Employer's Obligations Regarding Severance Pay Under Polish Law

In Poland, severance pay (odprawa) is not a universal requirement for every termination. It is strictly tied to the reason for the dismissal and, crucially, the size of your workforce. For international companies, underestimating these costs during a restructuring or market exit can lead to significant unbudgeted liabilities.

Here is what you need to know about your statutory obligations under the Polish Labour Code.

When is Severance Pay Mandatory?

Statutory severance pay is only triggered when the employment relationship is terminated for reasons not attributable to the employee. This typically includes:

• Redundancy: Job roles being eliminated due to organisational changes or restructuring.
• Company Liquidation: The employer ceasing all operations in Poland.
• Insolvency: The company becoming formally bankrupt.

Crucially, severance is NOT required if:

• The employee resigns.
• The employee is dismissed for performance issues or misconduct.
• A fixed-term contract simply expires.
• The termination is by “mutual consent” (unless the underlying reason is still redundancy).

The “20-Employee” Threshold

This is the most critical rule for foreign SMEs to understand. The legal obligation to pay statutory severance only applies to employers who employ at least 20 people in Poland (on employment contracts/UoP) at the time of termination.

If your Polish entity employs fewer than 20 people, you are generally not legally required to pay severance, even in cases of redundancy. However, you must still respect the standard notice periods and contractual terms.

How Much Must You Pay?

If you meet the 20-employee threshold, the amount of severance is dictated by the employee’s length of service with your company:

The Calculation: The payment is based on the average monthly remuneration from the last three months. This includes basic salary plus regular additions like bonuses or fixed allowances.

The Cap: Note that statutory severance pay is capped at 15 times the Polish minimum wage in force on the day of termination. Even for high-earning executives, the statutory portion cannot exceed this limit.

Expert Advice for Foreign Employers

1. Check Your Headcount: Always verify your total headcount (on UoP contracts) before initiating a redundancy process. Going from 19 to 20 employees changes your legal profile significantly.
2. Review Internal Policies: Check if your internal work regulations or specific contracts offer more than the statutory minimum. Polish law allows you to be more generous, but never less.
3. Document the Reason: If you are making someone redundant, the “reason for termination” written in the notice must be genuine. If the labour office finds you replaced the person immediately, you may be liable for unfair dismissal as well as severance.
4. Account for Collective Redundancies: If you are laying off a large percentage of your workforce (e.g., 10 people in a 20-99 person company), a much stricter “Collective Redundancy” procedure applies.

“Severance pay in Poland is predictable but rigid. Getting the headcount calculation or the termination reason wrong can lead to costly disputes in the labour court.”

Need to manage a staff exit or restructuring in Poland?

Don’t risk the technicalities of the Polish Labour Code. Contact our Kraków team for a clear, compliant plan for managing your redundancies and severance obligations.