The new anti-crisis measures adopted in Poland on 18 April provide a range of tools for employers. The new law expanded the financial aid available to companies affected by Covid-19. Polish employers who have suffered a decrease in their turnover can reduce the working hours of their employees, or even idle a portion of their workforce. In order to discourage lay-offs, the Polish government has introduced a wage subsidy scheme.
Preferential loans form the Polish Development Fund
The Polish Development Fund (‘PFR’ – Polish national development fund) can disbursed up to PLN 100 billion of preferential loans. PLN 25 billion is earmarked for sole traders and micro companies, PLN 50 billion for SMEs and PLN 25 billion for large companies. The European Commission still has not accepted the scheme for large companies.
Who can obtain a loan?
A company has to suffer a 15% decrease in sales to qualify. Companies can receive up to around EUR 95 000 (sole traders and micro companies) and EUR 800 000 (SMEs). The beneficial owner of the company applying for a loan has to be a tax resident of the European Economic Area.
How will the loan be disbursed?
The loans will be for three years, up to 75% of the loan maybe forgiven. The loan agreement will be concluded between the company and PFR via the electronic banking system of the bank in which the beneficiary of the loan has an account. The funds will be disbursed on this account.
Subsidies for the employer
Who can obtain subsidies?
If an employer suffers a 15% drop in the company’s turnover (by volume) within two months, or by 25% within one month in 2020, he/she will be entitled to change employment agreements and obtain a subsidy.
What changes to employment agreements are allowed?
Employers are entitled to:
- reduce working hours by 20%, however by not more than to a halftime. However, an employee working those reduced hours cannot earn less than the minimum monthly salary (or a part of the minimum salary if he/she is not a full-time employee).
- idle employees and reduce their salaries. A salary of an idled employee can be reduced by half, but only to the level of the minimum salary.
What is the procedure for idling employees and salary reductions?
In order to idle employees and to reduce working hours and salaries, the employer has to reach a collective agreement with either:
- a representative trade union;
- a company trade union organization; or
- employee representatives.
If it is not possible to select employee representatives due to the COVID-19 pandemic, an agreement can be concluded with representatives previously selected for other purposes (e.g. in relation to: collective lay-offs or election of work councils or any other purposes). The procedure for reaching this agreement is very similar to the agreement required for collective lay-offs.
The agreement should stipulate the: (i) groups of idled employees or employees whose working time is reduced; (ii) reductions of working hours; and (iii) period in which those measures apply.
When the agreement with employees representation is reached, it is automatically incorporated into every individual agreement, and no additional procedures are required (no notice of change is needed).
What subsidies are available?
A company can apply for:
- A subsidy of up to 50% of the minimum salary (around EUR 250) to the salary of every idle worker (for the time being for up to 3 months);
- A subsidy of up to 40% of the average salary (around EUR 500) to the salary of every worker who is working reduced hours (for the time being for up to 3 months).
These subsidies do not include social security contributions, and any social security contributions due from those subsidies will also be covered by the Workers’ Guarantee Fund.
In order to receive the subsidies, an application should be filed to the regional Labour Office. It is still unknown how long it will take to process such applications. Subsidies can be granted for three months. However, in future a regulation may be adopted by the government to extend that time and increase the subsidies.
Who is an employee in light of the new law?
The new measures apply not only to employees, but also to persons employed on the basis of other types of agreements, provided that social security contributions are due from those agreements. This means that subsidies may be obtained for employees working based on employment contracts or mandate agreements. B2B contracts do not qualify (however, sole traders working under B2B contracts may apply for a separate one-off subsidy amounting to PLN 2,080, or request an exemption from social security contributions – for details please see below).
How can an employer implement these measures?
We advise to start preparing the relevant documents as soon as possible. Employers could start collecting relevant data and start calculating their loss of revenues. New schemes of work organization, selection of workers to be idled and other conceptual work for the planned agreement with employee representatives can be undertaken. The sooner the collective agreement and an application for subsidies will be prepared, the sooner the employer’s cashflow could improve.
Social security exemptions for smaller firms and self-employed sole traders
Social security contributions exemptions
Under the new regulations, a company employing up to 9 employees (based on labor law employment contracts or civil law (mandate) contracts, but excluding B2B contracts) can be exempt from social security contributions due for March, April and May of 2020. This exemption is not subject to any decrease in turnover.
Also, sole traders (self-employed persons) can be exempt from social security contributions due for March, April and May of 2020 provided that they earn less than around PLN 15,681 (approx. EUR 3,900) monthly.
An application for the exemption should be filed by 30 June 2020. The exemption means you do not need to pay security contributions, including health insurance and contributions to the Workers’ Fund, Workers’ Guarantee Fund, Solidarity Fund and Temporarily Retirement Fund for period of up to three months.
An exemption may be granted from social security contributions due from employment agreements and other forms of employment contracts (civil law agreements).
Extension of exemption from social security contributions
Companies that pay contributions for more than 9 and less than 49 persons are also exempt from the duty to pay half of the due social security contributions for March, April and May 2020 similarly to sole traders and micro companies.
One-off payment for freelancers
The new law has introduced a one-off payment (‘idle time pay’) of up to PLN 2,080 (approx. EUR 500) for self-employed professionals, who suffered a 15% monthly decrease in their turnover compared to the previous month.
Please note that these measures do not apply to freelancers who earn a monthly income of more than three average salaries in Poland (PLN 15,681, approx. EUR 3,900). Such better paid professionals are not entitled to ‘idle time pay’ or an exemption from social security contributions.
Preferential loan of PLN 5 000
A micro entrepreneur can apply for preferential loan of up to PLN 5 000. The loan is disbursed by local administration (starosta) and if a company continues trading for three months can be forgiven. There no requirements for obtaining the loan, especially the entrepreneur does not have to suffer a decrease in turnover.
Like in other countries, Poland has introduced a host of other stimulus measures in order to combat the economic slowdown caused by COVID-19. Most of these are directed at sole traders. Aside from salary subsidies, companies can also apply to Bank Gospodarstwa Krajowego (BGK, Polish National Development Bank) for a loan guaranty. BGK can guarantee up to 80% of the loan. This is one of several measures aimed exclusively at larger entrepreneurs (small and microentrepreneurs cannot apply for this guaranty).
Companies can also receive funds from local government offices. An application has to be filed and funds are paid out based on an agreement (concluded with the respective office).
A number of tax easements have also been introduced, which will be described in a separate alert.
It is likely that more stimulus measures will be announced as the current package appears to be insufficient.
We will monitor this situation closely and keep you updated about the measures.
Please don’t hesitate to contact our Covid-19 Task Force team:
Our Covid-19 HotLine: +48 532 795 828