Labour law updates and recommendations

Abolition of the maximum annual basis for calculating social security contributions deemed unconstitutional

On 14 November 2018, the Polish Constitutional Tribunal ruled that the act abolishing the maximum annual basis for calculating some social security contributions is unconstitutional.

As a reminder, earlier in 2018 the Polish parliament passed a new law which abolished the limit on the maximum annual basis for calculating some¬† social security contributions i.e. retirement and disability contributions . As a consequence of the new law, Poland’s top-earners would have seen their remuneration reduced and their employers would have faced increased costs connected with their employment. However, the Polish president questioned the constitutionality of the legislative procedure (in particular, whether the draft act was properly consulted with the Social Dialogue Council, trade unions, and employers’ organisations) and thus referred the act to the Constitutional Tribunal.

The Constitutional Tribunal’s judgment means that the current rules on calculating social security contributions will continue to apply, i.e. the basis of calculation of pension and disability contributions cannot be higher in a given calendar year than 30 times the estimated average monthly remuneration for that year (in 2018 – approx. PLN 133,000 / EUR 31,000). In practice, this means that after an individual exceeds a certain total remuneration in a given calendar year, pension and disability contributions will no longer be payable.