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Working with sole traders is a normal part of doing business. It gives companies flexibility and allows entrepreneurs to provide services to several clients in their own name and at their own risk.
The problem arises when a person is a sole trader only on paper but in practice works just like a regular employee. Such an arrangement is known in Slovakia as “švarc systém” (disguised employment) and may be treated as illegal employment.
From 2026 this topic is even more important. The legal definition of dependent work has changed and the minimum penalties for illegal employment have increased.
What is “švarc systém”?
The term is not separately defined in Slovak law. In practice it describes a situation where an individual works as a sole trader or through their own company, but the actual content of the cooperation corresponds to an employment relationship.
So what matters is not:
- whether the supplier has a company ID (IČO),
- whether they issue invoices,
- what the signed contract is called,
- or even that both parties agreed to the cooperation.
What matters is how the relationship works in day-to-day practice.
Under the Labour Code, dependent work is work performed:
- in a relationship of the employer’s superiority and the employee’s subordination,
- personally by the employee,
- according to the employer’s instructions,
- on behalf of the employer.
Such work may not be performed on the basis of a civil-law or commercial-law contract. It belongs in an employment relationship.
What has changed since 2026?
Until the end of 2025, working hours set by the employer were one of the features of dependent work. From 1 January 2026 this feature is no longer part of the legal definition.
However, this does not mean that the assessment of cooperation with sole traders has become more lenient.
A company can no longer rely solely on the argument that the contractor decides when to work. Flexible working hours are common among employees today too, for example when working from home.
The assessment therefore focuses even more on the person’s actual position in the company and on how their work is managed.
Four main features a company should check
1. Superiority and subordination
The most significant warning sign is when a sole trader acts as a regular member of the company’s organisational structure.
The risk increases when the contractor:
- has an assigned superior,
- regularly reports to them,
- must attend internal meetings,
- cannot refuse assigned work,
- has their attendance or presence checked by the company,
- is evaluated in the same way as employees.
A genuine entrepreneur should be on an equal footing with the customer. The customer orders a service or a result but does not act as their employer.
2. Personal performance of work
An employee is expected to do the work personally. A supplier, however, should at least have a real option to deliver through their own worker, associate or subcontractor.
It is not enough for the option of substitution to be stated only in the contract. It must also be usable in practice.
A company can ask itself a simple question:
If the supplier sent another qualified person to carry out the job, would we accept it?
An automatic “no” may indicate that the company is not really ordering a service, but the work of a specific person.
3. Working according to the company’s instructions
A supplier must also respect the client’s brief. The difference lies in the scope of the instructions.
In a legitimate business relationship the company mainly specifies:
- the required result,
- the scope of the service,
- the delivery deadline,
- quality requirements,
- technical or safety conditions.
It is risky when the company dictates the supplier’s daily work procedure, assigns individual tasks, monitors the course of the working day and requires ongoing reporting as it would from an employee.
Simply put: the customer may check the result, but should not manage the contractor like its own employee.
4. Acting on behalf of the company
A sole trader should present themselves externally in their own name.
Risk factors include, for example:
- a company e-mail address with no indication that the person is an external contractor,
- a company business card with a job title,
- being listed among internal staff on the website,
- communicating with clients as a company representative,
- wearing work clothing or company branding,
- signing documents on behalf of the customer without a clear external status.
A company e-mail address alone does not automatically mean disguised employment. However, it is assessed together with the other circumstances.
Does having only one customer automatically mean a problem?
No. A sole trader may have only one major client for a certain time and the cooperation may still be perfectly legal.
Economic dependence is, however, an important warning sign, especially when combined with other circumstances:
- the same regular monthly invoice,
- long-term cooperation without separate orders,
- zero business risk,
- working exclusively with the customer’s equipment,
- integration into the internal team,
- inability to work for competitors or other clients.
Every business relationship must therefore be assessed individually.
Won’t a well-written contract protect the company?
A good contract is important, but on its own it is not enough.
If the contract states that the supplier works independently, but in reality the company assigns them tasks every day, checks their attendance and approves their time off, actual practice will be decisive in an inspection.
The contract should truthfully set out, in particular:
- the specific subject and result of the service,
- the price or how it is calculated,
- liability for defects and damage,
- delivery deadlines,
- the possibility of involving a subcontractor,
- how outputs are accepted,
- the use of the supplier’s own work equipment,
- the supplier’s independence in organising their activity.
On the other hand, wording typical of employment contracts is inappropriate, for example job description, holiday, probation period, management by internal regulations or performance appraisal. But even a professional contract will not help if it contradicts how the cooperation actually works.
What penalties apply in 2026?
From 1 January 2026, the Labour Inspectorate may impose a fine for breaching the ban on illegal employment of:
- from EUR 4,000 to EUR 200,000,
- for illegal employment of at least two persons, a minimum of EUR 8,000.
If the company pays two thirds of the fine within 15 days of the decision becoming final, the fine is considered paid in full, provided the legal conditions are met.
The consequences may not end with the fine itself. The problem can also affect access to public funds, participation in public procurement, the company’s reputation and follow-up inspections by other authorities.
A quick test for your company
For every long-term contractor, try to answer:
- Can they refuse a new job?
- Do they decide independently how to do the work?
- Are they responsible for the result and any defects?
- Can they deliver through another person?
- Do they use their own work equipment?
- Do they act in their own name?
- Can they also work for other clients?
- Do they invoice specific services or just the same amount every month?
- Are they outside the company’s internal hierarchy?
- Does the company assess their result or their daily presence?
The more answers point to the position of a regular employee, the more thoroughly the arrangement should be reviewed.
How to reduce the risk of disguised employment
Adjusting the contract alone is not enough. The company should align all aspects of the cooperation:
- contract terms,
- day-to-day assignment of work,
- invoicing,
- external communication,
- use of work tools,
- the contractor’s integration into the team,
- responsibility for the result.
Legal cooperation with a sole trader is possible and in many cases advantageous. However, it must be a genuine relationship between two business entities, not an employment relationship hidden behind invoices.
Conclusion
When assessing disguised employment, there is no single sentence in a contract or single universal feature that decides automatically.
What decides is the overall picture of the cooperation.
The greatest risk arises when a contractor is integrated into the company long-term, has a superior, works personally according to daily instructions and presents themselves externally as its employee.
Companies that regularly work with sole traders or one-person companies should therefore review their arrangements before any inspection.
Do you work with sole traders or external suppliers?
At Agentúra Tempo we will help you assess the tax, social security and accounting aspects of the cooperation and point out arrangements that may pose a risk. If needed, we will recommend having your employment documentation reviewed by a lawyer.
Contact us and set up your cooperation correctly.