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SOCIAL CO-OPERATIVES – POLISH EXPERIENCE

Presentation prepared by:

Social Co-operative in Żary

www.socjalna.plSpeaker: Janusz Sulczewski

Management Board Deputy Chairman for trainingsTranslation: Jan Popowski

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SOCIAL CO-OPERATIVES – POLISH PRACTICE

POLAND

2 years = 70 co-operatives,

70 co-operatives = approx. 500 jobs – members, and a couple of hundreds of jobs for other employees who have not membership rights in co-operatives.

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Legal environment and practice of social co-operative operation in Poland

• The new Act on Social Co-operatives effective from July 6, 2006 – i.e. for eight months now

• The Act, aimed at regulating matters related to employment, creation or dissolution of social co-operatives, forms part of a broader co-operative legislation.

• The Act contains provision on (definition of) the issue of social and professional re-integration which remains the responsibility of social co-operatives.

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Legal environment and practice of social co-operative operation in Poland

• However, in our opinion the definition does not regulate properly the issue of social and professional re-integration, being too general and not indicating the fields of activity or activities that may be pursued by social co-operatives. The definition is open to different interpretations which leads to many doubts both among the members of co-operatives and on the part of tax administration.

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Legal environment and practice of social co-operative operation in Poland

• We can say that the new Act only resulted in legal identification of social co-operatives within the bulk of other co-operatives, indicating the special obligation of their members to work personally for the co-operative and their additional statutory tasks that are absent in traditional co-operatives in Poland.

• It even seems that the Act requires further development and amendment, and the work should include both professional legislators and social co-operative practitioners whose experience can prove to be especially valuable.

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What hampers development of social co-operatives in Poland?

Excluded people who intend to create new social co-operatives and members of the already existing ones indicate several barriers in their activity.

The most commonly mentioned problems can be grouped in three categories.

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What hampers development of social co-operatives in Poland?

The first category covers problems related to the fact that Eployment Offices are not prepared to deal with people who want to create legal entities such as social co-operatives.

So far, Employment Offices have been well prepared to service people who started economic activity mainly in the form of self-employment.

Many employment service workers are not familiar enough with the new mechanisms that enable unemployed people to create legal entities such as social co-operatives with the financial support from Employment Fund – the source of financing, located within the structure of Employment Offices, for unemployed people who create their own firms or social co-operatives.

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What hampers development of social co-operatives in Poland?

• None of the many Employment Offices has a properly executed agreement with the Employment Fund – so far, they have had no need for such agreements. And when the new Act on social co-operatives came into force, employment service workers have found themselves completely unprepared to deal with the new tasks.

• Another problem are the amounts of the financial support offered. An unemployed person who intends to create his or her own firm may receive support amounting up to 500% of the average monthly wage in Poland, while a person who wants to create social co-operative may only receive support amounting up to 300% of the relevant sum. In our view, the situation can be seen as an example of inequality in the access to public funds.

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What hampers development of social co-operatives in Poland?

• The second category includes problems related to small (or even null) profits from the work of excluded people who, often enough, require special preparation to be re-introduced to the employment market – and this takes time and money. However, the legislators have not provided for any financing tools or mechanisms that would support the process. Quite often, the only resources that can be used for this purpose are „uncertain” profits of co-operatives, facing strong competition from local companies which have much ampler financial base and are able to employ professionals in a given industry rather than excluded people, as is the case for social co-operatives. At the very beginning of their existence, social co-operatives find themselves in a deep water, facing grave challanges that are often very hard to overcome by their members.

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What hampers development of social co-operatives in Poland?

• The third category covers problems related to the fact that it is not possible for social co-operatives to recover – either in part or in total – the costs of social security payments for their members. While the provisions in the Act authorise local governmental administration to refund such costs, the specific regulations allow for such possibility only in the case of social co-operatives created on the basis of CIS. Today, almost all social co-operatives in Poland are grassroot initiatives, created without participation of CIS, and as a result they are not allowed to recover such costs. According to my knowledge, so far no social co-operative created by excluded people in Poland has been able to recover costs incurred for the mandatory social security payments for their members.

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Problems faced by disabled people intending to create social co-operative

• Disabled people may create new social co-operatives or join the already existing ones. However, there are no financial tools offered by PFRON to cover the contribution required by statutory documents of co-operatives. If the disabled person is registered in the Employment Office as an unemployed person he or she may apply for a one-time subsidy from the Employment Fund, but such possibility to receive subsidy to cover membership contribution in social co-operative is closed for disabled people who are looking for job without being registered as unemployed people.

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Problems faced by disabled people intending to create social co-operative

• Another problem concerns social transfers or other benefits received by disabled people. When they decide to create co-operative and become its members they may lose the right to receive such benefits. Thus, some disabled people who otherwise would be willing to take the risk to start social co-operative remain inactive, being afraid to lose the existing social benefits.

• Thus in my opinion, the Act on employment and rehabilitation of disabled people should be amended to give such people access to financial resources for covering membership contributions in social co-operatives, even if they are not registered as unemployed people.

