Payroll accounting & social insurance

Payroll calculations is an inevitable part of doing business. If you decide to employ personnel, you need to remember about the obligations that come with it. Employers do not only need to pay out salaries or wages, but also need to make sure that they comply with all legal and tax obligations related to paying remuneration.

A substantial part of everyone’s salary goes to Social Insurance Institution, or ZUS. Founded in 1934, the body deals with all things related to work and retirement. If is financed, to a large extent, by mandatory contributions that are calculated based on an employee remuneration and settled on a monthly basis.

To go from gross salary to net salary, an employer needs to deduct the social insurance contributions paid by the employee. These are pension, disability and sickness contributions. They are 9.76, 1.5 and 2.45 percent of salary respectively. After these deductions, the amount you are left with constitutes the basis for calculating health insurance contribution. The contribution rate is 9% of the basis, but a part of it diminishes the basis for calculating income tax. Before we get to the income tax calculations, you need to also take into consideration the deductible expenses related to employment.

To arrive at the basis for calculating income tax payments, deduct the social insurance contribution, and the deductible employment expenses from the gross salary. Advance payments for income tax are charged at the rate of 18%. However, the amount you end up is deducted by 46.33 PLN and also by the part of health insurance contribution we established later, i.e. 7.75% of the gross salary. This is the amount you need to contribute to tax authorities. Advance income tax payments are provided tax authorities on monthly basis.

This is the end of payroll calculations on the part of an employee. To sum up, the gross salary is made smaller by pension, disability, sickness and health contributions and income tax. As you can see, payroll accounting in Poland is nothing but simple and easy.