Complete Guide to Payroll Processing in Poland

Poland is a favorable country for foreign investment due to its stable economic growth, vicinity to major European markets, enhanced infrastructure, and access to highly qualified employees. The World Bank categorizes Poland as a high-income economy making it one of the premiere locations to start a business. It ranks 23rd globally in terms of GDP (nominal) and 40th in the 2020 Ease of Doing Business Index.

Companies aiming to enlarge their business in Poland must be acquainted with local rules and regulations specified by the Polish government. This also helps in managing payroll in Poland and attracts the top talent in the country. A company also needs a comprehensive understanding of tax systems, salary structure, payroll cycle, payroll options, social security contributions, entitlement and termination terms, etc.

You must thoroughly understand payroll tax in Poland and labor requirements to set up precise and compliant payroll. The below guide explains all the aspects you should know about payroll in Poland.

How Is Payroll Calculated in Poland?

Poland’s payroll policies and procedures focus on making payments after services provided by employees. To ensure precise payroll calculation, you should regularly maintain record-keeping. Moreover, you must withdraw social security contributions and other applicable deductions by abiding by payroll rules and regulations in Poland.

The formula to calculate payroll is as below:

Net Salary = Gross Salary – Gross Deductions

here,

• Gross Salary = Basic Salary + All types of Allowances + Reimbursements + Bonus
• Gross Deductions = Professional Tax + Income Tax + Leave adjustments + Insurance + Loan repayments (if any)

Important Elements of Salary Structure in Poland

The below-discussed elements contribute to the salary structure in Poland:

Cost to Company (CTC)

The CTC signifies an annual amount a company owes while hiring an employee. It covers employees’ gross and net remuneration, additional benefits, payroll deductions in Poland, etc.

Gross salary

It includes all facets that assist an employer in designing an employee compensation package. The included aspects are health insurance, social security contributions, total income before considering payroll deductions in Poland, etc.

Net salary

It denotes the amount credited to an employee’s bank accounts after making all deductions from the gross salary.

Basic salary

It refers to the amount employees receive after the employer calculates all deductions and additions from the annual package. Its value depends on the employer’s job designation and the sector’s undertakings.

Allowances

It denotes all the job-related expenditures that employers are indebted to their employees. It benefits the employees by maintaining a work-life balance. In Poland, all employees are entitled to several allowances, regardless of the industry and the organization.

How to Set Up a Payroll in Poland

The below steps assist businesses intending to set up payroll in Poland:

• Step 1: Register a business in Poland with the Trade Register. The first step also validates your business name’s validity.
• Step 2: Get an EIN (Employer Identification Number) from the IRS.
• Step 3: Register the company name, national tax number, and labor and tax registration.
• Step 4: Obtain a state or local business ID (if needed).
• Step 5: Specify your team’s information, including each employee’s full name, employment joining or termination date, tax filing number, address, date of birth, and compensation details. The list also includes the following:

1. 1. Each employee’s job title
   2. Bank details
   3. Education documents
   4. Annual salary
   5. Work certificates from their former employers
   6. Personal income tax form
   7. Statement on joint spouse taxation

• Step 6: Categorize your employees among the part-time, full-time, and independent contractors.
• Step 7: Register with the tax and social security authorities.
• Step 8: Register for VAT, and pension and health insurance through the Tax Authority.
• Step 9: Register in CEIDG (Central Register and Information on Business Activity) or KRS (National Court Register).
• Step 10: Register for AHV (governmental social security) and registration pension (BVG).
• Step 11: Whenever hiring new employees, register them in ZUS (Social Insurance Institution) within 7 days.
• Step 12: Open a Poland bank account with a local bank to release payroll-related payments. You require the court and registration information (including health insurance registry, proof of statistical number, etc.) before authenticating the business bank account.
• Step 13: Calculate the employee’s payroll amount and authorize your company’s payroll cycle and structure.
• Step 14: Pay each employee through a local entity (which allows you to recruit and pay employees compliantly) or partner with an EOR provider platform in Poland.

A Step-by-step Process of Payroll Processing in Poland

The processing of payroll in Poland involves 3 stages which are discussed below.

1. Pre-payroll stage

This stage focuses on Poland’s legal requirements to process payments and payroll. The following section describes the mandatory components:

Business profile

You should register your business as a legal entity. The Polish Ministry of Justice handles the business registration process and will provide you with a unique business number. Make sure to state this number on all official payroll communication.

Attendance policy

The attendance policy states the rules set for the employees’ attendance. It helps you to calculate overtime, permissions, standard and special attendance, and more. Hence, the policy assists you with payroll calculation and compliance.

Statutory components

It defines the existing and new statutory compensation laws and regulations that entitle the employees with salary and leave entitlements.

Salary components

It considers different factors impacting salary calculation, i.e., allowances, deductions, and leave types.

Payment schedule

It defines the day on which the employee payments must be disbursed. Moreover, it defines a fixed payment schedule to avoid payment delays. This component informs the employees on when they will receive their monthly payments.

Employee details

You must gather professional and personal information about all your employees including employees’ names, nationalities, job titles, departments, etc. If any issues about payroll arise, these details will work as evidence and ascertain that the particular employee receives regular payments. These collected details are entered into payroll software.

2. Payroll calculation stage

In this stage, you need to enter the data gathered from the above stage into the payroll system. You must calculate the necessary deductions and taxes and then equate the obtained results to the employees’ net pay. Moreover, you should carefully check the process to ensure it is error-free. Hence, you must track employees’  working hours and salaries and print payslips.

