# The minimum wage in 2021

Every year the amount of the minimum wage increases. From January 1, 2021, the minimum wage is PLN 2,800 gross, which is PLN 200 more than last year. What does the minimum wage consist of and how much will the cost of employing an employee be in 2021? We answer below.

## Minimum wage - what does it consist of?

Pursuant to Art. 6 of the Act on the minimum remuneration for work, the amount of remuneration of a full-time employee may not be lower than the minimum remuneration in a given year.

To calculate the amount of the employee's remuneration, the employee's remuneration components resulting from the employment relationship are taken into account, as specified by the Central Statistical Office in the Annex to the explanations to the employment and remuneration reporting, among which we distinguish, among others: bonuses for performed functions, statutory bonuses and awards, remuneration for annual leave or a compensatory allowance paid for a reduction in pay due to an accident at work or an occupational disease.

Importantly, not all remuneration components are included in the minimum wage. When calculating remuneration, jubilee bonuses, severance payments due to employees in connection with retirement or disability pension, as well as remuneration for overtime and night work should not be taken into account.

From 2020, an allowance to remuneration for reaching a given period of employment, i.e. The internship allowance is also excluded from the minimum wage.

## Minimum wage and employer costs

In connection with the increase in the minimum wage, the cost of employing employees whose remuneration is the so-called National lowest. The total cost of employing an employee earning the minimum wage under a contract of employment in 2021 is PLN 3,373.44 (PLN 2,800 - minimum wage and PLN 573.44 - social security contributions).

Details are presented in the table below:

 Contribution financed by the employer The minimum wage in 2020 - PLN 2,600 The minimum wage in 2021 - PLN 2,800 retirement pension (9.76%) PLN 2,600 x 9.76% = PLN 253.76 PLN 2,800 x 9.76% = PLN 273.28 disability pension (6.5%) PLN 2,600 x 6.50% = PLN 169.00 PLN 2,800 x 6.50% = PLN 182.00 accident (1.67%) PLN 2,600 x 1.67% = PLN 43.42 PLN 2,800 x 1.67% = PLN 46.76 labor fund (2.45%) PLN 2,600 x 2.45% = PLN 63.70 PLN 2,800 x 2.45% = PLN 68.60 guaranteed employee benefits fund (0.10%) PLN 2600 x 0.10% = PLN 2.60 PLN 2,800 x 0.10% = PLN 2.80 TOTAL (20.48%) PLN 532.48 PLN 573.44

Based on the data contained in the table above, it follows that the cost of employing an employee receiving the minimum wage in 2021 increased by PLN 240.96 compared to the previous year.

For employing entities covered by the PPK Act, the cost of employing an employee should additionally include the amount of contributions financed by the employer. Pursuant to Art. 26 of the Act on Employee Capital Plans, the basic contribution financed by the employing entity amounts to 1.5% of the remuneration. In addition to the obligatory basic contribution, the employer may declare a voluntary additional payment of up to 2.5% of remuneration.

This means that the cost of employing an employee who is a PPK participant ranges from PLN 42 to PLN 112 more than an employee who resigns from the PPK, depending on the type and amount of contributions declared by the employer.

## How much will the net wage of an employee receiving the minimum wage be?

In 2020, an employee employed under an employment contract with a minimum gross remuneration of PLN 2,600 received a net remuneration of PLN 1,920.62. What net salary can an employee who is not covered by or resigned from PPK in 2021 can count on?

Gross salary: PLN 2,800

Tax deductible costs: PLN 250

Tax relief: PLN 43.76

The amount of ZUS contributions financed by the employee:

• pension insurance contribution - PLN 2,800 x 9.76% = PLN 273.28,
• disability insurance contribution - PLN 2,800 x 1.5% = PLN 42,
• sickness insurance contribution - PLN 2,800 x 2.45% = PLN 68.60.

The sum of social security contributions - PLN 383.88.

The amount of the health insurance contribution:

• health insurance contribution to be deducted from salary - (PLN 2,800 - PLN 383.88) x 9% = PLN 217.45,
• health insurance contribution to be deducted from the tax - (PLN 2,800 - PLN 383.88) x 7.75% = PLN 187.25.

Income tax:

• tax base - PLN 2,800 - PLN 383.88 - PLN 250 = PLN 2,166.12 ~ PLN 2,166,
• advance income tax - PLN 2,166 x 17% - PLN 43.76 = PLN 324.46,
• tax to the tax office - PLN 324.46 - PLN 187.25 = PLN 137.21 ~ PLN 137.

