Employee’s salary isn’t the total cost born by the employer in connection to engaging an employee. There is much more than this. Social security fees, health insurance, personal income tax, pension fund and more… What are the total employment costs in Poland? Is it low, high or just average? Let’s find out!
Employment costs in Poland – employment contract
The basic costs of hiring an employee in Poland include:
- social insurance contributions that the employer is obliged to pay
The contributions covered by an employer amount to:
- 9,76% of the gross salary for a retirement insurance contribution
- 6,50% for a disability pension contribution
- 2,45% for a Labour Fund
- 0,1% for the Fund of Guaranteed Workers’ Allowance [Polish: FGŚP]
- 1,67% for accident insurance (in this case, the interest rate is recommended according to the type of business but 1.67% is the standard value)
Therefore, the employer “adds” 20.48% of the gross salary for each full-time employee in total.
However, these are not the only costs of hiring an employee that an employer needs to cover. One should not forget about the costs of obligatory medical examinations of employees, compensation for possible overtime work, as well as ensuring remuneration for the period of incapacity for work, when the regulations state so. A frequently overlooked element of the costs incurred by employers for hiring people is the obligation to keep and maintain employees’ documentation.
Covering the above-mentioned expenses does not mean that the remaining amount of money goes to the employee’s pocket. On the contrary- the remaining gross salary is also subject to deductions for the following contributions: retirement – 9.76%, disability pension – 1.50%, sickness – 2.45% and health – 9.00%.
Example – Employment costs in Poland in case of the minimum salary in Poland
Remuneration for full-time work cannot be lower than the amount of the so-called minimum salary. It indicates the lower salary limit that should be received by every full-time employee. In 2022 the minimum gross salary amounts to 3010 PLN. The amount of the minimum salary is the same for all employed persons and does not depend on the length of working experience.
When calculating the amount of the employee’s minimum salary, it is necessary to take into account the components of the remuneration and other benefits resulting from the employment relationship, included in personal salary as stated by the Central Statistical Office [Polish: GUS].
When accepting a full-time employment under an employment contract and with a minimum salary, the employer will have to add 616.46 PLN to the employee’s salary. He will pay the following contributions:
- retirement in the amount of 293,78 PLN
- disability pension in the amount of 195,65 PLN
- accident in the amount of 50,27 PLN
- for Labour Fund in the amount of 73,75 PLN
- for the Fund of Guaranteed Workers’ Allowance [Polish: FGŚP] in the amount of 3,01 PLN
Therefore, with a minimum salary, the total cost of the employer will be 3 626,46 PLN gross.
Employment costs in Poland – contract of mandate
In the case of hiring a person under a contract of mandate, the costs incurred by the employer depend on the profile of the contractor.
A person who signs a contract of mandate and for whom it is the only source of income is covered by compulsory social and health insurance as well as a contribution to the Labor Fund and the Fund of Guaranteed Workers’ Allowance[Polish:FGŚP]. The contractor has one social insurance entitlement if he or she has one source of income. Therefore, the costs of hiring a contractor will be the same as in the case of hiring under a contract of employment.
On the other hand, a person who has signed several contracts of mandate at the same time is subject to obligatory social insurance contributions only under one contract. Generally, this concerns the earlier contract, unless the contractor chooses a different one. The second and subsequent contracts may be exempt from social insurance contributions, provided that the contractor receives at least the minimum salary under the first or the indicated main contract. In this case, the hiring party covers only the costs of gross salary.
A similar situation occurs when a student under the age of 26 is hired under a contract of mandate. A student is defined as a person enrolled and accepted to studies and who started a higher education programme and acquired student rights upon taking the oath. However, this does not apply to participants of doctoral and postgraduate studies.
For the contract of mandate, the minimum hourly rate is obligatory, which in this year (2022) is established to the amount of 19.70 PLN gross per hour.
Employment costs in Poland – contract of specific work
A person who signs a contract for specific work is not subject to social insurance, health insurance or contributions to non-insurance funds i.e. the Labor Fund and the Fund of Guaranteed Workers’ Allowance [Polish: FGŚP]. This means that the performer of the work is not obliged to pay these contributions.
Exceptions to this rule occur when a contract for specific work is concluded between parties who simultaneously signed an employment contract and when an employee concludes a contract with another entity in order to perform work for his employer. In both examples specified above, there is an obligation to pay social insurance contributions resulting from signing the contract for specific work.
Personal income tax on employees salary in Poland
Hiring a person imposes additional obligations on the entrepreneur. No matter if the worker is working under an employment contract or under civil law agreement, the employer has to calculate and pay income tax on his or her salary. Failure to settle the advance personal income payment on time carries severe consequences.
According to Article 8 of the Tax Ordinance Act, a taxpayer is a natural person, a legal entity or an organizational entity without legal personality obliged under the provisions of tax law to calculate and collect tax from the taxpayer and to pay it, by the appropriate deadlines, to the tax authority. This means that the employer is actually a payer of personal income tax on the paid salaries. Therefore, the entrepreneur has to calculate, collect and pay the advance personal income tax payments to the tax revenue office on time, i.e. by the 20th day of each month.
Employment costs in Poland – tax-deductible expenses
As a rule, employee benefits constitute tax-deductible expenses. Only those employee benefits which are not incurred for the purpose of earning revenue or preserving or securing a source of revenue, or which are expressly excluded from being deductible by law, are not expenses. The primary employee benefits classified as expenses are all kinds of remuneration for performed work.
The law allows entrepreneurs to deduct, among others, the following benefits paid to employees:
- remuneration for the performed work
- remuneration for working overtime
- night work or statutory bonuses
- expenditure resulting from providing working and protective clothes for employees
- preventive and regenerative meals
- corrective glasses
- expenditures for organizing special company events as well as social events
- expenditures for establishing a company’s nursery
- children’s club or kindergarten, as well as
- for educating employees, if new skills are required at work
Employment costs in Poland – summary
The costs of hiring employees in Poland consist of many elements including base salary, social insurance contributions paid to Social Insurance Institution [Polish: ZUS] by both the employee and employer together with an advance personal income tax payment. The costs incurred by employers are mainly dependent on the type of contract and on its provisions.
Do you want to find out what costs you will incur when concluding an employment contract or a civil law contract, and which of them may constitute tax-deductible expenses? Do you have doubts as to whether you are properly paying all liabilities to the state? Maybe you plan to increase employment and you are not sure if your company can afford it? These are extremely important issues, the neglect of which can lead to serious consequences. Therefore, we encourage you to contact our experts, who will help you find answers to any questions that may bother you.
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