Running payroll in Poland

With only two different tax rates on employment income and clearly defined social security contribution rates, running payroll in Poland might seem like an easy, straightforward process. However, the so-called “Polish Deal” which entered into effect in January 2022 has introduced several tax-related changes which will also impact local payroll processing. 

What’s more, employers have to comply with a multitude of different filing and reporting requirements imposed by different authorities, which makes it all too easy to miss a deadline.

Although there is no legal requirement to set up a local legal entity to hire employees in Poland, foreign employers have to register with the local authorities before they can start processing payroll. This includes registration with the Polish Social Security Institution (Zakład Ubezpieczeń Społecznych, short: ZUS) and the Polish Tax Authority. The latter must be done first in order to obtain a Polish tax identification number (NIP) which is needed to register for social security payments.  

Registration with the ZUS is done by handing in the necessary form (ZUS ZPA form). For companies without permanent establishment in Poland, registration can be handled by an official representative or by a local payroll provider. New employees must also be registered with the social security authority. Both registration processes must be completed within 7 days. Hiring declarations must be made electronically via the official government platform provided for this purpose which is the “Platnik”. After registration, the authority issues a unique identifier for each employee, the so-called PESEL number.  

Furthermore, employers need to register for the State Fund for Rehabilitation of Disabled Persons (short: PFRON). However, this is only necessary for businesses with more than 25 employees. Foreign businesses that decide to incorporate in Poland additionally need to register at the National Court Register (KRS). In this case, there is no separate payroll-related registration with the local tax authority since businesses are automatically registered during their incorporation process. Setting up a local bank account is optional but recommended. Payments to authorities can also be made from a foreign bank account. 

Both employer and employee make social security contributions to various funds. There are several reporting and withholding requirements employers need to fulfill with regard to social security contributions and income tax. Filing deadlines vary between authorities. 

Tax considerations

The Polish tax system is relatively simple as it only consists of two tax rates, a 17% base rate and a high rate of 32%. In January 2022, the threshold dividing the two tax bands increased to PLN 120,000 (from PLN 85,528 in 2021). An additional solidarity surcharge of 4% is levied on annual income exceeding PLN 1,000,000. 

There is a tax-free allowance which has recently (as of 2022) increased to PLN 30,000 per year as well as several tax credits and reliefs which need to be considered when determining the calculation base for income tax. The latter include a child relief, a standard employee tax deduction and more. There also is a new middle-class tax relief which will affect monthly income from PLN 5,701 to PLN 11,141 and which was introduced as part of the Polish Deal. 

Employment income earned by employees under 26 is exempt from income tax - up to annual income of PLN 85,528 (valid for 2022 tax year) - unless they earn more than PLN 120,000 (in 2022) in which case the 32% rate applies. Benefits in kind are taxable while social security contributions are deductible - except for healthcare contributions. 

Resident taxpayers pay tax on their worldwide income. Non-residents are only taxed for income earned in Poland. Residency in terms of income tax is determined via the 183-day rule. A person whose center of interests (work, life etc.) is in Poland is also considered a tax resident. There is no additional local income tax. 

Tax withholding and reporting 

Employers are responsible for calculating and withholding income tax from their employees’ salaries at source on a monthly basis. The local tax authority administering and collecting tax is the Urzad Skarbowy. Payments must be made to the employee’s individual tax account (so-called micro account linked to the employee’s PESEL number) no later than the 20th of the month following the pay period. 

There is no monthly tax filing obligation. Instead, employers file a cumulative electronic annual income tax return (PIT-4R) by 31 January of the following year, plus an annual account for each employee (PIT-11). This one must be sent to the authority as well as to the employee. 

The monthly income tax withholdings only count as advance tax payments. Therefore, employees are obligated to file their personal tax return by 30 April of the following year and settle the difference between the amount paid and the total amount due. Married couples can either file a joint or separate tax return. The tax year runs from 1 January to 31 December.