Salary to be paid: PLN 2,800 - PLN 383.88 - PLN 217.45 - PLN 137 = PLN 2,061.67.

An employee employed with the minimum wage will receive PLN 2,061.67 net in 2021.

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## Net salary of an employee making contributions to the PPK

An employee who is a participant in the PPK must take into account that his remuneration will be additionally reduced by the amount of contributions declared by him to the PPK. The employee finances the basic contribution amounting to 2% of the salary and has the option of declaring a voluntary additional contribution of up to 2%.

Importantly, contributions financed by the employer constitute income for the employee from the employment relationship, which should be taxed. This means that a PPK participant must pay a higher tax than an employee who is not subject to or has resigned from PPK.

Example 1.

An employee who is a participant in the PPK is employed for the minimum wage. The employer finances the PPK participant only the basic payment, while the employee has declared, apart from the basic payment, the payment of an additional payment in the amount of 1% of the remuneration. How much is the remuneration of a PPK participant?

Gross salary: PLN 2,800.

Gross salary increased by contributions financed by the employer: PLN 2,842.

Tax deductible costs: PLN 250.

Tax relief: PLN 43.76.

The amount of contributions to the PPK:

• employee's basic payment: PLN 56,
• employee's additional payment: PLN 28,
• basic employer's payment: PLN 42.

The amount of ZUS contributions financed by the employee:

• pension insurance contribution - PLN 2,800 x 9.76% = PLN 273.28,
• disability insurance contribution - PLN 2,800 x 1.5% = PLN 42,
• sickness insurance contribution - PLN 2,800 x 2.45% = PLN 68.60.

The sum of social security contributions - PLN 383.88.

The amount of the health insurance contribution:

• health insurance contribution to be deducted from salary - (PLN 2,800 - PLN 383.88) x 9% = PLN 217.45,
• health insurance contribution deductible from tax - (PLN 2,800 - PLN 383.88) x 7.75% = PLN 187.25.

Income tax:

• tax base - PLN 2,842 -383,88 PLN - PLN 250 = PLN 2208.12 ~ PLN 2208,
• advance income tax payment -2208 PLN x 17% - PLN 43.76 = PLN 331.60,
• tax to the tax office - PLN 331.60 - PLN 187.25 = PLN 144.35 ~ PLN 144.

Salary to be paid: PLN 2,800 -383,88 PLN - 217.45 PLN -144 zloty -56 zloty -28 PLN = PLN 1970.67.

## The minimum wage for a part-time employee

Pursuant to Art. 8 of the Act of 10 October 2002 on the minimum remuneration for work in the event that an employee is employed on a part-time basis, the amount of the minimum wage is determined in proportion to the number of working hours to be worked by the employee in a given month. This means that in 2020 an employee employed at the minimum wage may receive:

• PLN 2,800 gross, if employed full-time,
• PLN 2,100 gross, if employed full-time,
• PLN 2,400 gross, if employed full-time,
• PLN 933.33 gross, if employed full-time,
• 700 PLN gross, if employed in a quarter of a time.

## Minimum wage and preferential ZUS contributions

The basis for calculating preferential ZUS contributions is 30% of the minimum remuneration for work in a given calendar year. This means that in 2021 entrepreneurs entitled to a 2-year tax relief for new companies are obliged to pay ZUS contributions calculated from the base amounting to PLN 840 (PLN 2,800 x 30%). In 2020, the basis for the assessment of preferential ZUS contributions was PLN 780, which means that from 2021 it will increase by PLN 60. The table below presents a comparison of the amount of preferential ZUS contributions in 2020 and 2021.

 Insurance premiums The amount of contributions in 2020 Contribution amount in 2021 retirement pension (19.52%) 152.26 zł PLN 163.97 disability benefits (8%) PLN 62.40 PLN 67.20 sickness (2.45%) PLN 19.11 PLN 20.58 accident (1.67%) PLN 13.03 PLN 14.03 TOTAL (31.64%) PLN 246.80 PLN 265.78

In 2021, we have another increase in the minimum wage. It amounts to PLN 2,800 gross, which is PLN 200 more than in the previous year. Importantly, an employee who is a participant in the PPK should take into account that his remuneration will be additionally reduced by the amount of his declared contributions to the PPK, as a result of which his net earnings will be slightly lower.