What Global Companies Need to Understand About Payroll in Poland

Poland is one of the countries whose economy and great workforce are attracting more and more foreign companies each year. Its Gross Domestic Product (GDP) increased by 4.1 percent in 2019 to $566 billion. The same year, Poland ranked 40th in the World Bank's Ease of Doing Business Survey.

These put Poland on the map and made it into a market a lot of companies wish to expand to. It is also conveniently located in the center of Europe, connecting a significant number of major markets.

Poland also has a highly qualified labor force. It is renowned for its universities. Poland offers educated and motivated workers, who are a perfect fit for an international market. They excel in the IT, engineering, and science sectors.

There are a few things you should know if you decide to hire someone from Poland. Getting familiar with Poland’s labor laws and payroll will help you get the best employees and maintain compliance.

Employment essentials in Poland

In most countries, to hire someone from a foreign country, you need to establish a presence in the country you want to hire in or go with an EOR provider. Poland doesn’t need you to establish a presence to hire a Polish citizen, but you do need to register with several government agencies. You can also rely on a local payroll provider to assist you with the payroll setup.

To register with the relevant authorities, you need to appoint an official representative. They would then register you with the Polish Tax Authority, and get a Polish tax identification number (NIP) for you.

The next step is to submit a ZUS ZPA form to the Polish Social Security Institution (ZUS), to register yourself as an employer. You must also register your employees with the social security authority. You are required to complete both registrations within seven days. After the registration, each of your employees will receive their PESEL number. This number is used to identify the employee for tax purposes.

Required documents for new employees

You must have a written employment contract to hire someone legally in Poland. A formal employment contract must be signed by both the employer and the employee no later than the employee's start date. Employers that don't have a contract with their employees may face fines and penalties.

In Poland, employment contracts must be in Polish. They can also be bilingual as long as one of the languages is Polish.

Employment contracts in Poland

According to the Polish Labour Code, the contract must include certain essential elements. First, it needs to state the parties' names—this means both the employer and the employee. It should also specify the type of contract, the date it was made, and the conditions of employment.

The contract's conditions of employment include the kind of work the employee will do. It also covers where they will work, and the details of their pay. The contract should also list how long the employee will work each day and week, and the start date of their employment.

Within seven days of signing the employment contract, the employer must inform the employee about several things. This includes the hours they should work each day and week. It should also include how often they will get paid, their holiday entitlement, and the notice period for leaving the job.

The contract must also include hours considered nighttime work if the company doesn’t have specific work regulations. The contracts should also cover the place, date, and time of salary payment. Lastly, the contract should outline the rules for recording attendance and explaining absences.

Employee benefits and compensation

Each employee must receive the right treatment and protection from their employers per Polish Labor Law. It includes benefits and compensation.

Minimum wage

The minimum wage in Poland is PLN 4,242.00 per month, or PLN 27.70 per hour. This minimum wage requirement is effective since 1. January 2024. However, it only applies to full-time workers.

Working hours in Poland are generally 40 hours a week, or 8 hours per day. The workday usually starts at 8 am and ends at 4 pm.

Overtime

Poland does not allow overtime unless the employee opts out of the 40-hour workweek. The employee may request overtime, but it should be discussed on a per-employee basis. Employees working overtime cannot exceed 150 hours of overtime in a calendar year.

The employee working overtime is entitled to overtime pay. If an employee works at night, on Sundays, or on bank holidays, they earn 100% extra pay.

For working overtime on any other day, they get 50% extra pay. If they work overtime that goes beyond the average weekly work hours in a given period, they also earn 100% extra pay for each hour.

Instead of getting extra overtime pay, the employer can give the employee time off. If the employer decides this without the employee asking, every hour of overtime equals 1.5 hours of paid time off. If the employee asks for time off, each hour of overtime equals one hour of paid time off.

What are the employer's social security contributions in Poland?

