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Payroll in Poland

Payroll in Poland

Employers in Poland are required to observe a set of rules when hiring workers, and one of the issues that need to be addressed is that of the payroll in Poland.

An advantage when doing business in the country is that the taxation regime is beneficial in this sense. Namely, there is no payroll in Poland, no tax for this purpose. However, although this is an exemption, employers are required to pay their employees according to the provisions in the signed agreement and even though there is no payroll tax, they will need to pay other taxes on time.

Read below a few issues concerning payroll and please reach out to the tax and employment experts at our law firm in Poland for complete assistance.

Poland payroll

Payroll in Poland is a subset of accounting, and it represents the total amounts payable by a business or employers to its employees in a given, pre-determined period of time. Calculating payroll can be performed in-house, by a team within the company or, most commonly, it can be outsourced to an accounting company in Poland that also provides these types of services.

 Quick Facts 
Dedicated payroll tax in Poland (YES/NO)NO

Social security contributions

Approximately 35% of an employee’s salary, paid by both employee and employer.

Contributions paid by employer

– pensions & disability insurance,

– accident insurance,

– labor fund,

– employee guaranteed benefits,

– solidarity fund for support of disabled persons (only in certain conditions)

Contributions paid by employee

– pensions & disability insurance,

– sickness insurance,

– health insurance

Employee capital plans (PPK)

A retirement savings plan with contributions from both employees and employers. Consult our lawyers for details.

Personal income tax

12% of the base income for annual income up to PLN 120,000;

PLN 10,800 + 32% of the excess over PLN 120,000 for annual income over PLN 120,000.

Overtime compensation

100% or 50% of the employee’s regular pay rate

Compensation for working on public holidays

regular pay + 100% of regular pay rate for each hour worked

Severance pay

Depends on the employee’s seniority in the company.

Taxable employees benefits

– holiday pay,

– private medical insurance,

– sport activities,

– gym membership, etc.

Annual paid time off

20 – 26 days (depending on employment duration)

Sick leaves

14 – 33 days (depending on employee’s age)

Standard working hours in Poland

40 hours/week

Personalized services (YES/NO)

YES, our law firm provides customized payroll services.

AssistanceOur attorneys can recommend our partner accountants for full payroll services.

Personal income tax is deducted at source in Poland, from the salaried paid by the company to its employees and it is administered by the Polish Tax Office. The benefits offered to employees in kind are also included in final income amount, simply by estimating the cash value of the said benefit.

Social security contributions are submitted to and administered by the Polish Social Insurance Institution, functioning under the Ministry of Labor and Social Policy.

Following the accounting principles is essential when starting a Polish business and our attorneys in Poland are able to provide you with specialized advice and assistance for observing the laws in force, including those relating to payroll in Poland.

We encourage companies to request specialized assistance in order to standardize the payroll process within the company, property manage the date and make the submissions as required by law. Working with a partner company that specializes in these services is often preferable, especially for foreign companies in Poland.

Employment contributions in Poland

Although there is no payroll in Poland as a separate tax, employers are responsible for paying a number of taxes when they hire employees, along with the main income. These are listed below by our lawyers:

  • Social security contributions: the total amount is around 35%, out of which approximately 21% is paid by the employer and the remaining amount, 14%, by the employee.
  • Income tax on salary: the individual income tax rate in Poland varies according to the taxable income and it can have rates of 4%, 17% pr 32%, as listed below by our lawyers in Poland;
  • Minimum wage: the minimum wage in Poland can change, however, our inform investors that in 2020 this had a value of 610.8 € per month;
  • Bonuses: these are established by the employer and they are subject to the 19% capital gains tax.

Severance pay in Poland is another issue to consider, and this can vary according to the rates established in the employment agreement.

The national minimum wage is important, as are the rest of the employment conditions in the country. Before hiring employees, entrepreneurs can discuss these aspects with our employment lawyers in Poland.

Taxation of international employees

Poland implements a taxation model based on residence both for companies and for individuals. This means that in those cases in which a Polish company works with an international executive or a foreign employee, the manner in which this individual will be taxed will be based on the total number of days spent in the country. For this purpose, the international executive will be taxed as a non-resident, meaning that the taxes will only be changed on the Polish-source income.

