Types of Сontracts for IT Companies

The modern IT industry places special demands on the formalization of labor relations. Unlike traditional areas, where standard employment prevails, IT companies widely use various forms of contracts depending on the tasks, level of flexibility, and legal requirements. Employers strive to optimize the tax burden, minimize risks, and attract highly qualified specialists by offering them comfortable conditions for cooperation.

In Belarus, IT companies can employ specialists under an employment contract, enter into civil law agreements with them, or attract freelance workers through outsourcing and freelancing mechanisms. Each format of cooperation has pros and cons, affecting taxation, social guarantees, and the degree of control on the employer’s part.

In this article, we will consider the key types of contracts used by Belarusian IT companies, their features, legal aspects, and recommendations for choosing the most suitable option for business.

The Role of Contracts in Regulating Labor Relations in IT

The nature of work and labor relations in information technology (IT) differs from traditional industries. Companies strive for flexibility in personnel management, and specialists are often interested in a flexible schedule, remote work, and cooperation with foreign customers. In this context, the choice of the employment contract plays a key role for both the employer and the employee, determining the protection of rights, taxation, social guarantees, and opportunities for professional growth.

A contract is a legal basis for the relationship between an employer and an employee. It regulates the obligations of the parties, the procedure for remuneration, and working conditions and determines the mechanisms for terminating the agreement. In the IT sector, companies can employ employees using different schemes: through employment contracts, civil law agreements, or international contracts. Each of these options has its pros and cons, which depend on the business’s specific tasks and specialists’ personal preferences.

Why is choosing the form of cooperation important for the employer and the employee?

For the employer:

1. Flexibility in personnel management – different contracts allow you to adapt your personnel policy to current business tasks (for example, short-term projects or long-term cooperation ).

2. Optimization of taxes and costs: Companies choose the most profitable schemes, minimizing the tax burden and expenses on social payments.

3. Reducing legal risks – proper relationship registration helps avoid disputes with employees and regulatory authorities.

4. Attracting foreign specialists – IT companies can enter into contracts with developers from other countries without their official employment in Belarus.

For the employee:

1. Level of social protection – an employment contract provides guarantees ( paid leave , sick leave , pension contributions ). In contrast, cooperation under a civil contract or through an individual entrepreneur provides more flexibility but requires independent payment of taxes.

2. Financial conditions – some forms of cooperation allow you to receive higher income due to tax optimization.

3. Flexibility and remote work—An employment contract implies a strict schedule and company requirements, while cooperation under a civil or international contract provides more freedom.

4. Prospects for working with foreign companies – the choice of cooperation affects the possibility of working with foreign customers and receiving payment in foreign currency.

Thus, a correctly chosen contract format helps the company build effective personnel processes, and employees choose the most convenient working conditions. In the following sections, we will analyze the key types of contracts and their features, advantages, and disadvantages.

Primary forms of labor relations in IT companies in Belarus

IT companies in Belarus use different forms of employee registration depending on the business objectives, the level of tax burden, and the degree of involvement of specialists in the work. The main options include traditional employment under a contract, civil law contracts, work through the status of an individual entrepreneur (IE) (this does not apply to labor relations but to civil law,) and international agreements with foreign customers.

Each cooperation format has its characteristics related to taxation, social guarantees, and the degree of freedom for the employee. Let’s consider the key forms of labor relations in IT companies.

Employment contract (contract)

This is a classic form of labor relations in which an employee is registered as a company employee. The employer is responsible for compliance with labor laws, including paying taxes and contributions to social funds.

Main features :

• Fixed salary and additional payments are provided for by the company’s labor code and internal rules.
• Mandatory social guarantees : paid leave , sick leave , maternity benefits .
• Strict regulation of working hours and duties.
• The possibility of unilateral termination of the contract only on the grounds established by labor regulations.
• The employer pays 13% income tax, insurance contributions to Belgosstrakh (approximately 1%), and contributions to the Social Security Fund (35%, with only 1% of the 35% deducted from the employee’s salary).

An employment contract can be concluded indefinitely or for a specific period ( contract form ). This option is often used in the IT sector for long-term cooperation with key specialists.

Civil law contract (CLC)

The civil contract is regulated not by labor law but by civil law. The employer acts as the customer, and the specialist acts as the contractor who performs a specific job or provides services.

Main features :

• There is no fixed salary; work is paid based on the work performed at the rates established by the contract.
• There are no social guarantees, such as vacation and sick leave.
• There is no mandatory work schedule, but there are requirements for the timing of tasks.
• The employer pays only income tax (13%) and insurance contributions (1%), which reduces the burden compared to an employment contract.

A civil contract is convenient for short-term cooperation or engaging specialists on a project basis. However, frequent use of a civil contract instead of an employment contract may cause claims from inspection bodies.

Self-employment and individual entrepreneurship

Many IT specialists obtain the status of individual entrepreneur (IE) or self-employed person to work with companies on more favorable terms.

Main features :

Flexibility in choosing customers and work schedule.

Possibility of working with both Belarusian and foreign clients.