In Poland, employers pay several social security contributions. These are based on their employees' gross salaries. They contribute 19.52% to pensions and disability insurance. For accident insurance, employers with up to nine employees pay 1.67%, while those with more than nine employees pay between 0.67% and 3.33%. The actual cost depends on their business sector, but foreign employers pay a flat rate of 1.67%.

Additionally, employers pay 2.45% to the Labour Fund and 0.10% to the Employee Guaranteed Benefits Fund. Employers also contribute to the Solidarity Fund for Support of Disabled Persons if they do not hire at least 6% of disabled persons. The contribution is calculated based on a specific formula involving 40.65% of the average salary.

The Employee Capital Plan (PPK)

The Employee Capital Plan (PPK) is a savings program in Poland designed to help employees save for retirement. It is funded by contributions from the employee, the employer, and the government.

Employers contribute 1.5% of the employee's gross salary to the PPK, and they can choose to add up to an extra 2.5%. Employers are responsible for calculating, deducting, and submitting both their own and the employee's PPK contributions to the financial institution that manages the PPK.

In Poland, employees are responsible for their health insurance contributions. Unlike with PPK, the employees make these payments. However, the employer calculates, deducts, and submits the contributions for them during payroll. This system ensures that the necessary health insurance payments are made on time and correctly.

Employee tax in Poland

Employee contributions in Poland include income tax and social security payments. Residents of Poland pay tax on their worldwide income, while non-residents pay tax only on income earned within Poland:

• Income up to 120,000 PLN is taxed at 12%, and income over this amount is taxed at 32%.

• Employees under 26 years old do not have to pay tax on income up to 85,528 PLN per year.

• Additionally, there is a 4% solidarity tax on income over 1 million PLN.

Employee Social Security in Poland

For social security, employees pay 13.71% of their gross salary. Employers withhold this amount from the employee’s salary and submit it along with their contributions. This payment covers pensions, disability, and sickness insurance. Employees also pay a 9% healthcare contribution, with up to 7.75% being deductible from their tax, while the remaining 1.25% is not deductible.

Lastly, participation in PPK is usually voluntary for employees. Employees between the ages of 19 and 54 are automatically enrolled but can opt-out if they wish. Those between 55 and 69 must apply if they want to join, while employees over 70 cannot join.

Employees contribute 2% of their gross salary to the PPK, and they can choose to add up to an additional 2%.

Holidays and leaves in Poland

In Poland, every employee has the right to an annual paid vacation, and employers must ensure that employees take it. When starting a new job, employees gain the right to paid time off, earning 1/12 of their annual leave entitlement for each month worked.

Typically, employees take their entire leave at once, but they can request to split it, with one period being at least 14 consecutive days.

The amount of vacation time depends on the length of service. Employees are entitled to 20 days if they have less than ten years of work. 26 days is the norm for those with at least ten years. Part-time employees' vacation days are adjusted based on their working hours, rounded up to a full day.

Interestingly, education also counts toward the working period that determines vacation entitlement. For example, a higher education degree is equal to eight years of work experience.

Unused vacation days carry over to the next year and must be taken by September 30. Payment instead of taking a vacation is only allowed if employment ends.

Public holidays

Employees in Poland are entitled to 13 paid public holidays each year. Employees who work on a public holiday receive a compensatory day off or additional pay of 100% for each hour worked.

Sick leave in Poland

Employees on sick leave receive 80% of their salary for the first 33 days of illness within a calendar year. This is paid by the employer. It increases to 100% if the illness occurs during pregnancy or results from a work-related accident.

After the first 33 days, the Social Security Institute takes over from the employer. It pays 80% of the base pay for up to 182 consecutive days yearly. This period includes the initial employer-paid period.

Maternity, paternity, and parental leave

Poland's maternity, paternity, and parental leaves are among the most progressive ones in the world.

Female employees are entitled to maternity leave after childbirth or adopting a child under seven years old. They receive 20 weeks for one child, 31 weeks for twins, and up to 37 weeks for five or more children.

