation was not fully successful. People with a moderate degree of disability do not willingly undertake employment in the open labour market. Therefore Centres of Vocational Activation often become a long-term employment form for the disabled individuals. 22
  23. 23. A.2.5 Type of goods or services produced by the WISEs Centres for Vocational Activation can run production and service-oriented activity, apart from products which are excisable, for example different kinds of alcohols, tobacco, fuels, and products made of precious metals. The research conducted by the Klon/Jawor Association indicates that most popular activities undertaken are: trade, production and service-oriented activities, training, tourism and transport, room leasing, catering, printing and typography, etc. Klon/Jawor Association classifies Centres for Vocational Activation according to the area of activity. The Centres describe themselves as being most active in the field of labour market for the disabled, employment, vocational activation and also in the area of health care, social services and social assistance. A.2.6 Type of resources The State Fund for Rehabilitation of the Handicapped (PFRON) provides the Centres of Vocational Activation with a grant for starting-up and running Centres of Vocational Activation. PFRON finances a significant part of the service-rehabilitation activity (the funding is distributed by the Marshal Office). In turn each Centre for Vocational Activation has to hammer out resources to run day-to-day activities. On average Centres for Vocational Activation spend approximately 1.500.000 PLN to start up. The organizer of the Centres for Vocational Activation can also count on reimbursement of salaries for the disable workers, however not more than 100% of the lowest wage in Poland. Due to the fact that working hours of individuals with a moderate degree of disability must be shorter than usual working hours (no longer than 5 h and 26 min, and no less than 3 h and 51 min), their salaries are lower accordingly. Their wage does not exceed the mentioned amount so that they can receive an integration benefit. Moreover, one must bear in mind that State Fund for Rehabilitation of the Handicapped (PFRON) is not obliged to cover all costs defined in the regulation, but only a proportional contribution connected to the rate of the disabled in the Centre. Other sources of funding besides PFRON: - Income from the economic activity - Public resources (from various ministries of central government, regional and local governments, etc.) - Refund for employment and rehabilitation of disabled people (State Fund for Rehabilitation of the Handicapped and Regional Job Offices); - European Social Fund; The cost of a single person working in the Centres for Social Activation is between 3.500 PLN and 5.000 PLN per month. 23
  24. 24. A. 3 Supported Employment Enterprises - legal requirements Cooperatives of the disabled have a long-standing tradition. Some of them were created during the interwar period. The structure and hierarchy of the requirements to set before those entities was close to current requirements of set before social cooperatives. The priority was to create employment for the disabled freely associated in the cooperative and economic activity was only a tool to serve this goal. Management of the entity was in the hands of its members and the support of the State was only a supplement source of financing of a cooperative run by the disabled. In late 80ties cooperatives enjoyed privileges in the field of supplies, tax reductions and a monopoly for producing a number of items such as brasserie and protective clothing. During transformation years a dominant part of the support mechanism was not practiced as it was not compliant with market economy principles. Cooperatives were ill-prepared to function in a new environment. They had to pay out rehabilitation and social benefits and were deprived of privileges given by the State, and therefore they encountered difficulties. It is only the Act on Vocational and Social Reintegration & Employment of Handicapped Individuals dated 27 August 1997 provided new opportunities for cooperatives of the disabled through the creation of a new entity – so called Supported Employment Enterprises. The cooperatives of the disabled can also transform into social cooperatives according to the Act on Social Cooperatives. Supported Employment Enterprises are run on the basis of the regulations of the article 28 in the Act no 1 on Vocational and Social Reintegration & Employment of Handicapped Individuals dated 27 August 1997. In order to receive the status of an employer who runs supported employment enterprise, the employer must: - runs business activity for the period of at least 12 months and employs no less than 25 staff members that count for a full time working hours - achieve employment indicators of disabled individuals for the period of at least 6 months. Act on Vocational and Social Reintegration & Employment of Handicapped Individuals obliges all employers to employ at least 6% of disabled individuals. The charges paid for not having fulfilled this requirement create the State Fund to Support the Disabled (PEFRON). The existing in Poland cooperatives of invalids which employ at least 40% of the disabled (including 10% of seriously injured), were given the status of Supported Employment Enterprise. This opened up a path for commercial and private entities to apply for the status. 24
