Employer's Obligations Regarding Severance Pay Under Polish Law

In certain situations, when an employment relationship in Poland ends, employers are legally required to pay severance pay to the departing employee. Understanding when this obligation arises and how the amount is calculated is important for foreign companies employing staff in Poland.

When is Severance Pay Required?

Severance pay is primarily linked to the termination of employment due to reasons that are directly attributable to the employer and concern the company or workplace. These reasons can include things like:

• Redundancy due to organisational changes: This might happen if positions are eliminated as part of restructuring.
• Liquidation of the employer: If the company ceases to exist.
• Insolvency of the employer: If the company becomes unable to pay its debts.

It’s important to note that severance pay is generally not required when an employee’s contract is terminated for reasons related to the employee themselves, such as poor performance or disciplinary issues, or if the employee resigns. It also doesn’t usually apply when a fixed-term contract simply expires.

Important Note on Company Size: The obligation to pay severance pay for the reasons listed above generally applies to employers who employ at least 20 employees. If your company has fewer than 20 employees, you are typically not legally required to pay severance in these situations. However, the standard rules for terminating employment contracts, such as notice periods, still apply regardless of company size.

Who is Entitled to Severance Pay?

Employees who are terminated for the reasons mentioned above (and working for companies with 20 or more employees) and who have worked for the employer for a certain period are entitled to severance pay. The length of their employment with the company determines the amount they will receive:

• Less than 2 years of employment: The employee is entitled to severance pay equal to one month’s salary.
• Between 2 and 8 years of employment: The employee is entitled to severance pay equal to two months’ salary.
• More than 8 years of employment: The employee is entitled to severance pay equal to three months’ salary.

Calculating Severance Pay

The amount of severance pay is calculated based on the employee’s average monthly remuneration during the last three months of their employment. This includes their basic salary as well as any other regular payments they received, such as bonuses or allowances.

Important Considerations for Foreign Employers

When making decisions that might lead to the termination of employment for reasons related to the company (especially if you employ 20 or more people), be aware of the potential obligation to pay severance. Factor these costs into your planning. Ensure you accurately calculate the employee’s length of service and their average monthly pay to determine the correct amount of severance.

It’s also worth noting that there might be collective bargaining agreements or internal company policies that provide for more generous severance packages than the statutory minimum, even in smaller companies. Always check if any such agreements apply to your employees in Poland.

The rules around severance pay requires careful attention to the reasons for termination and the employee’s service history, as well as the size of your company. If you are unsure about your obligations in a specific situation, seeking legal advice is always recommended to ensure compliance with Polish Labour Law.