What is a lump sum and what are its types?
Employers can decide how to account employees for the work they do. Very often, the manner in which the work is performed allows for a flat-rate remuneration to be indicated in the employment contract. This method of settlement is a beneficial solution for both parties to the employment relationship. Pursuant to Art. 80 of the Labor Code, remuneration is due for work performed. For the time of non-performance of work, the employee retains the right to remuneration only if the provisions of the labor law so provide. Various types of benefits may be added to the base salary, paid in the form of a salary or a lump sum. It should be noted that, as a rule, employers indicate in the content of employment contracts also a specific rate of remuneration for each overtime hour. The lump sum allows employers to settle employees for the performance of work on a regular basis, for work at night permanently performed outside the workplace or work in extraordinary hours.
Lump sum - what are its types?
A distinction should be made between a lump sum of a remuneration nature, which allows the employee to be accounted for in a situation where the amount of remuneration for the duties performed cannot be precisely determined, therefore an approximate amount is used. It is worth pointing out that this type of lump sum is most often used in settlements for overtime work.
Pursuant to Art. 1511 § 4 of the Labor Code in relation to employees who work permanently outside the workplace, the remuneration with the allowance referred to in § 1 may be replaced by a lump sum, the amount of which should correspond to the expected amount of overtime work. The lump sum can therefore be fixed in amount in exchange for the number of overtime hours worked. Calculation of the lump sum should be in line with the provisions of the Labor Code on overtime. On this basis, the employer may increase the lump sum if the overtime limit is greater or reduce the employee's duties and activities if he has too much work.
It is worth adding that "the form of a lump sum in the employment contract is permissible, but it does not deprive the employee of any claims to remuneration for overtime, not covered by this lump sum. The employment contract may not infringe the employee's rights resulting from the statutory working time standards ”(see the judgment of the Supreme Court in the judgment of June 11, 1971, file No. III PZP 15/71).
In addition, workers who perform night work should receive a wage supplement. In a situation where night work is performed constantly, the employer may settle the employee on the basis of a flat rate for night work.
Pursuant to Art. 151 § 2 of the Labor Code in relation to employees who perform night work permanently outside the workplace, the allowance referred to in § 1 may be replaced by a lump sum, the amount of which corresponds to the expected work hours at night.
Another type of lump sum that is worth mentioning is the lump sum for a business trip, which can be defined as compensation, because it serves to cover the expenses that the employee has spent, for example, on a business trip. Then the employer should equip the employee with the appropriate lump sum amount, which will cover the costs of accommodation and travel by means of on-site transport. Additionally, an employee who uses his own car during a business trip may also be settled on a lump-sum basis.
In view of the above, it is worth adding that employers may regulate other possibilities of compensating employees for expenses incurred on the basis of a lump sum in internal labor law regulations or in employment contracts. However, these regulations cannot be less favorable than those indicated in the Labor Code.
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What is the amount of the lump sum in accordance with the Labor Code?
According to the judgment of the Supreme Court of June 6, 2000 (file reference number I PKN 707/99): "the remuneration referred to in the employment contract as" lump sum ", with the simultaneous indication that it is due in a certain amount per month of work, should be treated as monthly the rate of the employee's remuneration within the meaning of art. 134 § 1-2 of the Labor Code ”. The lump sum does not replace the remuneration for work and is an additional remuneration for the employee. It is an approximate amount that will compensate the employee for expenses incurred or work performed in excessively high hours. It should be indicated that the employer should adjust the amount of the lump sum to the variable number of hours of overtime work, in a given period of night work, or the number of business trips in particular months. When determining the lump sum amount, the employer is obliged to apply the remuneration provisions of the Labor Code.
Therefore, if the number of working hours, for example at night, and the amount of the allowances for this work are not determined sufficiently, the lump sum should be increased by the employer. It is worth adding that an employee may apply to the Labor Court with a claim for compensation of the lump sum if the amount is underestimated, despite having worked more hours of work (see the judgment of the Supreme Court of 18 July 2006, file reference number I PK 40/06 ).
In a production company, in the pre-Christmas period, due to the increased amount of work, employees had to work overtime. The employer determined that for overtime work, employees will receive PLN 16 of remuneration for each overtime. In December, one of the employees worked 24 overtime hours for which she received a lump sum of PLN 384. However, it turned out that, in accordance with the employment contract, the employee should receive a higher amount of overtime pay, i.e. PLN 520. The employer did not want to compensate for the missing lump sum, so the employee referred the case to the Labor Court. In its judgment, the Court awarded the employee the due amount and obliged the employer to pay the lump sum. In order to save on the employee's remuneration, the employer cannot replace him with a lump sum, ignoring the statutory benefits. Then the lump sum should not be lower than the due remuneration, determined on the basis of the provisions of the Labor Code together with bonuses. According to the judgment of the Supreme Court of July 12, 2006 (file no. II PK 366/05): "it is unacceptable to adopt a lump-sum system of remuneration consisting in an increase in the hourly rate for work to compensate for overtime worked out in relation to The hourly rate resulting from the employment contract, valid on an eight-hour working day, if the employee's remuneration in such a system is lower than the basic salary he / she is entitled to, including the overtime bonus determined on the basis of the Labor Code (...) only when employees perform work exceeding the agreed working time standards, and it is or would be highly difficult to control the amount of overtime worked. "
However, in a situation where the employer cannot determine exactly how many overtime hours the employee will work in a given month, the remuneration together with the allowance for overtime may be paid in the form of a lump sum. Then the amount of the lump sum should not be lower than the remuneration, together with the allowances specified in the Labor Code.
Ms Jolanta had a lump sum remuneration indicated in the employment contract in the amount of PLN 2,500 per month. If she performed overtime work, the employer paid her an overtime bonus, including 60% of the salary, i.e. PLN 1,500. However, this method of calculating the amount of the allowance for overtime is incorrect due to the fact that the entire amount of the lump sum, i.e. PLN 2,500, should be the basis for calculations. The employer may not lower the employee's remuneration, ignoring the principles set out in the Labor Code.
In addition, "(...) the supplement to the remuneration for overtime work supplements the remuneration for the work performed, and thus cannot be the only component of the remuneration" see the judgment of the Supreme Court of November 5, 1999 (file reference number I PKN 348/99).
It is worth remembering that the regulations allow employers to apply a flat rate to employees who work permanently outside the workplace, for whom the calculation of the exact number of overtime hours is complicated, in particular, it concerns sales representatives or drivers. The lump sum should take into account the amount of the basic salary, together with an allowance for each overtime hour. It is worth adding that according to the jurisprudence, if an employee constantly works outside the workplace, but starts and ends his working day at the company's premises every day, the calculation of the lump sum is unjustified.
In conclusion, it should be emphasized that the lump sum may be used in situations specified in the Labor Code. Overtime work, work constantly performed outside the workplace at night, work performed on a business trip - may be settled in the form of a lump sum, although the basic salary cannot be paid in the form of a lump sum.
The different lump sum amounts from month to month must take account of the number of overtime hours actually worked, including the corresponding wage supplements. An employee who received an understated lump sum should receive compensation from the employer. Otherwise, he will have a claim to be paid extra for overtime hours.
The flat-rate remuneration indicated in the employment contract, in a fixed amount for each month, should be taken into account in full when calculating the allowances for overtime work. The use of a lump sum for overtime work is advisable when the detailed control of the number of hours worked is difficult. The employer, by indicating a lump sum in the employment contract, anticipates that the employee will work overtime and accepts this fact.