If you’re running payroll for remote employees in Poland for the first time, getting it right means you can hit the ground running with your employees in that country. Miss a step, however, and you could rack up thousands of dollars in penalties—or even risk legal action from the Polish National Revenue Administration.
Here’s a step-by-step guide to running payroll in Poland, with everything you need to get it right every time.
Step #1: Decide whether or not to create your own entity in Poland or use an Employer of Record (EOR)
If you want to hire and pay employees in Poland, you first need to establish a business entity in that country. One way to do this is to use an Employer of Record (EOR). The other is to create your own legal entity in Poland.
EORs are third-party companies that allow you to hire and pay employees through their own entities. They’re responsible for calculating and withholding the appropriate taxes and for paying your taxes to Poland’s National Revenue Administration (KAS).
When, why, and how do companies use an EOR?
When companies expand their operations to Poland—and around the world—they typically use EORs like Deel, Papaya Global, and Rippling to run payroll, issue benefits, and navigate international compliance issues.
This is because it can take a long time to set up your own legal entity and payroll system. It’s a significant administrative load that smaller companies seldom have the time or resources to carry.
Why do companies create their own entity?
If you create your own entity, that replaces the EOR as the legal entity hiring employees and running payroll. Companies typically create their own entities once the costs of an EOR outweigh the costs of creating their own entities.
How do I set up my own entity in Poland?
Before you start, you should check whether you need to register a company in Poland at all. If your business is based in another European Union (EU) country and you only provide temporary, occasional services in Poland, you might only need to obtain a permit, concession or entry in a register, depending on the type of commercial activities your business engages in. The Polish Ministry of Economic Development and Technology maintains an online list of these activities, but it’s only available in Polish, so if you’re not fluent, get someone to translate applicable parts of the document for you.
Once you’ve established that you need to open an entity in Poland after all, you need to check your entitlement to trade in the country. You need to be a citizen of Poland or of another EU or European Economic Area (EEA) member state or be a relative of someone who is a citizen. Alternatively, you need to have a permanent or temporary residence permit, refugee status, subsidiary protection, temporary protection in Poland, a valid Polish Card or a valid Polish Business Harbour Visa.
If you don’t meet any of these requirements, you can opt for simply opening a Polish branch of your existing company, which involves considerably less paperwork than starting a completely new entity. Alternatively, you can enter a partnership with someone who qualifies, or run a company.
Now you need to decide what type of company you want to open. If you’re going to have employees, you can open a registered partnership, a limited joint-stock partnership, a joint-stock company or a limited liability company (LLC). The latter is the most common type of company in Poland.
If you decide to open an LLC and have the minimum capital of PLN 5,000, you can set it up in the traditional way by visiting a notary who will prepare articles of Association (AoA). Alternatively, you can set it up electronically by visiting the Portal of Court Registers website, which is in Polish only. Here you register an account, set up a profile, provide the required information and have your application electronically signed. Then you pay the court inscription fees and estimated tax.
Now you need to register your company in the National Court Register as well as in the Court and Commercial Monitor. As part of this, you need to provide the appropriate Polish Classification of Activities (PKD) code, which you can find here. You will then be issued with a tax identification number (NIP) and a statistical number of companies number (REGON).
You also need to submit an NIP-8 form to the tax office, within 21 days of entering your company in the National Court Register and within 7 days of starting to do business, and submit an application to the Central Register of Real Beneficiaries within 7 days from the date of incorporation.
Once you’ve registered your LLC, you’re automatically reported to the Polish Social Insurance Institution (ZUS) as a payer of insurance contributions for your employees and yourself. However, you also need to register yourself and all your employees as insured persons within 7 days after registering your company. Depending on the nature of your business, you may also need to register as a VAT payer. You do this at the tax office.
You don’t need to set up a local bank account for payroll but you’ll find it more convenient to do so.
Step #2: Pick a global payroll software solution
First, it’s vital to understand the two kinds of international payroll solutions: global payroll processors and global payroll aggregators. You can learn about both in our guide.
- Global payroll processors actually process your payroll, transmit funds, and calculate and file taxes in every country through their own software. Put simply, global payroll processors allow you to pay your international employees just as easily as your local employees: together in a single pay run.
- Global payroll aggregators aggregate local payroll providers in every country and manually transmit your payroll files to them.
Step #3: Determine your workers’ employment status
Before onboarding your new employees, and certainly before you run payroll, it’s crucial to understand who you’re paying in the eyes of Polish labor law: Are your workers employees or contractors?
It’s essential to classify them correctly to avoid big fines. Also, if they’re employees, there are payroll deductions you’re responsible for, including income tax, pension insurance, disability insurance, work accident insurance, and the employee capital plan (PPK).
Employment contracts in Poland can be for a fixed term, which would include a probation period of no longer than 3 months, or they can be for an indefinite period. It doesn’t matter what you call the contract; if the person works according to your instructions and under your control, at a place and time you specified, and you pay them a fixed remuneration, they’re considered employees under Polish labor law. Independent contractors aren’t representatives of your company, and you don’t control how they do the work you pay them for, so they don’t enjoy the same entitlements as employees.
Step #4: Capture your new hires’ Polish payroll information
Once you’ve decided whether to use an EOR or your own entity, picked a payroll solution, and ensured that your employees are correctly classified, you should be able to automatically collect (and then pay) your team in Poland.