  25. 25. In exchange, an employer gains a right to be exempt from paying the majority of taxes and social insurance contributions. With time the number of private Supported Employment Enterprises by far exceeded those which were established within cooperatives of invalids. Unfortunately private supported employment enterprises, which were to contribute to achieving progress in the area of employing the disabled, abused and omitted the binding laws and regulations. The tax exemptions and grants which they received for creating work places for the disabled did not result in increasing employment opportunities but they were a way of taking advantage of allowed entrepreneurial forms to run a dishonest competition. Entrepreneurs defended themselves arguing that the new EU regulations exacerbated the availability of public support for entrepreneurs thus forcing them to take up more of a market-oriented approach. Reception of the Supported Employment Enterprise status Employer gains the status of Supported Employment Enterprise if: 1. the indicator for employing the disabled equals: a. at least 40% including at least 10% of all employed are persons with a significant or moderate degree of disability, b. at least 30% of the blind, the mentally ill or persons with mental handicaps with a significant or moderate degree of disability, 2. locations and buildings used by the enterprise: a. meet the standards of health and safety regulations b. cater for the needs of the disabled persons with regards to well-adapted work places and sanitary rooms as well as an easy access to them. In addition: 3. An emergency and specialist medical care, counselling and rehabilitation services must be provided. It is an employer’s initiative to apply for a status of running supported employment enterprise. The decision whether such status will or will not be granted is made by a relevant regional governor (who covers an area where the enterprise premises are located). The scope of activities being implemented The scope of activities is unlimited. Accepted are all activities permitted by law. The limitations which are binding for Centres of Vocational Activation are not obligatory for supported employment enterprises. For example, Centres of Vocational Activation are not allowed to run activities connected with production of fuels, tobacco, alcohols and spirits above 1,5% nor products made of 25
  26. 26. precious metals. The Centres cannot trade such products either. Supported Employment Enterprise should be perceived as a Social Enterprise despite of the fact that the entity which runs Supported Employment Enterprise earns profit which cannot be divided between staff members. Yet Supported Employment Enterprise meets the criteria described in the definition of Social Enterprise in the chapter regarding the necessity that the activities focused on social integration of a local community. Moreover, the entity which runs supported employment enterprise is obliged to open up a fund for the disabled reintegration. The resources from the fund are to be allocated for covering the costs of vocational and social reintegration, insurance and treatment including individual reintegration programs of the disabled. (Such programs are designed by special committees established by employers). There is a regulation which in details describes the way of resource spending. B. Analysis of policies B.1 Policy overview B.1.1 Specific public scheme Summary In this chapter legal acts which regulate activities of non-governmental organizations and social enterprises are described. Presented are three types of activities which a non-governmental organization can implement, these are : non-chargeable statutory activity, chargeable statutory activity and economic activity. Despite of the realization of social objectives, non-governmental organizations are treated just as other entrepreneurs. Presented here are other legal acts which enable creation of institutions for social and economic integration of unprivileged groups as well as the tax system applied to those groups. Institutions in question are centers for vocational activation, social integration centers, social cooperatives, foundations and associations undertaking entrepreneurial activities as well as active forms of support to the unemployed such as public works and social benefit works. The currently existing legal system in Poland seems to present a holistic and integrated offer which enables vocational reintegration and employment of the socially excluded and those at risk of exclusion as well as handicapped individuals. The system consists of: A. Act on Vocational and Social Reintegration & Employment of Handicapped Individuals dated 27 of 26
  27. 27. August 1997, B. Act on Social Employment dated 13 of June 2003; C. Act on Social Cooperatives dated 27 April 2006; D. Act on Foundations; E. Act on Associations; F. Act on Public Benefit Activity and Volunteerism dated 24 April 2003, G. Act on Employment Promotion and Labour Market Institutions dated 20 April 2004. Ad. A) Act on Vocational and Social Reintegration & Employment of Handicapped Individuals consists of a pack of elements which are helpful in connecting them with labour market. The first opportunity is created by Centres for Vocational Activation which provides employment for individuals with a significant as well as moderate degree of disability. The salaries of the disabled individuals as well as costs of their rehabilitation and treatment are being refunded. Another opportunity is support provision to the disabled in order for them to establish own economic and/or agriculture business. In this case the funding to establish own business by a disabled individual come from Regional Job Offices which provide a grant up to 42.000 PLN based on a submitted business plan. Regional Job Office can also provide a grant to establish a social cooperative, whose member is a disabled individual. Within this scheme a grant can be provided to a disabled person to cover