Payroll taxes in Poland are an important aspect of the country’s tax system. Understanding how payroll taxes are calculated and what components are considered is crucial for both employers and employees. Employment under an employment contract has 2 tax brackets 12% and 32%.
The payroll list includes the employee’s base salary and other components as well as all benefits. Presents tax settlements, costs of obtaining a tax relief as well as ZUS and PPK contributions. It is a document on the basis of which remuneration is transferred to the employee’s account. Payroll lists are stored for the period of required access to this information, resulting from pension, disability and tax regulations, but not shorter than 5 to 10 years.
The total cost of employment includes several components. First and foremost is the gross salary, which is the amount paid to the employee before any deductions. Additionally, employers are required to contribute to various social security funds on behalf of their employees. These include pension insurance, disability insurance, accident insurance, the Labour Fund, the Employee Guaranteed Benefits Fund, and the PPK Fund (a newly introduced employee savings program). The contributions to these funds are calculated as a percentage of the employee’s gross salary, resulting in a combined total percentage of 21.98%. This means that for a gross salary of 5,000 PLN, the total cost of employment amounts to 6,031.32 PLN.
See the example below for the cost of employment:
|5 000,00 PLN
|Pension insurance – 9,76 %
|Disability insurance – 6,5%
|Accident insurance – 1,67 % *
|Labour Fund – 2,45 %
|Employee Guaranteed Benefits Fund – 0,1%
|Total costs of employement
An employer who employs at least 25 full-time employees must make monthly payments to the State Fund for Rehabilitation of Disabled People if it does not reach the 6% employment rate for disabled people. Values are calculated taking into account the average wage, employment status coefficient 0.4065 employment of people with disabilities, and coefficient 0.06.
After exceeding the annual amount of gross remuneration of 208,050, i.e. the upper earnings threshold, the Employer and the Employee do not pay ZUS contributions: pension insurance and disability. For Employer, it means that the total cost of salaries is decreasing.
MINIMUM SALARY AND OVERTIME WORK
The current minimum salary in Poland is 3,490 PLN gross. This is the minimum amount that employers are legally required to pay their employees. The minimum wage is periodically adjusted to account for inflation and changes in the economy. From July 1, 2023, the minimum wage will be increased to 3,600 PLN gross, with an hourly rate of 23.50 PLN.
In terms of overtime regulation, the standard working time in Poland is 8 hours per day and 40 hours per week. Employees are entitled to a 15-minute break if they work at least 6 hours a day, which is included in their normal working hours. Employees who spend at least 4 hours a day working at a computer monitor are entitled to a 5-minute break every hour. Overtime work is allowed in special cases and must be approved by the supervisor. Employees are entitled to additional compensation for overtime work, which varies depending on whether the work is performed at night, on Sundays and public holidays, or on other days. In exchange for overtime work, employers may grant employees time off in the same amount of hours worked.
For overtime work, in addition to the normal remuneration, an allowance in the amount of:
1) 100% of remuneration – for overtime work falling:
- at night,
- on Sundays and public holidays that are not working days according to the working time schedule in force for the employee,
- on a day off given to the employee in lieu of work on Sunday or on a holiday, according to the working time schedule in force for the employee;
2) 50 % of remuneration – for overtime work falling on any day other than that specified in item 1) above.
When it comes to work on public holidays, it can only be performed in specific situations specified in the regulations (by Art. 151 of the Labor Code). Examples include:
- if it is necessary to conduct a rescue operation in order to protect human life or health, protect property or the environment, or to remove a failure,
- in continuous operation, in shift work, during necessary repairs,
- in transport and communication,
- in company fire brigades and in company rescue services,
- when guarding property or protecting people,
- in agriculture and breeding,
- when performing works necessary due to their social utility and everyday needs of the population (e.g. in gastronomy or factories
If the employee will perform his duties on Sunday and it is a day off from work, the employer is obliged to provide him with another day off. However, if the employee is unable to take the “time off” within this period, the employer must pay the employee the appropriate remuneration and allowance.
Employee must receive special salary for work on a day off, as well as an allowance of 100 percent for each hour worked to pay. This rule applies both on Sundays and public holidays.
EMPLOYEE BENEFITS AND TAX DEDUCTIONS
Employee benefits play an important role in Poland’s payroll tax system. Some benefits, such as lunch coupons and eye glasses refunds, are not subject to social security contributions or income tax.
Excluded from the calculation basis for ZUS contributions are holiday benefits paid on the Company Social Benefits Fund up to PLN 1,914.34.
On the other hand, benefits like holiday pay, private medical insurance, life assurance/insurance, and sports activities are subject to both social security contributions and taxation.
Only If the employee participates in the costs of some benefits, in accordance with the regulations, the benefits is taxable but without ZUS contribution.
Employers can also provide employees with additional extras, such as gym memberships or other various perks. It’s important to note that these extras are taxed, but some may be exempt from social security contributions. For example, prizes in the form of jubilee bonuses, inventiveness or research work bonuses, sports-related bonuses, and gifts for important life events (up to a certain limit) are exempt from social security contributions. Additionally, employers with fewer than 50 full-time employees may establish a Social Fund, which provides benefits and rewards to employees that are exempt from both social security contributions and taxation until December 31, 2023.
In Poland, there are also additional tax deductions available for certain circumstances. These include deductions for single parents with children, large families with four or more children, individuals who have recently relocated to Poland, young people up to 26 years old, working seniors, and couples filing taxes together. These deductions can lower the overall tax rate up to a certain income level.
In conclusion, payroll taxes in Poland encompass various contributions and deductions that contribute to the overall cost of employment. Employers are responsible for making contributions to social security funds on behalf of their employees, while employees may benefit from tax deductions and certain exemptions for specific circumstances. It’s essential for both employers and employees to understand the payroll tax system in order to comply with regulations and make informed financial decisions.