You need to register for Platnik, the online government portal where you have to provide a full return of earnings and deductions by the 15th of every month. Here you also report details about new employees and termination of employment, as well as ad-hoc changes.
Here’s the information you need to collect when you hire employees:
- Name (matching the account where you’ll deposit their pay)
- Date of birth and date of hire
- Contact information, including their mailing address in Poland
- PESEL, which is their unique personal identification number
- NIP, which is their tax identification number
- Bank account information
- Employee’s salary amount to be paid in Polish zloty (PLN), including any bonuses
Non-residents will need to submit a valid work permit as well.
Step #5: Choose to pay in your local currency or in Polish zloty (PLN)
The main currency in Poland is the Polish zloty (PLN) but some employees get paid in other currencies. In fact, the majority of Polish IT specialists would prefer getting paid in EUR or USD.
There are challenges for companies based outside Poland that need to pay Poland-based employees in PLN: The exchange rate between your local currency and PLN can vary (see exchange rates here). If the rate is unfavorable, you’ll end up paying more of your local currency to cover your employees’ wages. You may also need to account for fluctuations in the exchange rate when calculating your financial statements, which can create accounting complexities.
Step #6: Run payroll
You have an entity (either your own or via an EOR), you’ve set up your global payroll system, and you’ve ensured your employees are correctly classified under Polish employment law. Time to run payroll!
Here’s a preview of how Rippling’s global payroll system works:
Step #7: File your taxes in Poland
Once you’re up and running paying your employees in Poland, you’re obliged to pay taxes to the KAS. There are different tax rates in Poland, based on income.
Up to PLN 120,000
Above PLN 120,000
Above PLN 1,000,000
32% plus solidarity surcharge of 4%
There are several tax credits and reliefs that employees may qualify for. In addition, employees under the age of 26 do not pay income tax on annual employment income up to PLN 85,528. In the case of income exceeding PLN 120,000, the tax is PLN 10,800 + 32% of the excess over PLN 120,000. The decreasing tax amount is already included in the above sum of PLN 10,800.
Every month, you need to deduct each employee’s income tax contribution and every month provide a full return of earnings and deductions via Platnik. Then, every year, you need to file two forms with the tax office:
1. By January 31, you need to submit form PIT-4R, which shows the total amount of personal income tax paid during the year.
2. By February 28, you need to submit form PIT-11, which details individual pay, social security contributions and tax. Your employees need to get a copy of form PIT-11 too, since they need it to file their annual tax return by April 30.
Employers who fail to submit these forms, or submit them late, can face penalties and interest charges.
Frequently asked questions about running payroll in Poland
What are the employer costs for full-time employees in Poland?
As an employer, you are responsible for a number of contributions to employee benefits. They are:
9.76% (capped at PLN 177,660 wages)
6.5% (capped at PLN 177,660 wages)
Foreign employers pay a flat rate of 1.67%
National Labor Fund
Wage Guarantee Fund
0.1% (does not apply to foreign employers)
Employee capital plan (PPK)
If you have more than 25 employees, you must also make monthly contributions to the Rehabilitation of Disabled People Fund (PFRON). The rate is updated every quarter and depends on various factors, including whether you employ people who are disabled.
In addition, you must deduct the following from your full-time employees’ paychecks. (Bear in mind though that Polish labor laws are in the process of being changed and through the course of 2023, deductions may change too.)
9.76% (capped at PLN 177,660 wages)
1.5% (capped at PLN 177,660 wages)
Additional healthcare contribution, which is health insurance that allows the employee to benefit from the public healthcare system
9% (Must be taken out of the employee’s wages before calculating the other social contributions)
Employee capital plan (PPK)
2% unless the employee opts out
What is the average salary for employees in Poland?
According to Statistics Poland, the average gross monthly wage for employees in the enterprise sector in Poland in the last quarter of 2022 was PLN 6,869.29. However, wages vary widely by industry and occupation.
What are the minimum wages in Poland?
The minimum wage in Poland is set to increase at the beginning of July 2023, to a monthly wage of PLN 3,600 or an hourly rate of PLN 23.50 gross.
How much does it cost to run payroll in Poland?
Most payroll software is priced on a per-employee basis, or per pay run. Payroll service pricing varies according to:
- Payroll frequency.
- The number of employees on your payroll.
- How often you add and remove payees.
- Any additional services you need, such as year-end processing or mailing out pay stubs.
Can I manually run payroll for workers in Poland?
Some small business owners choose to run payroll themselves, using a payroll calculator and making a direct deposit to employee accounts, in an attempt to cut costs. But payroll processing can be time-consuming, especially as your business grows. If you go this route, there are potential risks to keep in mind:
- Compliance: Running payroll manually in Poland, without using native global payroll software, puts you at risk of manual errors and omissions. Rippling handles your compliance work for you—enforcing Polish minimum wages, working hours and overtime rules, for example for public holidays, as well as maternity leave, paternity leave, parental leave and sick leave, as well as severance pay, which can save you from heavy fines.
- Security: Processing payroll manually can pose security risks, especially if you are using spreadsheets or paper records. This increases the risk of sensitive employee information being lost, stolen, or misused.
What are the late tax filing penalties in Poland?
By September 2022, the Polish Ministry of Finance had increased the interest rates for tax arrears and late payments of taxes for the seventh time in the same calendar year, to a standard rate of 16.5% per year. In light of these frequent changes to penalties, it’s best to check with the Ministry of Finance for the latest rates.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.