the interest of a bank loan. In turn an employer of disabled individuals received a refund of all costs connected with adaptation and equipment of a disabled person’s work room (this refers to employers who have employed a disabled person for the period of 36 months). Employers can also count on a refund of a disabled employee’s salary and their social insurance contribution. These provisions are only taken advantage of at a small scale due to the excessive bureaucracy requirements which discourage potential beneficiaries. Act on Vocational and Social Reintegration & Employment of Handicapped Individuals describes a venture called Supported Employment Workshops which prepare disabled individuals vocationally and socially to undertake employment in Centres for Vocational Activation. Supported Employment Workshops should not be perceived as Social Enterprises due to their inability to run trade, production and service-oriented activities. Legislation on Supported Employment Workshops ought to be changed. Supported Employment Workshops should be given larger legal rights to sell their products. If this was the case, Workshops could run their business activity, start a production process and search for the market to sell the products. Such approach would speed up the reintegration of the disabled who, having realised that the job bring benefits, engage even more responsibly in what they do. 27
  28. 28. Ad. B) Act on Social Employment Centres for Social Integration (CSI) function on the basis of the Act on Social Employment from June 13, 2003 (Dz.U.03.122.1143). According to the Act, the long-term unemployed, the homeless, ex-prisoners, alcohol and drugs addicts, disabled persons and refugees can participate in a yearly program of social and vocational reintegration within so called supported employment. After a year of participation in the activities in the Centre (in justified cases the participation period is shorter than a year) Regional Job Office can refer a participant to work: a) at employers’ b) in CSI (within their economic activity); c) participants can start joined economic venture in form of social cooperative on basic of rules defined Act on Social Cooperatives; d) a participant can start their own business activity. Employer who decides to employ a CSI participant can sign an agreement with the regional governor whereby, in lie of bund to employ this person for at least 18 months, the employer receives a right to get a refund of a part of the person's salary through the 12 months of employment period. So far this form of employment has not succeeded. The problem is that employers do not want to take such kind of bunds for people, whose health and problems with addictions can stand in a way to fulfil the bund towards the employer. In connection to this, an employer protecting the business of their company - applies for funding not for a certain CSI participant, but for a certain position created for people like this. (Such opportunity came into existence along with the Act on Supported Employment and Labour Market Institutions). This kind of solution helps an employer to employ CSI participant, and when they stops to meet the obligations or simply stop showing up for work, the employer can hire another worker, also a CSI participant. Resources from the Employment Fund provide a CSI participant with an 80% cover of the costs of legal aid, consultancy and counselling in the field of economic activity. When it comes to former CSI participants, who were later employed in social cooperatives on the basis of a cooperative employment contract, part of the fee connected to insurance, can be funded from the Employment Fund resources for a 12-months period. This is done according to an agreement between the regional governor (who covers an area where the cooperative is located) and this particular cooperative. The Employment Fund gives grants to the unemployed in amount up to 300% of an average wage in Poland in recent year, for establishing a social cooperative. Refund of social security contribution likewise 28
  29. 29. the grant for establishing social cooperative is given de minimis support according to the ordinance of the Committee (EC) no 1998/2006 dated 15 December 2006 on the implementation of the articles 87 and 88 of the Treaty for de minimis support (Dz.Urz. UE L 379 z 28.12.2006, str. 5). CSI can run production, commercial and service-oriented activities, excluding activities based on production and trade of fuels, tobacco, alcohols and spirits and other products that contain more than 0,5% of alcohol as well as precious metals products. But yet, economic activity of CSI according to the legislation is not an economic activity in accordance with the regulations on business activity. In connection with this, CSI are exempt from paying income-tax form private persons. Due to the fact that economic activity rules for CSI must be revised in the Act on Social Employment and that there is a statutory obligation to separate CSI financially and organizationally from the subject, which created it– we must accept that the activity run by the CSI can be treated as a Work Integration Social Enterprise (WISE). During so called vocational and general education workshops CSI participants learn concrete professions through production and running services which can be sold on a free market. The Social Enterprise of CSI is separated from the entity which created CSI. That is why any possible income from the CSI can be allocated exclusively for the CSI activity. CSI can also aim at reaching an economic profit, but the priority of the enterprise is the social benefit. It is obvious that within the activities of a Social Enterprise of CSI, a profit can be elaborated. But the essential target of the enterprise is the social reintegration of the CSI participants who work in its social enterprise. The Act on Social Employment talks about Clubs for Social Integration. Legal requirements for the Clubs’ existence Entities which establish Clubs for Social Integration Clubs for Social Integration can be created by local governments or non-governmental organizations which run social and vocational reintegration for people who are socially excluded and due to their life situations are not able to appease the basic needs. They are in a situation which causes them poverty and reduces their participation in a vocational, social and family life. The Act does not set any particular rules for creating the clubs by non-governmental organizations. Therefore the best form of action is treat the Clubs as a non-governmental organisation. 29