You must calculate and maintain payroll records manually, paper-based, or automatedly. This assists you in the timely processing of payments and simplifies the compliance and reporting processes.

3. Post-payroll stage

After setting up your payroll processes, the following components help you to finalize them.

Statutory compliance

The payroll administrator should strictly follow statutory compliances when performing payroll processing. Deductions like TDS, EPF, ESI, and more must be deducted from the employee’s payroll. These deductions are to be funded to the respective government agencies or authorities.

Salary payments

You can use any of these ways to release salaries to your employees.

– Request the bank (where your company’s account exists) to initiate salary payment

– Use software that automatically disburses salaries to your employees

Payroll accounting

It involves tracking payments and payroll-related expenses that help you to meet reporting and compliance requirements. Internal payroll accounting allows you to keep expenses under control.  Alternatively, you can outsource it to an external auditing service.

Payroll reporting and compliance

It implies that you should prepare all mandatory compliance and reporting forms to convey to local regulatory authorities. It specifies all contributions, withholdings, compensation, and other details requested in your compliance and reporting forms.

Payroll Contributions

Based on the salary, the employees and employers should contribute to social security in Poland to conform to the Poland payroll requirements.

Employer contribution

Employee contribution

Employee payroll contributions include the following elements.

Payroll Cycle

In Poland, employees are usually paid monthly before the 10th of the following month.

Poland Payroll Options for Companies

Employers can choose among different options to efficiently process the payroll in Poland based on their needs and budget. The following section discusses the HR payroll in Poland options.

• Internal payroll: Larger companies with long-term contracts signed with Poland can run internal payroll. It is an expensive option as the company must dedicate enough time and recruit a skilled workforce competent at setting up payroll.
• Remote payroll: This option of the Poland payroll guide focuses on using remote payroll with your company. The remote payroll compensates the employees. Despite being a cost-effective option, the company should know various labor laws in Poland.
• A Poland payroll processing company: Make sure to use this option of the Poland payroll guide after exhaustively researching the market. It suggests using services from a trustworthy payroll processing company that is knowledgeable at setting up payroll and payroll rules and regulations in Poland.
• Poland payroll outsourcing: This option conveys a simple, economical, and flexible approach to administering payroll in Poland. Companies can utilize services from an international PEO service provider like Multiplier. It manages all the components of the Poland payroll process and ascertains that the payroll processes conform to the Poland payroll requirements. It also dismisses all the challenges of payroll processing in Poland and brings your focus to the company’s development.

Entitlement and Termination Terms

Entitlement terms in Poland

The employees in Poland are entitled to the following benefits.

Paid time off

• The employees are entitled to paid annual leave of 20-26 days (based on their work experience).
• The below table indicates the number of paid leaves offered to employees depending on their work experience.

Sick leave

• The below table indicates the number of sick leaves that employees are entitled to as per their age.

• Sick leave compensation is made at either 80% of the allowance basis (if the illness develops during pregnancy) or 100% of the allowance basis (if the illness is due to an accident on the commute to the workplace).

Maternity leave

• The below table indicates the number of maternity leaves that female employees are entitled to.

The Social Security Institute compensates the maternity leave at 100% of the employee’s regular salary rate.

Paternity Leave

• Fathers in Poland are entitled to two weeks of paid paternity leave.
• Social Security compensates the paternity leave at 100.00% of the employee’s regular salary rate.
• It is provided within 24 months after the child’s birth or from the adoption date. The child’s age must be below 7 years.

Parental Leave

• Employees are entitled to up to 32 weeks of parental leave in Poland.
• It is offered to both female and male employees and adoptive parents after finishing the maternity leave.
• The employer compensates for the initial 6 weeks (100.00% of the employee’s regular salary rate). Subsequently, Social Security compensates for the leave (at 60.00% of the employee’s regular salary rate).

Public holidays

• The employees in Poland get 13 public holidays per year.

Severance pay

• The employees in Poland are entitled to severance pay as mentioned below:

Special event leave

• Employees are entitled to two days of paid leave for joining a close family member’s life events, including a child’s birth, funeral, or wedding

Termination terms in Poland

• The termination process in Poland differs based on the reason for termination, the type of contract, the Employment Agreement and the Collective Agreement.
• The notice period for a permanent or temporary employee depends on the employee’s duration of service. It is mentioned below:

Poland Payroll Processing Company

To oversee timely, accurate, and compliant payroll in Poland, foreign investors must thoroughly understand local tax, reporting, and employment and compensation requirements. They should also know the compliance with Poland Labor and local employment laws before establishing payroll in Poland. You can utilize services from a global PEO company like Multiplier to gain the maximum possible benefits of payroll rules and regulations in Poland.

How Multiplier Can Help with Global Payroll?

Poland’s payroll management oversees all aspects ranging from payroll processing to entitlement and termination terms. The businesses may not independently manage the whole payroll process because it is time-consuming. You can use the service from an international PEO platform like Multiplier to eliminate these hassles and employ the Poland payroll process.

Multiplier is famous for offering EOR solutions to global corporations existing in 150+ nations. Our proficient staff handles payroll processing, contributions, management, employee recruitment, and other relevant tasks. Furthermore, our SaaS-based PEO services ascertain that payroll processing is accomplished efficiently in the country.