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Country Spotlight

Payroll Considerations in Poland

By Agnieszka Polañska-Kanka

Poland1464880402_94978

Poland2_1464880398_18614Situated in “the heart of Europe,” Poland has the largest economy in Central and Eastern Europe (CEE). It is one of the most attractive locations for foreign investment, owing to its economic and political stability and its educated and competent workforce with extensive foreign language skills. According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2013, Poland will be ranked the fourth most attractive economy in Europe and 14th in the world in the next two years. Its consumer market of 38 million strong is one of the biggest in Europe.

Poland’s major trade partners include Germany, Russia, China, France, the U.K., Italy, Hungary, Ukraine, and Spain. It is a country of rich history and cultural heritage and beautiful nature, whereas tourists are enchanted by Polish hospitality and friendliness.

Main HR Issues Under Polish Labor Code

Below are the main duties of employers and employees:

The employer is responsible for, among other things, the following:

  • Completing an employment contract in writing. This duty should be carried out before the first day of work or at the latest on the first day of work.
  • Arranging a medical check-up by a certified doctor before the commencement of employment.
  • Providing health and safety training for the employee.
  • Informing the new employee about the employment conditions within seven days of employment.
  • Providing the employee with internal work regulations.
  • Registering the new employee with the Social Security Office within seven days of employment.
  • Instructing employees as to the scope of their duties.
  • Ensuring safe and hygienic working conditions.
  • Paying the correct and timely remuneration.
  • Maintaining personal files.
  • Keeping attendance records.

An employee is obliged in particular to:

  • Work conscientiously and carefully.
  • Follow the orders of his/her superiors at work.
  • Observe work hours.
  • Observe workplace regulations.
  • Observe safety and hygiene regulations and fire prevention regulations.
  • Observe confidentiality regulations.
  • Inform the employer of any absences from work.

Obligation to Maintain Personal Files

Per the Polish Labor Code, all employers are obliged to maintain personal files. These files should be divided into three sections:

  1. Section A: Personal documents regarding the job application
  2. Section B: Personal documents regarding employment and employment history in the company
  3. Section C: Documents regarding termination of the contract

Essential personal documents include personal questionnaire; copies of work certificates from previous employers; copies of diplomas or school reports; employee’s tax statements (PIT-2 form, statement regarding annual joint taxation, etc.); signed employment contract; and documentation regarding maternity leave and paternity leave.

Types of Employment Contracts

The contract of employment shall be:

  • for a probation period
  • for an indefinite period
  • for a definite period (fixed term)

The definite and indefinite contracts may be preceded by an employment contract for a trial period, not longer than three months. An employment contract shall be made in writing.

The employer shall notify the employee in writing, no later than within seven days from the date of conclusion of the employment contract, of the daily and weekly working-time standards, the frequency of payment of remuneration for work, the vacation leave, and the duration of contract notice period, the night period, location, date and time of remuneration payment, as well as the procedure applied for the employees to confirm arrival and presence at work, and justifying absence from work.

Termination of Employment

Before terminating an employment agreement, an employer should consider the risk of a labor dispute. Legal advice should be considered prior to taking such action. There are various ways to terminate a contract of employment:

  • By mutual agreement of the parties
  • Declaration by one of the parties in compliance with the notice period
  • Declaration by one of the parties of non-compliance with the notice period
  • After lapse of the prescribed period 

There are various notice periods to be considered depending on the nature of the agreement (trial, indefinite, or definite) and the employment periods lapsed. This can range from three days to three months.

Attendance Records

Attendance records must be maintained for each employee in the company. The information recorded should include scheduled work hours, actual work hours, overtime, night shift, full paid holiday, unpaid leave, sick leave, child care, business trips, and other absences. The information is required to calculate salaries and benefits accurately.

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Leaves of Absence

Annual Leave
Rights, terms, and conditions for paid holidays are covered by the Labor Code and depend on variousLeave_1464880408_40987 factors. While there is a lot of conformity, cases should be considered individually. An employee is entitled to annual paid leave of 20 or 26 days. Annual holidays are 20 workdays for employees who have been employed in total for up to 10 years and 26 workdays if employees have been employed in total for more than 10 years. The employer fully pays annual leave.

Maternity Leave
The length of paid maternity leave depends on the number of babies born at once. A female employee is entitled to maternity leave of:

  • 20 weeks for one child 
  • 31 weeks for two children 
  • 33 weeks for three children 
  • 35 weeks for four children 
  • 37 weeks for five or more children

The ZUS (Social Security Institution) fully finances maternity leave.

Paternity Leave
Fathers are entitled to use paid paternity leave for a child up to the age of 24 months. Currently, the duration of paternity leave is two weeks. Paternity leave is granted on the employee’s written application. This application should be submitted at least seven days before the start of this leave. The employer is obligated to consider the employee’s application. The ZUS fully finances paternity leave.

Parental Leave
Parental leave shall be granted at the written request of the employee (mother or father of the child) directly after completion of the maternity leave. The employer is obligated to consider the employee’s application. The length of parental leave totals 32 for the birth of one child (or 34 weeks for the birth of two or more children in one delivery).