  30. 30. On the basis of regulations (article 9, chapter 1 of the Act dated 8 March 1990) Clubs for Social Integration can be run directly by Regional municipalities (Dz.U.01.142.1591). The article says „in order to implement its tasks, local municipality can create organisational entities as well as sign agreements with other entities including non-governmental organisations”. The regulation indicates that Clubs for Social Integration run by local municipalities can act as its organisational entity. Local municipality, in the process establishing a Club for Social Integration, must equip the organisational entity in the Club for Social Integration’s regulations. Such Clubs can also be run as a specialized entity of Social Support Centre. Such solution is accepted according to the regulations (article 15 , point 6 of the Act on Social Assistance dated 12 March 2004 (Dz.U.04.64.593). The Act is in favour of “developing new forms of social assistance within the identified needs”. Social Support Centre can run Clubs for Social Integration as one of its units in the Department of the Community Aid. In particular, the clubs for social integration conduct the following actions and activities: 1) help in finding a job for a defined period of time or to complete a defined task on part time or full time basis; providing services based on the written agreement under civil law; preparing for undertaking the employment 2) public benefit work; 3) public works; 4) counselling; 5) mutual help in the field of employment, housing and social matters. Establishment of the clubs for social integration and their activities can be financed in particular by: 1) the European Union; 2) grants from the local municipality. The Clubs do not run economic activity. The activity run by in the Club is based on public benefit works and public works realized on the local market and whose costs are covered by Employment Fund. Therefore economic activities of the Club for Social Integration are limited. Ad. C) Act on Social Cooperatives Social cooperative runs the activity in favour of social and vocational reintegration of the long-term unemployed, the homeless, the addicted, disabled people, ex-prisoners, refugees, etc., through an individual work of its members. People establishing social cooperatives can receive a grant of 300 % of average of national wage which is 30
  31. 31. about 8.500 PLN per person from the Employment Fund. The statutory scope of a social cooperative which partially embraces the social and vocational reintegration of its members, is not considered an economic activity in accordance with the Act on Economic Freedom dated 2 July 2004 (Dz. U. Nr 173, poz. 1807, z późn. zm.6), and it can be run as a statutory chargeable activity. With regards to a statutory chargeable activity, one must follow the regulations described in the Act on Public Benefit Organisations and Volunteerism dated 24 April 2003. Employment in a social cooperative takes place on the basis of the cooperative employment contract. The contract does not include the right of division in case of account surplus. The account surplus is divided as a result of the vote of the general meeting and it is allocated for: 1) increase of the reserve fund – no less than 40%; 2) for social reintegration purposes – no less than 40%; 3) investment fund. Social cooperative can join only with other social cooperative and divide only to social cooperatives, with 2/3 voted members. In case of liquidation of a cooperative, its property that comes out from public sources has to be returned to the Employment Fund or the State Fund for Rehabilitation of the Disabled (it depends on which institution supported the cooperative). Cooperatives of invalids can transform to become a social cooperative as a result of a vote (by a majority of votes). A social cooperative can participate in the bid for the implementation of public tasks organized by public entities. It is the cooperatives which take an initiative to submit applications. The grant can be used for social and economical reintegration of its members and for providing services for local society. In connection to legal regulations, social cooperatives can benefit from dismissal from: stamp duty, tax from civil and legal activities, income tax, and council tax. Those simplifications emphasize the social targets of social cooperatives and their character as a Work Integration Social Enterprise. Ad D) Act on Foundations dated on the 6th of April 1984. According to the Act on Foundations (Art.1), a foundation is established to implement objectives that are convergent with the basic interests of the Republic of Poland and which are socially or economically beneficial; in particular: health protection, development of economy and science, education and upbringing, culture and art, care and social support, environment protection and monument care. Foundation can run economic activities as long as it serves 31