Social security contributions

Social security contributions are levied on both employee and employer while the latter pays the bigger share. The competent authority is the ZUS. Contributions go towards several social security funds which mainly cover retirement, disability, sickness and work accidents. In total, employers currently contribute between 14.93% and 17.86% while the employee share of the social security contributions is 13.71% - excluding health insurance (see below). 

Pension and disability contributions are only levied on the part of the employee’s annual income which does not exceed 30 times the national average salary. For 2022, the annual salary threshold is set at PLN 177,660. 

The contribution rate to the work accidents insurance depends on the business activity as well as on the number of employees. Foreign employers as well as local employers with less than 9 employees pay a 1.67% flat rate while locally incorporated businesses with over 9 employees pay between 0.67% and 3.6%. 

There also is a 9% healthcare contribution which is payable by the employee and which must be taken out of the employee’s wages before calculating the other social contributions. Additional minor contributions are made by the employer to the National Labor Fund and the Wage Guarantee Fund. From January 2021, it is mandatory for most employers to set up an additional retirement savings plan (Pracowniczy Plan Kapitałowy, short: PKK) to which they contribute 1.5% of the employee’s monthly salary. Employees pay a 2% contribution unless they decide to opt out. 

It is the employer’s responsibility to calculate and withhold the employee’s share of the social security contributions and remit the withheld amount to the ZUS along with their own contributions. Payments must be made monthly. The due date is the 15th of the following month. 

Employers further have to prepare and file a monthly (ZUS DRA) as well as an annual social security declaration (ZUS IWA) which lists the total amount of contributions paid in that particular month or year - annual returns are only mandatory for businesses with more than 10 employees. The due date for the monthly return is the same as for the payments. There are several forms that need to be filled out, including a separate declaration for sickness-related absences. The annual return is due by 31 January of the following year. All declarations must be made via the Platnik platform. 

Companies employing more than 25 employees are required to make monthly contributions to the Rehabilitation of Disabled People Fund (PFRON). The rate varies depending on a number of factors and is updated on a quarterly basis. A separate monthly declaration must be filed via a dedicated online system. Payments are due on the 20th of the following month. The due date for the annual PFRON declaration is 20 January of the next year.

* The exact rate depends on the business activity and the number of insured employees.  

** Does not apply to foreign employers. 

*** Please note that employees further have to make a 9% healthcare contribution which is calculated after deducting the social security contributions listed in the table above.

Employees in Poland are entitled to various statutory benefits. These include:

• Annual leave and public holidays: minimum 20 days (increasing to 26 days after 10 years of service), plus 13 public holidays

• Maternity leave: 20 weeks (extendable to up to 37 weeks in case of multiple births)

• Paternity leave: 2 weeks 

• Parental leave: up to 32 weeks (34 for multiple births) for both parents on statutory parental leave allowance, further 36 months of unpaid upbringing leave are possible

• Sick leave: 33 days within one calendar year (14 days for employee over 50) paid by the employer, afterwards employees receive statutory sickness benefits for up to 182 days

For more information on employee benefits and other employment requirements in Poland (including severance pay and termination procedures), check out our Global Hiring Guide.

Poland has a national minimum wage which is set by the government every September for the following calendar year. In 2022, the Polish minimum wage stands at PLN 3,010 per month (up 7.5% compared to 2021). The hourly minimum wage is hence fixed at PLN 19.70. Overtime needs to be remunerated at a rate of 150% (200% on Sunday, public holidays, days off or for nighttime work). There is no legal obligation to provide employees with a 13th salary. 

According to Polish law, payroll must be processed once a month and payments to employees must be issued no later than the 10th of the month following the payroll run. Both cash and bank transfer are possible payment options. Bank transfers can be ordered from a foreign bank account. 

Although it is common practice to provide employees with a monthly payslip - either in paper form or digital - there is no legal obligation to do so. However, employment (and thus payroll) related information must be kept for a period of 10 years.