National Minimum Pay in Poland: An Increased Increase?
There is a law in Poland guaranteeing minimum pay for work. There are rules how its amount is calculated and agreed. There are also upcoming elections in October 2019 which may unexpectedly influence its amount.
The national minimum pay is reviewed annually. In 2018, for a full-time employee it was PLN 2100, increased in 2019 to PLN 2250 per month. What will it be in 2020?
By 15th June each year, the government proposes to the Social Dialogue Council (formed by the representatives of trade unions – employers – government) its suggested level of national minimum pay for the following year. The Council has then 30 days to agree the amount of the increase. The new national minimum pay is then announced in the Official Journal “Monitor Polski” by 15th September each year, whether it is agreed by the Council or, in the traditionally more likely case of there being no agreement, it is decided unilaterally by the government. However, the government cannot unilaterally decide on a national minimum pay lower than the one proposed to the Social Dialogue Council in the first place.
During the Summer negotiations in the Social Dialogue Council this year, the proposals for the increase varied from 6% on the employer side to 12% from the trade unions. No agreement was reached so until last week, it was planned that the monthly minimum would increase in 2020 in accordance with the government’s proposal, to PLN2450 per month, i.e. by a healthy 8.2%.
However, on 7 September, during the Convention of the governing “Prawo i Sprawiedliwość” party, it was announced that the national minimum pay should be even higher and go up to PLN 2600 in 2020, with the aim of reaching PLN 4000 by 2023, a scarcely credible 90% in 5 years. It remains to be seen whether this latter number is a considered extrapolation from Poland’s growing economy or just blatant electioneering. In either case it is certainly a warning to employers that they face potentially significantly increased costs over the next handful of years.
For many employers it will mean a need to increase salaries merely to match the national minimum pay threshold. For others, there are certain statutory benefits / rights that depend on the value of the national minimum pay, even if the employees actually earn more. Examples include statutory night work allowance, minimum compensation for discrimination and a cap on statutory severance in case of collective dismissals. But remember that increases required by law will trigger pressure for increases required to maintain differentials between pay grades within the business, so that impact of an increase in the minimum wage will ripple a long way up the organisation. For all, plan for a higher salary budget for next year. The exact amounts will be known by 15th September.
And note it is not the only change with regard to the national minimum pay for 2020. There are rules specifying what components of compensation are included when determining whether the national minimum pay threshold has been met for a specific employee. These components are specifically excluded when calculating the minimum wage:
- long-service award (also known as a ‘jubilee award’);
- special compensation paid to a retiring employee;
- overtime pay; and
- night work allowance.
As of 1 January 2020, seniority allowance also shall be excluded from the calculation of national minimum page. [Seniority allowance is a non-obligatory allowance paid by certain employers in recognition of long-term work for them, usually on a monthly basis.] Where seniority allowance is currently calculated into minimum threshold, the salary of the employee will need to be increased to match not only newly increased national minimum pay but also to exclude seniority allowance from the calculations.