  32. 32. the realisation of its objectives. A decision on economic activities implementation must be included in the memorandum of association of the Foundation. Ad E) Act on Associations dated on 7 April 1989. In agreement with the Act on Association (Art. 34.), an association can run economic activity however it must follow general principles defined in separate regulations. Income from the economic activity of an association serves the realisation of the statutory objectives and cannot be divided between its members. Ad F) Act on Public Benefit Activity and Volunteerism dated on 24 April 2003. According to Act on Public Benefit Activity and Volunteerism, a non-profit organisation can run 3 kinds of activities: a) statutory activity free of charge, b) statutory chargeable activity and c) economic activity. The two first kind of activities represent statutory goals listed in the memorandum of association along with the ways of their implementation. Both chargeable and unchangeable activities are ventures not for profit. Public benefit activities free of charge are those for which an organisation does not take any salary. An organisation acquires financial grants for its activity from a variety of sources (applies for donation, seeks for donors and sponsors, organises public collections), takes advantage of volunteers’ work which enabled them to run services free of charge for clients (eg. organises training for which the participants do not have to pay, serves free meals etc.). A chargeable public benefit activity is a statuary activity of a non-profit organisation which an organisation earns salary for. The salary earned by an organisation for produced services or goods in a specific area cannot be of a higher value that the one which results from direct costs of the activity. In organisations which run chargeable activities the employees’ salaries are limited. The Act foresees two particular kinds of chargeable activity for public benefit: - Sale of commodities or services produced or run by individuals direct involved in the public benefit activity especially in the scope of rehabilitation and adapting the handicapped to enter employment . - Sale of objects which were received in a form of donation for the purposes of public benefit activity. The term economic activity is defined by the Act on Economic Freedom dated on the 2nd of July 2004. According to article 2, an economic activity is a chargeable, reconstructive/restorative, building- construction, service-oriented activity as well as seeking, recognising and exploiting natural resources and also a professional activity performed in a continuous and organised way. A chargeable public benefit activity of non-profit organisations is an economic activity if: 1. The salary acquired within a particular activity or business, is higher than the one which is results from the calculations of direct costs of this activity/business. 32
  33. 33. 2. The salary of a natural person by virtue of employment to implement statutory activity free of charge as well as chargeable activity exceeds by 1,5 the average monthly salary in the enterprise sector announced by the President of the Central Statistical Office for the previous year. One is not allowed to run a chargeable public benefit activity and economic activity within the same subject of activity. Non-profit organisations can run two kinds of social enterprises: 1. Those, which support social objectives and the needy individuals allocating the elaborated resources to reach this. 2. Those which employ mainly individuals with difficulties to find a job: the handicapped, the homeless, the long-term unemployed, the addicted and those who use social care. WISE is implemented when an organisation runs a chargeable public benefit activity and/or an economic activity under the condition that they employ workers from disadvantaged groups and run reintegration programs which involve these workers (the second kind). Legal act do dot regulate these matters. Whether an organisation will or will not run a social enterprise and what kind of groups will be involved in reintegration activities, depends on records included in the statute of an organisation. Ad) G. The Act on the employment and promotion of institutions of the labour market will be described in the next part. Tax exemption A. Income tax Foundations and associations are not exempt from taxation duty to the State. Non-profit organizations are obliged to pay income tax just as other entities. This is due to the fact The Tax Act does not allow subjective tax exemption of the non-profit organizations. Nonetheless, the majority of non-profit organizations don’t pay income tax. This may be associated with the fact The Tax Act covers a broad spectrum of objective tax exemptions. The revenues spent on social cause purposes, listed in the Tax Act are exempt from taxation. This leads to tax exemption of the majority of revenues acquired by non- profit organizations. It must be stressed that only revenues spent on strictly defined purposes may benefit from tax exemption. Income tax exemption may only benefit organizations carrying out statutory activities that fall within the frames set in The Tax Act. Entities that have been granted public benefit organization status are entitled to a broader range of tax exemption. Tax exemption in this case includes revenues spent on all statute-defined objectives falling within a sphere of public benefit and not only set out by The Tax Act. This applies to statute activities with exclusion of business activities. 33