Employees can take two weeks of paid paternity leave within 24 months of their child's birth or adoption.

Parents are eligible for up to 41 weeks (43 for multiple births) of paid parental leave after maternity leave is used. Paid at 70% of the salary, parental leave can be taken by either or both parents simultaneously but not exceeding the total weeks allowed.

Special leave in Poland

Employees are also entitled to special event leave for significant family life events. This includes weddings or funerals, with two days for events involving close family members and one day for others. Employees are also entitled to leave for court appearances, compulsory medical exams, or blood donation.

Employee termination procedures and guidelines in Poland

In Poland, employment can end in four ways:

1. By mutual agreement,

2. By either party with notice,

3. By either party without notice,

4. Or when the contract term expires (for probationary or fixed-term contracts).

Regardless of who initiates the termination, the declaration must be in writing.

When the employer initiates the termination, they must inform the employee of their right to appeal to the Labour Court. After the employment ends, the employer must provide a Certificate of Employment. They should also deregister the employee from the Social Security Authority (ZUS). The final payment should be made in the next regular pay cycle.

Termination by Mutual Agreement

When both the employer and employee agree to end employment, either party can initiate it. Severance is mandatory if the employer ends the contract with notice or by mutual agreement.

Termination with notice

Employees can resign at any time with notice, without needing to provide a reason. However, employers must provide valid reasons for terminating an indefinite period contract. Employers cannot pay instead of notice.

Termination without notice

Employers can terminate employment without notice if the employee is at fault, such as for serious misconduct, committing a crime confirmed by a court sentence, or losing a required work license through their fault.

Employers can also terminate without notice if the employee cannot work due to an illness lasting more than three months. This only applies to employees who have been with the company for less than six months.

Employees can terminate without notice if there is a serious breach of essential employer obligations. Also, if the employer refuses to transfer them to another position when their current one is found harmful to their health.

Employee termination protection

Certain categories of employees are protected from termination with notice. This includes those on:

1. Vacation, maternity, parental, or unpaid carer’s leave;

2. Sick leave with a doctor’s certificate;

3. Employees within four years of retirement;

4. Pregnant employees;

5. Trade union members.

Redundancy pay and entitlement

Redundancy rules apply to companies with more than 20 employees. Employees are entitled to severance pay if their termination is due to company reasons like reorganization or job closure.

The severance pay depends on how long they were at the company. Employees are entitled to:

1. One month's pay for less than two years of service,

2. Two months' pay for two to eight years,

3. Three months' pay for more than eight years.

Companies with fewer than 20 employees are not required to pay severance.

Other End-of-Employment guidelines

The notice period depends on the contract type and the employee’s length of service. For trial period contracts, notice periods range from three working days to two weeks. For fixed-term and permanent contracts, notice periods range from two weeks to three months.

During the notice period in Poland, employees receive their regular salary. They may be asked to take statutory leave or be given time off to seek new employment.

Employees who have worked at least 365 days in the past 18 months are eligible for unemployment benefits for six to twelve months. However, this may depend on local unemployment rates and other criteria.

FAQs

What is the payroll frequency in Poland?

In Poland, employees are typically paid once a month. The exact date of payment is usually stated in the employment contract or company's policies. Salaries are usually paid by the 10th of each month for the previous month.

How much do you need to live comfortably in Poland?

To live comfortably in Poland, a single person generally needs about 6,000-8,000 PLN per month. It depends on the city. In larger cities like Warsaw or Krakow, costs are higher compared to smaller towns. This amount covers rent, food, transportation, and some leisure activities.

What is the payroll tax in Poland?

In Poland, payroll taxes include income tax and social security contributions. The income tax rate is 12% for annual income up to 120,000 PLN, and 32% for income above this amount. Employees and employers also contribute to social security, which covers health, pension, and other benefits.