The abolition of limits on contributions to National Insurance (ZUS) will probably become a reality, despite the act lifting the limits of contributions as at 1 January 2018 being postponed from coming into force by a year. The changes will affect top earners, posing a real problem in many industries in times of tough competition for high-skilled workers. For now, the act is awaiting review of its constitutionality.

Changes from 2019

The first draft of the act assumed the amendments would take effect from 1 January 2018. The Senate, however, introduced an amendment to the act that provided for its enactment after a year’s delay.

In the end, under the act of 15 December 2017 on amending the social insurance scheme and certain other acts, the annual limit on social insurance premiums will be abolished. The result of the act, which is planned to go into effect from 1 January 2019, will be the duty to make ZUS contributions calculated on the full remuneration received by employees. So far, high-salaried workers have benefited from their exemption upon exceeding the threshold of 30 times the projected average monthly remuneration in the national economy. In 2017, this amounted to 127,890.00 PLN. Although the President referred the adopted act to the Constitutional Tribunal to verify its constitutionality, its planned enactment appears to be a foregone conclusion.

Methods of optimizing social insurance contributions

The abolition of limits on contributions, which for employers will result in increased labour costs of employing high-earners and a lower net remuneration received by such persons, revives the issue of legal solutions to optimize social insurance contributions. The formulas in the new law are airtight. Nevertheless, the law gives some means to reduce the social insurance burden, such as the provision of services within sole proprietorship, payments of remuneration based on organizational and legal frame of business activity, using a multi-entity system of employment. When using such methods, however, it is necessary to design consistent systemic solutions to minimize the risks of loopholes in the social insurance system.

Author: Karol Kulig, Ph. D.