  34. 34. Additionally, according to the 17 article of the Act on legal person’s income tax, tax exemption may benefit partnerships that are solely owned by registered associations. However only this part of partnership’s revenue is covered by tax exemption that was given to the owner – an association and was spent on the objectives defined in the same article. Legislator decided on tax allowances for financial donations supporting non-profit organizations. These allowances apply to those of the tax payers who are subject to corporate and personal income tax settlement, but on slightly different rules. Every year the maximum amount is subject to tax allowance changes. B. Tax on goods and services (VAT) Non-profit organizations are not automatically subject to VAT exemption. The Act of 11th March 2004, on goods and services tax, treats social cause activities of non-profit organizations as business activities (article 15). VAT exemption is defined in the article 43rd of the above mentioned Act. From the associations and foundations perspective, significant is the provision reading „services provided by membership organizations, not classified elsewhere (statutory organizations exclusively) (marked with a symbol PKWiU- 91)1” are subject to tax exemptions. The above mentioned exemption is not dependent on the range of revenues associated with those services. If the organization’s activities don’t fall within the remit set in the VAT exemption services catalogue, organization can only exercise tax exemption if the total income of the activities run didn’t exceed the equivalent of 10,000 EUR in the previous or present year. Goods donated (for example by corporations) for the benefit of non-profits are liable to tax (article 7). The acquisition/purchase cost serves as a tax base. If this however does not apply, it is the production cost that serves as a tax base.2 The Act allows numerous objective tax allowances. Financial donations for non- profits are subject to VAT taxation. B.1.2 Other public support not specially targeted at WISEs Summary In the chapter described are support forms available to all entrepreneurs, which can also be used by WISE. These support forms are solutions within the policy of employment: interventionist works, reimbursment of the costs of equipment in a work place, one-off reimbursment of social insurance costs, 1 There are different interpretations of this legal provision. Unfortunately Revenue Offices, usually apply narrow interpretation, stating that the above mentioned provision refers only to services provided by an organization for the benefit of its own members, but within the limit of the membership fees, namely without the remuneration for the particular service. 2 When items donated lost its economic and commercial utility according to entrepreneur’s judgment, it is better for a non-profit organization to purchase items for a symbolic amount of money. Then the purchase price will serves as a tax base. 34
  35. 35. social benefit works and public works. These forms are atractive for stable entrepreneurs who are able to quarantee employment for the unemployed persons for at least two years. Due to a weak condition and very uncertain prospects for the future, WISE use only those forms which do not require two-year employment period such as social benefit works and public works. Aid to entrepreneus, including WISE, is controled by regulations on de minimis support. Act dated 20th April 2004 on the employment and institutions of the labour market promotion establishes following instruments of the labour market that may be beneficial for entrepreneurs, including WISE: I. INTRVENTIONIST WORKS Objective: employment support for the unemployed “in a specific situation within the job market”. Who can be employed within the frames of interventionist works? - unemployed up to the age of 25, - long-term unemployed (registered in a State Labour Office for no shorter than 12 months within the last 2 years, excluding the period of on the job and vocational training), - unemployed above 50 years old, - unemployed without job qualifications (without any qualifications supported by a diploma, certificate entitling to the job performance), - unemployed single parents raising at least 1 child of the age of up to 7, - handicapped unemployed. Period of employment: depending on the above mentioned categories, interventionist works may last from 6 to 48 months (in case of refund for every second month). Level of financial support: refund of a part of remuneration and social insurance contributions based on refunded remuneration (maximum amount of refund constitutes of the amount of unemployment benefit increased by social insurance contributions); in case of people who after interventionist works qualify for the pre-retirement benefits, the level of the refund may amount to up to 80% of the minimal remuneration. Employer’s costs: employer spends monthly an amount of at least the minimal remuneration along with margin, refund of some of the costs follows. Comments: after the refund period, employer is obliged to further employment of the unemployed over the period depending on the character of public assistance (in case of small and medium enterprises – up to 24 months). II. REFUND OF THE COSTS OF PREPARATION AND FURTHER IMPROVEMENT OF A WORKPLACE 35
