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Tuesday, November 28, 2023

Hiring in Poland – Payroll & Employment Law to Know

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It’s become an open secret that countries in Eastern Europe, and especially Poland, are emerging as top destinations for companies looking to outsource their IT operations. Many companies are opening regional offices to take advantage of the high level of talent at an affordable price.

According to some assessments, Polish developers are ranked among the very best in the world, which makes it easy to see why so many tech companies are lining up to hire them. The low cost of living in Poland keeps salaries low, especially by Western standards, which means a company can hire more developers for the same budget they might have in more expensive countries. 

It’s not just tech companies, however, that are opening branches in Poland. As a member of the EU, Poland can be relied on to maintain law and order, and its location, next door to the economic powerhouse, Germany, is a strategic asset that should not be ignored.

Key Payroll and Employment Law

With the tentative decline in the COVID-19 pandemic as vaccinations demonstrate their effectiveness, many companies are expected to resume efforts to hire a team in Poland, both in search of programmers and any number of other professions. The Polish population is highly educated and highly proficient in English, making it easy to find skilled employees alongside a full workforce of unskilled workers.

Before you begin to hire, however, it is important to become familiar with Polish labor laws and tax codes. Using an online resource with updated information (such as papayaglobal.com/countrypedia/country/poland/ can help, enabling you to know the basics so you budget correctly and understand the essentials to be compliant.

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Tax laws might be the hardest to master, especially because they are the most likely to change without much preparation. Currently, you will pay 19.48% – 22.14% in employer taxes on the salary for each employee you hire. Employees will pay 22.71% in social taxes and between 17% and 32% in income taxes, depending on their pay rate.

It is also essential to know the minimum wage, which is currently 2,800 PLN. That represents the lowest monthly salary you can offer your employees according to Polish law.

Overtime law demands that you pay your employees 150% per hour for work done above 40 hours a week. That number jumps to 200% when it is performed on Sundays, at night, or on a holiday.

It is also important to budget for paid time off. Polish law demands a minimum of 20 paid days off. For employees that have more than 10 years of experience at your company, the minimum vacation time is 26 days.

When it comes to terminations, it’s important to follow the law to avoid any legal repercussions later. The law states that a permanent employee receives at least 2 weeks of notice if the employee has less than six months of service; a month of notice if the employee has 3 years or less of service; and 3 months of notice if the employee has worked at the company for more than 3 years.

If there is severance pay, then the employee receives 1 month of pay for two years of service and 2 months for anyone with 2-8 years of service.

Options For Hiring in Poland

When you are familiar with the local labor and tax laws, you are in position to consider the different options available for expanding your business to Poland. For most businesses there are two primary options that reflect different approaches you might take to the expansion.

Traditionally, companies that opened branches in Poland had no option other than going through the whole process of incorporating in the country by opening a legal entity. The entity gave them legal status in the country and allowed them to hire employees legally.

That option still exists for companies that are confident they will stay in Poland for the long term and expect to hire a critical mass of employees, say 10 or more. Opening an entity is the ultimate goal for every business engaged in overseas expansion. It is the most stable option and the one that opens the most possibilities legally.

Some companies, however, would prefer to take a slower and safer approach. For them, the Employer of Record (EoR) option is a good way to test the market while greatly reducing the amount of time it takes to start hiring and launching operations.

The EoR assumes the legal status of the employer on behalf of the company and accepts legal liability for the employees. It also handles the administrative part of the employment, such as payroll and benefits administration. The company, however, directs the employees in their day-to-day tasks.

Essentially, the EoR functions as an outsourced back office for a company that isn’t ready to open an entity. The first time getting employees on the ground lets a company take advantage of any opportunities that are available right away, and it allows the company time to see if the product is a good fit with the market. It also gives companies the option of a short-term engagement in a country, in full legal compliance – something that is hard to do with an entity, which takes time and money to open, and more time and money to close.

Ultimately, if the expansion proves durable and the company believes it will invest in it long-term, it will be wise to open an entity, take on the liability, and operate as an independent company. That gives it options for partnerships and contracts it might not get working with an EoR. An entity is a big and bold move, but if the situation calls for it, it’s also the best and most stable way to run an overseas expansion.

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