On September 15, 2022, the Journal of Laws of the Republic of Poland published an ordinance on the minimum salary and the minimum hourly wage in 2023.
Inflation plays a huge role in minimum wage increases. This follows from the content of Article 3 of the Minimum Wage Law. According to its content, if the inflation index projected for the following year exceeds 5%, the minimum wage must be raised twice a year: January 1 and July 1. According to the assumptions of the draft national budget for 2023, the mentioned value is 7.8%.
As of January 1, 2023, the minimum salary has risen to PLN 3,490, and as of July 1 will rise to PLN 3,600. As of July, the minimum salary will be PLN 590 higher than the minimum salary in 2022.
At the same time, the minimum hourly wage in 2023 has increased to PLN 22.80 from January 1 and will rise to PLN 23.50 from July 1. The wage in January means an increase of PLN 3.10 over the amount in effect in 2022 (i.e. 15.7%), and in July it will be PLN 3.80 higher (19.3%).
Minimum wage increase - tax aspects
Polish Deal changes introduced an increase in the tax exempt amount to PLN 30,000, will increase the tax-reducing amount to PLN 3,600 annually (12% of the tax-free amount, i.e. PLN 30,000 x 12%). The minimum wage increase in 2023 resulted in the tax base of those receiving the minimum wage for the entire year exceeding the free amount threshold. Taxpayers will be required to file a tax return and pay PIT at a 12 percent tax rate. The amount of tax on an annual basis will be just over PLN 400, and on a monthly basis about PLN 30-40.
Increasing the minimum salary is also connected to the salary-related employee benefits and obligations. On its basis, the following are calculated, inter alia:
- remuneration of employees with the lowest earnings;
- the maximum amount of severance pay in case of collective or individual dismissal for reasons not related to the employee;
- minimum remuneration for standby time and downtime through no fault of the employee;
- the minimum amount of compensation for mobbing at work;
- the minimum basis for the old-age and disability pension contribution for persons on parental leave (if they were employed under an employment contract);
- night work allowance;
- amounts free from deductions from wages and salaries, which must be left at the disposal of the employee.
PwC's comment
The minimum wage increase in 2023, due to the projected high level of inflation, has affected about 2.7 million people. The result of such changes is that the tax base of those receiving the minimum wage throughout the year will exceed the free amount of PLN 30,000, and consequently taxpayers will be required to pay PIT at a 12 percent tax rate.
The most common form of employment in Poland is the employment contract, which is significantly restricted by the Labour Code. Perhaps a good solution could be to look for more flexible forms of cooperation. An example would be a business-to-business (B2B) contract with a sole proprietor. It not only involves a high degree of freedom in shaping the terms and conditions of cooperation, but also means that you can choose the form of taxation of your income - which in turn can result in a higher net salary for the self-employed. Financial benefits can also include lower social security contributions for beginning entrepreneurs, or the possibility to use various types of subsidies.
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