  36. 36. Objective: support of economic entities in the employment of the unemployed Who can be employed: every unemployed. Period of employment: - 2 years - for micro, small and medium enterprises - 3 years – for other economic entities Level of financial support: refund of up to 5 times an average remuneration for a creation and further improvement of a newly created workplace Employer’s costs: employer incurs full costs of the employment Comments: - in order for an entrepreneur to be entitled to a refund, the business activities must run for at least 6 months - unemployed must be employed full time III. SOCIAL INSURANCE CONTRIBUTIONS AS THE BASIS OF SINGLE REFUND COSTS Objective: support of unemployed employment. Who can be employed: the unemployed Conditions for the refund obtainment: recommended unemployed worked full time for no less than 12 months and after that time is still employed. Level of financial help: up to 300% of the minimal remuneration Employer’s costs: employer incurs full costs of employment IV. WORKS FOR SOCIAL BENEFIT Objective: stimulation of the unemployed not entitled to benefits, receiving help from the social aid. Time and place of the works: works for social benefit must be undertaken in a place of residence or stay of the unemployed and may not exceed the number of 10 hours per week. Level of financial help: The commune/municipality receives a refund from Work Fund, accounting for up to 60% of the minimal amount of the unemployed service entitlement. Employer’s costs: for every hour of performing social benefit works, unemployed is entitled to a remuneration not smaller than 6, 20 PLN per hour; 2, 48 deducted from that amount is not refundable. 36
  37. 37. Comments: - social benefit works may be organized by a commune in organizational units of social aid, statutory organizations and institutions of charitable character or those working for the local community, - person performing social benefit works is covered by heath and accident insurance. V. PUBLIC WORKS Objectives: support of the unemployed for the time of no longer than 12 months aimed at labour and social reintegration. In the light of the social employment law, the works are organized by communes, non-profit organizations that on the basis of their statute deal with: the protection of the environment, culture, education, sport and tourism, health care, unemployment, social aid, and also water companies and their associations. The works must be funded or co-funded through state budget, local government units, non- government organizations, special purpose funds, water partnerships and their associations. Who can be employed? - The long-term unemployed persons (registered in a State Labour Office for no less than 12 months within the last 2 years, excluding the time of on the job and vocational training), - The unemployed above 50 years old, - Unemployed single parents raising at least one child of the age no older than 7. Time of employment: - up to 6 months, - up to 12 months (in case of the refund for every second month) Level of financial help: partial refund of spending on remuneration, awards, social insurance contributions over the period of up to 6 months, up the level of 50% of an average remuneration and social insurance contributions based on that remuneration. Employer’s costs: employer incurs monthly costs of at least minimal remuneration along with margin; partial refund of the costs follows. Comments: it is possible for the mayor to apply for the money from the budget of the Work Fund, when an organizer of the public works claims for it. The money is spent on remunerations and payment of the social insurance contributions. Public assistance Public assistance rules regulate support that can be received by companies. Public assistance may be defined as public money spending or diminishing public giving in order to support companies or production 37
  38. 38. of particular goods, for the economic benefit of the receiver. According to universally agreed rule, public assistance for the firms is unacceptable due to the fact it breaks free and equal competition. Polish law, as well as other countries’ systems, allows exceptions from this rule that are of quality, subjective or objective character. One of the exceptions is de minimis support. European Commission systemizes the use of the de minimis rule. It established that support for a firm, which worth is below 200 000 EUR over 3 consecutive tax years and fulfils certain criteria isn’t considered state help in the light of the article 87, 1 Treaty. It is considered that the above mentioned help doesn’t influence economic exchange and free competition. Therefore there is no obligation of reporting upon receiving such help B.1.3 Public procurement and WISE Summary Public procurement in Poland does not include any preferences for WISE. Public administration units can commission certain public tasks to non-governmental organisations (including WISE) according to the Act on Public Benefit Organisations and Volunteerism. The commissioning takes place in the form of support or subcontracting. In both cases applications are considered in the bidding process. The Act dated on 29th January 2004. Public procurement law does not predict preferential treatment of the entities considered to represent social enterprises sector. The may take part in biddings as well as all of the other entities. Currently works on up-dating the Act on social co-operatives from 2006 are undertaken. Amongst others, introducing a change in The Public Procurement law is proposed. The change in the above mentioned law focuses on adding the following paragraph to the 91 article: „3b. Ordering body, no matter the conditions set out in the paragraph 2, may decide on particular criteria of the offer assessment with relation to the employment of at least 50% of people defined by the social employment law by the delivering organization. Particular criteria must be presented in the public procurement offer or in the procurement documentation”. This change would enable public sector entities to employ preferential treatment towards social enterprises, namely social co-operatives, ZAZ-y and also non-profit organizations. It is not known whether the Office for public procurement accepts the proposed amendment. If it does, an information and promotional campaign aimed at local governments and state’s bodies will be necessary in order to encourage them to exercise this opportunity. It has to be stressed that the Act on Public Benefit Organisations and Volunteerism establishes that public administration bodies: 38
