Information for Employers about Payroll in Poland

When recruiting employees, employers in Poland are expected to abide by a set of regulations, and one of the problems that needs to be solved is Poland's payroll.

The taxes system is advantageous in this regard, which is a benefit while conducting business in the nation. In Poland, there is neither a payroll nor a tax for this reason. Despite the fact that this is an exemption, companies must nevertheless pay their workers in accordance with the terms of the written contract, and even though there is no payroll tax, they must still pay other taxes on time.

Please contact the tax and employment specialists at our law office in Poland for full support after reading the few payroll-related difficulties below.

Payroll in Poland

The total sums that an employer or corporation in Poland must pay to all of its employees during a specific, predetermined period of time constitute payroll. Payroll calculation can be done internally, by a team within the organization, or, more frequently, it can be outsourced to a Polish accounting firm that also offers these kinds of services.

When a company pays its employees a salary in Poland, personal income tax is withheld at the source and managed by the Polish Tax Office. By assessing the benefit's monetary value, the benefits provided to employees in kind are also reflected in the final income amount.

The Polish Social Insurance Institution, which is a division of the Ministry of Labor and Social Policy, is responsible for collecting and managing social security contributions.

Starting a Polish business requires adhering to accounting standards, and our attorneys in Poland can give you expert guidance and support for abiding by the rules in effect, including those that deal with payroll in Poland.

We recommend businesses to ask for specialist help in order to standardize payroll procedures internally, maintain data, and submit documents in accordance with legal requirements. It is frequently advantageous to work with a partner organization that specializes in these services, especially for foreign businesses operating in Poland.

Poland's contributions to employment

Despite the absence of a distinct payroll tax in Poland, hiring employers are nevertheless liable for a number of taxes in addition to the primary income. Our attorneys have listed these below:

• 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.

Foreign employees are subject to tax

Poland uses a residence-based taxes system for both businesses and people. This means that in situations where a Polish company hires a foreign executive or employee, the way in which this person is taxed will be based on the total number of days spent in the country. The international executive will be treated as a non-resident for tax purposes, which will solely affect the taxes on income with Polish origins.

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.

The employment agreement taxation rules apply when a foreign person works in Poland as part of an employment contract. The rules for taxation on director's fees generated from Poland will apply where the acts are carried out in accordance with a resolution, for instance when there is no employment contract but a foreign firm has issued a resolution and appointed the person to execute activities there. In some circumstances, double taxation avoidance regulations may be applicable.

All forms of compensation and perks received from Poland are considered for tax purposes for overseas executives and partners. Earnings in kind and cash are both considered. Payments made by a polish employer to an expatriate or international executive in their home country or place of origin will also be taxed. Retirement benefits are one example of these contributions. For additional information on the particular regulations that apply when recruiting expatriates or foreign executives for a Polish company, contact one of our lawyers in Poland. You can get more information from our Polish team that specializes in tax and payroll.

Insurance receipts, daily reimbursements or allowances, money generated overseas, and other incomes covered by bilateral or international agreements are typically exempt from the Polish personal income tax.

Foreign employees in Poland do not benefit from regular, specific tax deductions or reductions.

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.