An individual is a Polish resident when at least one of the two conditions are met:

  • has close personal or economic relations with Poland; or
  • the person spends more than 183 days in Poland, in a given fiscal year.

When a foreign individual performs his duties in Poland under an employment contract, the employment agreement taxation rules prevail. When the actions are performed on a resolution, for example there is no employment contract, however, a foreign company has issued a resolution and an appointment for the individual to perform activities in Poland, then the regulations for taxation on director’s fees derived from Poland will apply. Double taxation avoidance rules can apply in certain cases.

For international executives and collaborators, all types of renumeration and benefits derived from Poland are taken into account for tax purposes. Both in-cash and in-kind earnings are taken into account. When the polish employer makes payments for the benefit of an international executive/expatriate in their country or origin, these will also be taxed. Examples of these types of contributions can include retirement benefits. Our lawyers in Poland can give you more details on the specific requirements that apply when hiring expatriates or international executives for a Polish company. Our team specializing in tax and payroll in Poland can give you more details.

The following types of income are usually exempt from the Polish personal income tax: insurance receipts, daily reimbursements or allowances, income earned abroad, subject to the provisions of international or bilateral agreements.

Foreign employees in Poland do not benefit from regular, special tax exclusions or concessions.

The employment law in Poland

When hiring employees, employers in Poland need to take into account a number of issues, not only the concerning payroll in Poland. The country is a preferred location to start a business in Europe given its large pool of educated employees, combined at the same time with the low personnel costs, when compared to other Western European countries.

Some of the main issue employers need to be prepared for when starting a business is to observe the legal framework for hiring employees and in this respect, the strict EU laws that extend to Poland (including the strict data protection laws that have entered into force) as well as the local Polish laws are important to keep in mind.

In order to clarify any legal aspects, or the scope of the legal framework that is in place, we invite you to reach out to the team of experts at our law firm in Poland. We can help answer any specific questions and provide details on any notable developments that come in force concerning employees’ protection.

Below, we list some of the key points concerning employment in Poland:

  • work permits: the rules are different for EU nationals seeking a job in Poland, compared to those in other countries; obtaining a work permit is required;
  • employment contracts: these can be concludes with a fixed term or remain open-ended; in any case, the specific terms of the employment relationship will be laid out in the agreement; other essential information that will be included sets forth the work conditions, the remuneration, the date of commencement and others;
  • trial period: this is a separate period for which an agreement can be concluded;
  • notice period: according to law, a notice period is included for trial period agreements, fixed-term employment contracts and unlimited term contracts;
  • working hours and overtime: the working time is set at eight hours a day for a five-day work week; overtime is permitted in justifiable circumstances, under the condition that the employer also grants a minimum rest period; the cumulated regular working time and the overtime will not exceed a certain limit;
  • workplace health and safety: it is the employer’s responsibility to provide safe and hygienic work conditions;
  • other issues: employers also need to observe the anti-discrimination laws, as well as the employee benefits such as social security coverage, health and insurance, maternity and paternity leave, sickness and disability leave, etc.

Our team of employment lawyers in Poland can give you mode details about these obligations.

Doing business in Poland

The costs related to doing business in Poland are relatively low from an employment-related and payroll perspective, compared to those in other European countries. As mentioned, employers are not subject to a payroll tax, however, there are several other important taxes for a company that need to be added up when calculating the costs.

Observing the conditions for employment and payroll in Poland are not the only ones that need to be taken into consideration by those who open a business. The main taxes for corporations are the following:

  1. Corporate income tax: the general corporate income tax rate in Poland is 19%; this rate also applies to branches;
  2. Lower corporate tax: a lower rate of 9% can apply to income other than capital gains for small companies are those that are just commencing their activities, if they have a revenue lower than 1.2 million EUR in the tax yar (subject to certain exceptions);
  3. Dividend taxation: dividends received by a resident company in Poland from another Polish, EU/EEA or Swiss company can be subject to an exemption from the withholding tax on dividends;
  4. Capital gains: these are taxed separately at a rate of 19% and an exemption can apply to venture capital companies.

Investors who need more details about payroll, general employment conditions and the applicable law as well as any other matters related to doing business can contact the experts at our law firm in Poland.