  39. 39. 1. support public assignments delivery through non-profit organizations running statutory work in particular field; 2. award public assignments delivery to non-profits. Delivery and awarding follow running and open offer competition, unless other laws set out different procedures. In an open offer competition non-profit organizations, social co-operatives and public administration dependent and controlled organizational units bid. Awards nomination may take place according to different procedures, if certain assignments may be delivered more effectively in a different way, defined by separate laws, particularly through a purchase of services on the basis of the public procurement rules, with comparison of cost calculation methods and taxation comparability. Delivery support and assignments awarding may take place according to the rules and procedures set out in the Act from 28th July 2005 on public-private partnership.(Dz. U. Nr 169, poz. 1420). B.1.4 Private Sector support (non-profit or profit) Summary Private sector supports WISE mainly through donations in kind. More serious support comes from other national and international non-governmental organistions. 6,7% of social enterprises (PES) benefit from other national non-profit organizations (foundations in particular). 3,7% receive support from foreign non-profit organizations. Apart from that WISEs also receive donations, mainly in a form of items. Giving donations for social benefit causes is supported by the state through tax system, namely allowance in income tax. Private entrepreneurs may cooperate with WISE through ordering a delivery of certain parts of assignment. Currently this form is not used efficiently due to the fact that the WISE sector is not yet developed and private entrepreneurs aren’t aware of these possibilities. B.1.5 Ongoing political debates and trends Summary In this chapter described are current on-going public debates with regards to WISE, among others a debate on the European Union Services Directive and its impact on national law. The discussion on the implementation on the Services Directive in Poland is first of all about possible negative outcomes which this process can bring for WISE activities. There are concerns that the differentiation to chargeable statutory activity and economic activity run by non-governmental organisations will be abolished as this would be very unbeneficial to the organisations. 39
  40. 40. Other debates concern the relevance of introducing new legal regulations in the field of creation of social enterprises in Poland. Some debaters believe that a new entity of social economy whose name is “social enterprise” must be legally separated. Then it could be can be established by NGOs and commercial companies (as separated organisational and financial entities).Negative experiences in the area of Supported Employment Enterprises being created by commercial companies, cause a lot of oposition to new proposals for social enterprises to be established by commercial companies. Another imporatant questions is whether commercial companies can receive „public benefit certificate” as NGOs do, and whether commercial companies are responsible for social development or their obligation is focusing on generating profits only. I. Debates 1. Debate on service directive Currently there is a heated debate in Poland concerning the results of the Service Directive implementation (Directive 2006/123/WE European Parliament and Council from 12th December 2006 on services within the domestic market) with reference to the “third sector”. The objective of the service directive is to bring down the barriers that service deliverers encounter within the inner market. However, some groups believe that its provisions may significantly change the law context for the non-profit organizations in Poland. Directive refers only to those public benefit services that are provided in the economic interest and do not apply to public benefit social services. However, till present it hasn’t been decided, what public benefit services are, including social services. It means, that it hasn’t been decided what in practice will be excluded from the spectrum of services Directive. European Court of Justice agreed that every activity based on goods and services delivery within a particular market constitutes an economic activity, no matter the legal status of the entity and sources of its financing. The Court also decided services delivered in exchange for financial rewards must be regarded as economic activity in the light of The Rome Treaty. Decisions of the European Court of Justice may have fundamental meaning for the future shape of the Act on public benefit activities and volunteerism, in the light of which non-profit organizations may run free of charge, chargeable and economic activities. It is worth noting the intention of the Legislator was to develop chargeable statutory activities that would at the same time be regarded as non-commercial. Implementation of the Directive may lead to categorizing non-chargeable statutory activities as economic activities that would undermine the differentiation between public benefit activities and volunteerism introduced by the Act. It is not the only possible scenario though. Everything depends on the way the Directive is implemented to the national law. European Union gives member countries certain freedom with regards to 40