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The preconditions for efficient functioning of social co-operatives in Poland

• In fact, social co-operatives – whether they employ or not disabled people – do not need financial gifts and subsidies; they need orders from consumers that will allow them to generate funds for their effective operation.

• Often enough, there is no need to change the existing legislation in this field: what is needed is a bit of good will, understanding and willingness to interpret the existing regulations in a way to support social enterpreneurship. A good example may be Wałbrzych where intercommunal agreement on partnership for social co-operative development was signed that created huge opportunities to support social co-operatives.

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The preconditions for efficient functioning of social co-operatives in Poland

• The efficiency in functioning of social co-operatives can be enhanced by their institutional members such as communal institution or non-governmental organisation. This is a special kind of member of co-operative who can support and direct its development, while other members focus on its current operations. Thus, during our trainings with participation of representatives from communal, governmental or non-governmental institutions we urge them to consider such possibility, indicating that membership of communal institution or non-governmental organisation strenghtens the position of co-operative on the local market.

• The efficiency in functioning of social co-operative on the local market also depends on pro-active attitudes of its members and their dedication to their work. There are things that cannot be inspired by legislative arrangements – such as personal engagement in the development of co-operative.

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Services most commonly offered by social co-operatives in Poland

• Most of social co-operatives in Poland offer general construction and refurbishment services, but more and more often they also enter other fields of activity such as care services, trainings, cleaning services, green areas administration, catering, bars, shops, advertising services, etc.

• The multifunctional character of co-operatives is mainly due to perceptive abilities of their members and their former professional experience.

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Are local authorities willing to assist the

growth of social co-operatives? • In many communities in Poland it is a common

practice to grant small orders (up to 6 000 euro) without tender procedure to social co-operatives. It is a valuable help that enables weaker co-operatives to survive. Higher funding for trainings in social economy for e.g. members of local councils, if made available, would certainly enhance participation of local authorities in supporting social co-operatives. So far, only in few regions local authorities offer significant assistance for social co-operatives.

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The possible role of communal institutions in creating social co-operatives

• Increasingly, social co-operatives sign agreements with communal authorities for the development of social enterprises.

• The role of communal authorities may consist in e.g. making available (letting) or providing for accomodation for such activity.

• Chełmno n/Wisłą seems to be a model example of relations between local authorities represented by district Employment Office and a newly created social co-operative „Od Nowa”. Also our Social Co-operative in Żary played its part in creating the new co-operative and in promoting „good practice”, including the role of communal institutions, in this process: we organised trainings for future members of co-operative and representatives of Employment Office, suggesting the best ways of their mutual co-operation and carifying several problems that hampered and delayed the registration of the new co-operative.

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Are there any governmental initiatives to support social co-operatives?

• It is hard to implement any consistent policy in this field as long as we lack a well-established „Polish model of social enterprise” (such as the model functioning e.g. in Italy).

• As far as we are concerned, we have suggested to the Ministry several proposals that should be included in any systemic solutions for social enterprises. One of the proposals is to create a closed market for activities in the fields of social and professional re-integration and provide for their funding from the State budget.

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Are there any governmental initiatives to support social co-operatives

• Social Policy Strategy 2007-2013 includes a task of creating the system of guarantees for social co-operatives and other initiatives in the field of social economy. Preparing to implement the task, in 2006 the Ministry started a tender for organising centres that would be responsible, among others, for supporting social co-operative activities. The first edition of the tender resulted in selecting 7 such centres (OWSS). Presently, the second edition of the tender is under way that should reslut in creation of additional 6-7 support centres.

• In February 2007, the centres started to receive applications for subsidies from existing social co-operatives. The one-time subsidy may amount up to 20 000 PLN (5 000 euro). However, funds at the disposal of the centres are relatively small: they reach only 80 000 to 150 000 PLN (from 20 000 to 38 000 euro) per centre.

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New initiatives to create social co-operatives

• Recently, many communities have decided to offer assistance to groups of people willing to create social co-operatives, using original and unique tools for this purpose.

• A good example may be Nidzica (in Warmińsko-Mazurskie region) and Czersk (in Pomorskie region). Social co-operatives created in these localities would gather only disabled people.

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New initiatives to create social co-operatives

• In Czersk, a co-operative is to be created that would gather people with different kinds of disabilities, under local system of assistance for disabled people.

• In Nidzica a project unique for Poland, and perhaps even for Europe, is realised – creation of social co-operative that would gather only mentally disabled people. It is a wonderful idea. The project receives huge assistance from local authorities of Nidzica, as well as from local association for mentally disabled people. Practical trainings for disabled people are conducted – on behalf of the Promotional Foundation for Polish Communities – by Social Co-operative in Żary.

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What is the future of social co-operatives in Poland?

• When the concept of Polish „social enterprise model” is finally shaped, it will become possible to introduce provisions regulating financing methods for social co-operatives operating in different filelds.

• Most social co-operatives have been created and operate without any governmental financial support which undoubtedly proves that they are worth further development.

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• Thank you for your attention.

• Please, feel free to ask any additional questions.