According to the information provided by the government’s spokesman, the removal of the annual limit for the pension and disability contributions, after exceeding which, the said types of contributions are no longer payable is to be introduced as of 1 January 2020. Although official draft of bill in this respect was not released yet, the introduction of the change is highly possible. Additional funds from social security contributions were also included in the draft of 2020 budget bill. As confirmed by the government’s spokesmen, the change will affect the employees and employers but will not affect self-employed individuals.
The scope of changes
If the amendments come into force, the pension and disability contributions will be payable on one’s full employment income – similarly to the remaining social security contributions: sickness and accident insurance. New rule will be also applicable in respect of contributions paid to the Bridge Pension Fund (Fundusz Emerytur Pomostowych) for employees working in specific conditions.
It should be underlined that the consequence of the removal of the annual limit for the pension and disability contributions will be a significant increase of labour costs as well as reduction of the net salary for employees exceeding the cap. The additional costs will be equal to the amount of employee’s (13,71%) and employer’s (app. 20%) social contributions on the amount exceeding currently binding cap.
What does it mean for me?
In case of employees with monthly gross salaries higher than PLN 11 912,50 (the limit for 2019), the removal of the annual limit will have an adverse impact on their net remuneration. At the same time, it will also entail increased employment costs for companies. For example, costs for employer who hires an employee with a monthly gross salary of PLN 15 000 will increase in 2020 by ca. PLN 8 000 per annum in comparison to 2019. The employee with monthly gross salary of PLN 25 000 - under changed provisions – will increase employer’s annual costs by ca. PLN 27 000.
Currently, companies are considering the impact on the potential removal of the said limit in their payroll budgets for 2020 and further years.
What actions I can undertake?
Despite of lack of the formal legislative process at the moment, the issues related with cap removal, may be an impulse to the analysis of the costs which are to be bear by your organization in this respect.
If you have any questions or doubts regarding the above issues, please do not hesitate to contact with our P&O Team
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