Taxation: Individual entrepreneurs pay 20% of income tax. They have the right to apply various deductions from income before taxation. Individual entrepreneurs can also pay a single tax. The tax rate depends on the locality in which the individual entrepreneur is registered: it ranges from 671 rubles in Minsk to 298 rubles in some localities.  

Self-employed persons pay a tax on professional income. The general tax rate is 10% of monthly income, including contributions to the Social Security Fund.

Lack of social guarantees typical for an employment contract (vacation ).

Working through an individual entrepreneur and self-employment is suitable for individuals who want to receive income from several clients and legally optimize tax payments. However, this format requires mandatory contributions to the Social Security Fund.

International cooperation (contract with a foreign company)

Belarusian IT specialists often work with foreign companies, formalizing cooperation directly.

Main features:

• Payments are received in foreign currency, which protects income from exchange rate fluctuations.
• Possibility of remote work without obligations to a Belarusian employer.
• The Belarusian state does not provide social guarantees, but in some cases, the employer may provide insurance or other bonuses.
• The taxation issue is resolved so that the Belarusian specialist usually pays taxes in Belarus himself. But if he works under a contract with a foreign company, he must get a certificate that wages have been withheld in another country. This certificate must be taken to the tax office when it is time to declare income.

This work format is especially popular among developers, designers, and analysts who prefer to work directly with foreign companies without intermediaries.

What format of cooperation do you choose? 

The choice of cooperation between an IT company and a specialist depends on many factors, including the nature of the work, the level of stability, taxation, and legal requirements. Each option has pros and cons for both the employer and the employee.

To make the best decision, it is essential to consider several points.

What factors influence the choice of the form of relationship (contract)?

1. Duration and nature of work

If an employee is required permanently, and the job involves a fixed schedule and responsibilities, it is more logical to formalize the employee under an employment contract.

Employers often use civil law contracts or hire individual entrepreneurs if the project is temporary or requires a flexible schedule.

2. Tax Burden

Employing a specialist under an employment contract means the company pays all social contributions and taxes (34% of the wage fund ).

Cooperating with an individual entrepreneur or self-employed person through a civil-law contract lowers the tax burden, which makes these formats more attractive for business.

3. Level of social security

An employment contract gives the employee full guarantees ( paid, sick, and pension contributions ).

There are no such guarantees (except for pension contributions) when working under a civil contract, so specialists care for insurance themselves.

4. Flexibility in cooperation

Individual entrepreneurship or civil law allows you to work with several clients simultaneously rather than depending on one employer.

An employment contract imposes restrictions: the employee must comply with the company’s internal rules and work schedule and may not have the right to work part-time. There is also a ban on working for competitors for up to a year after dismissal, a non-disclosure obligation, etc.

5. Working with foreign clients

If a specialist works with foreign customers, drawing up a civil or international contract gives more freedom in receiving foreign currency earnings.

What is more beneficial for the employer? 

IT companies choose different employee registration schemes depending on their business objectives:

• An employment contract benefits companies that need to retain key employees and provide them with a social package. However, this option is associated with high taxes.
• The GPD is convenient for short-term tasks but cannot be used by employees who work permanently.
• An individual entrepreneur allows a company to reduce its tax burden but also increases legal risks (for example, inspections may reveal signs of a hidden employment contract ).
• International contracts allow companies to work with remote workers worldwide but require legal and accounting work to avoid currency and tax issues.

If a company is focused on long-term cooperation, stability, and development of corporate culture, it is more convenient to work with employees under employment contracts. If the primary focus is on project work and minimizing costs, then attracting specialists through a civil-law contract is more logical.

What is more convenient for the employee?

The choice of the appropriate option depends on the specialist’s priorities.

An employment contract suits those who want a stable salary, social guarantees, and security. This option is significant for specialists who are planning a mortgage or loan or want to accumulate pension contributions.

GPD interests those who want to work on a flexible schedule but are willing to accept the lack of social guarantees.

An international contract is ideal for those who want to work for foreign companies and receive payment in foreign currency. However, this format is associated with additional tax and legal complications.

Conclusion

The choice of relations with performers in IT companies in Belarus depends on many factors: business goals, tax burden, level of social protection of employees, and the need for flexibility in personnel management.

An employment contract remains the most reliable option for long-term cooperation, as it provides social guarantees, stable income, and legal security. However, it is associated with high taxes for the employer. A civil contract is suitable for temporary projects but does not provide the contractor with the same guarantees as official employment. Individual entrepreneurship and self-employment remain among the most popular options among IT specialists, as they allow you to optimize taxes and work with different clients, including foreign companies. International contracts open up opportunities for cooperation with foreign customers but require independent settlement of tax issues.

For employers, it is essential to choose the most cost-effective option and consider possible legal risks. For employees, the key aspect is the balance between income level, work flexibility, and social security.

Each of the formats considered has pros and cons, so it is important to consider current needs and long-term prospects when choosing a form of cooperation.

We are ready to advise you on all issues related to formalizing relationships with employees and contractors and provide you with services for hiring and managing personnel.