Parents can use this leave at the same time (each can use half of leave or share it between themselves). Parental leave is granted once or in parts (no more than four parts). The leave must be taken by the end of the calendar year in which the child turns 6 years old.

An employee should submit the application no more than 14 days after the date of birth (for whole period of maternity leave and parental leave employees receive allowances in amount of 80% of the base), or at least 14 days before the commencement day (for the period of maternity leave and first six weeks of parental leave, employees receive allowances in amount of 100% of the base, and for the remaining period of parental leave employee receives allowance in amount of 60% of the base). The ZUS fully finances parental leave.

Non-Paid Leave Connected With Child Care
The length of childcare leave has been specified in months (36 months). Childcare leave can be taken in a maximum of five parts, until a child is 6 years of age. In the case of a child requiring personal care by the employee due to the child’s state of health, confirmed by a ruling on disability or a level of disability, the time limit for using leave continues until the child is 18 years old.

Sick Leave Pay
Generally, an employee is entitled to 80% of his remuneration for all days of his absence from work as a result of illness, supported by a doctor’s note, up to the maximum number of days set in the labor and social security law. An employee is entitled to be paid the sick leave if he has been insured (sickness insurance) for at least 30 consecutive days (obligatory insurance).

In certain cases such as accidents on the way to and from work, pregnancy, or organ donor schemes, employees can receive 100% of their remuneration.

The sick pay is payable by the employer to the employee for periods of incapacity for work or isolation due to communicable disease of a total duration not exceeding 33 days in a calendar year, and—if the employee has reached 50 years of age—not exceeding 14 days in a calendar year.

The sickness allowance is payable by ZUS from the 34th day of incapacity for work in a calendar year or from the 15th day (respectively) if the employee has reached 50 years of age.

The current maximum paid sick leave is 182 days, or 270 days for sickness during pregnancy.

 

Basic Personal Income Tax Regulations  

The detailed regulations governing individual areas of personal income tax are contained in the Law of 26 July 1991 (consolidated text: Journal of Laws of 2012 No. 80, Text 361 with further amendments)

In Poland, there are two tax brackets (see Table 1). The Polish tax authorities provide certain allowances and costs to reduce the tax liability. The legal minimum monthly wage for work in 2016 is Polish zloty (PLN) 1,850.00 (gross).

The amount of annual tax relief is PLN 556.02 (monthly PLN 46.33).

Income-related costs depend on the employment relationship, whether based on an employment relationship, cooperation contract of employment, or remote work (see Table 2).

50% Tax-Deductible Expenses
There is a limit on income earned from copyrights and related ownership rights. In 2016, it amounts to PLN 42,764. In the Act regarding changes to Personal Income Tax from Physical Persons, a limit of 50% of tax deductible expenses has been set.

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Basic Social Security Regulations 

The detailed regulations governing individual areas of social security are contained in separate laws. The most important of them include:

  • The Law of 13 October 1998 on the social insurance system (consolidated text: Journal of Laws of 2009 No. 205, Text 1585 with further amendments);
  • The Law of 17 December 1998 on pensions from the Social Insurance Fund (consolidated text: Journal of Laws of 2009 No. 153, Text 1227 with further amendments);
  • The Law of 28 August 1997 on organization and operation of pension funds (consolidated text: Journal of Laws of 2010 No. 34, Text 189 with further amendments);
  • The Law of 25 June 1999 on cash social insurance benefits in respect of sickness and maternity (consolidated text: Journal of Laws of 2010 No. 77, Text 512 with further amendments).

Pension and disability insurance are no longer applicable on amounts exceeding the limit set by the government on the cumulative gross salary figure. In 2016, this limit amounts to PLN 121,650.00 (see Table 3).

Registration With the Social Security Office (ZUS)
The company is obliged to submit a registration form to the relevant Social Security Office (ZUS) within seven days from:

  • The date of employment of the first employee,
  • Commencement of other ZUS obligations in relation to the nature of the business. 

Included with the form are details of the entity itself and identification numbers.

Responsibilities of the Employer in Regard to ZUS
Employers must also register employees within seven days of the commencement of employment/social insurance liability. The employer is responsible for preparing all the calculations, making the deductions, and paying the contributions to ZUS each calendar month.

The employer must also submit the necessary ZUS forms and pay their portion of due contributions within 15 days of the following month.

Individuals (not employees, but for instance entrepreneurs) paying their own contributions have 10 days from month end to submit the forms and settle amounts due.

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Right to Sickness Coverage

Since 1 January 2013, EWUŠ (electronic system of verification of beneficiaries’ rights) has been introduced, which enables verification of the right to sickness coverage by the PESEL number (individual ID number) and an identity card.

Both Employer and Employee Liable for Social Security Contributions

The employer contribution is quite significant and can add approximately 20% to the total cost of employing an individual. Meanwhile the employee deduction is also very significant. 

The net amount received by an employee after tax and social security may be 60% to 70% of gross salary, while the employer pays out approximately 120% of the gross salary. The difference between the amounts paid out by the company and that received by the employee goes to the government.