| 10 November, 2022

Factors determining the amount of salary in 2023

In the forthcoming year, the employees will have to face new provisions that directly translate into the level of employees’ salary.
Regulations that are subject to an update pertain, among others, to the following areas:

Minimum pay
Tax-reducing amount

In the interests of its clients, Tias Accounting and Legal Office shall make every endeavor to ensure a smooth change implementation process in the companies it cooperates with.

Minimum pay in 2023

Regulation of the Council of Ministers on the minimum pay for the forthcoming year was published in September 2022. The main change concerns gross minimum pay for employees hired under employment contracts. Additionally, the minimum gross hourly rate for certain civil-law contracts such as order contract [umowa zlecenie] or contract for the provision of services (self-employment) [umowa o świadczenie usług] has also been updated. The changes will be implemented in two stages. The first increase will be implemented on 1 January 2023 r, the second - on 1 July 2023. Therefore, the employers have to be prepared for increased organisational and administrative effort involved.

What will be the minimum pay in 2023?

Below are the new minimum pay rates in force in 2023:

minimum net salary [1]

in 2022 : PLN 2, 363.56

from 01.01.2023 : PLN 2, 709.48 +PLN 345.92 vs. 2022
from 01.07.2023 : PLN 2, 783.86 +PLN 420.30 vs. 2022

minimum gross salary

in 2022 : PLN 3, 010.00

from 01.01.2023 : PLN 3, 490.00 +PLN 480.00 vs. 2022
from 01.07.2023 : PLN 3, 600.00 +PLN 590.00 vs. 2022

minimum pay – employer’s cost (including Social Security (ZUS) payments for employee)

in 2022: PLN 3,626.46

from 01.01.2023: PLN 4, 204.75 +PLN 578.29 vs. 2022
from 01.07.2023: PLN 4, 337.28 +PLN 710.82 vs. 2022

minimum gross hourly rate

in 2022: PLN 19.70

from 01.01.2023: PLN 22.80
from 01.07.2023: PLN 23.50

It follows from the above that the new minimum pay rate for work effective from 01.01.23 will be higher in relation to the amount of 2022 by 15.9%, while the rate in force from 01.07.23 – by 19.6%. The minimum hourly rate will increase from 01.01.23 by 15.7% on a year-to-year basis, from 01.07.23 – by 19.3%. Therefore, entrepreneurs have to take into account higher costs of pay in the forthcoming year. Those entrepreneurs who are commencing economic activity, as well as those already taking advantage of the possibility to pay contributions for 24 months on 30% of the minimum wage also have to take new regulations into account.

How should an entrepreneur prepare for introduction of the new minimum pay rates?

Such changes mean that the employer must adapt existing processes in the company to the new regulations. It is worth taking care of this well in advance. Which areas should be taken into consideration?

In the case of employees whose salary corresponds to the amount of the minimum pay, the relevant provisions in their employment contracts ought to be verified and, if necessary, appropriately revised.
With regard to the new minimum hourly rates, the civil-law contracts for contractors (zleceniobiorcy) or the self-employed (contract for the provision of services) also ought to be verified and adjusted to the new provisions.
If an entrepreneur does not use the services of an accounting office, a new level of the minimum pay ought to be taken into account in the HR and payroll systems, so that the higher minimum pay be reflected in the tax calculation, ZUS contributions or other employee benefit liabilities. Where the entrepreneur uses the services of an accounting office, it is the duty of the latter to introduce those changes.
New salary levels for the lowest paid employees ought to be adjusted in the company’s budget for 2023 so that the operating expenses are properly planned.

Employees will have time to do so by 31.12.2022 and – by 30.06.2023.

Tax-reducing amount in 2023

New minimum pay rates are not the only changes that will influence the amount of salaries in the forthcoming year. As from January 2023, new provisions on the tax-reducing amount will enter into force, which will also translate into change in the level of salaries.

What is a tax-reducing amount?

It is directly connected with the tax exempt amount, hence with the income that is not subject to personal income tax. In 2023, it will amount to PLN 30, 000, so it will be the same as in 2022. The tax-reducing amount is the tax-free amount on an annual or monthly basis multiplied by 12%, i.e. the basic tax rate of PIT. It is calculated according to the formula:

PLN 30, 000 x 12% = PLN 3, 600 - tax-reducing amount on an annual basis
PLN 30, 000/ 12 months x 12% = PLN 300 - tax-reducing amount for the calculation of monthly income tax advances

The option to use the tax-free amount means that the employee or contractor can enjoy a higher net salary.

Who may apply the tax-reducing amount?

Next year, the level of the tax-reducing amount will remain the same as this year; in turn, the group of eligible taxpayers will be expanded. As the Ministry of Finance informs, ‘As from 1 January 2023, the provisions will allow for the application of the tax-reducing amount by all the remitters, who withhold tax advances (among others, employers, ordering parties (zleceniodawcy), pension authorities). Remitters apply the tax-reducing amount ex officio, i.e. by force of an act or upon receipt of a statement to this effect from the taxpayer - in writing or in any other manner customary for the taxpayer concerned. An employee may submit a statement at any time which obliges the remitter to apply the tax-reducing amount – from the month following the declaration. It is sufficient to do it once only, to be able to apply the tax-free amount for the consecutive years. If the taxpayer fails to submit the statement to the remitter, tax will be reduced by the amount of PLN 3, 600 in an annual return.

Who may apply the tax-free amount in 2023?

A list of taxpayers in 2023 who are entitled to apply the said amount is longer than last year. It concerns those generating revenues from the following sources:

contract of employment,
other forms of remuneration for full-time work, such as service relationship, homework relationship, cooperative employment relationship,
order contract,
specific-task contract,
business management agreement,
director’s service contracts,
property rights,
pensions and disability pensions from abroad.

A taxpayer may indicate in his statement one out of 3 tax-reducing amount:

PLN 300 so 1/12 of the tax-reducing amount (1 contract),
PLN 150 so 1/24 of the tax-reducing amount (2 contracts),
PLN 100 so 1/36 of the tax-reducing amount (3 contracts).

Even if the taxpayer is bound by the contract with two or three entities, he may still decide, at his own discretion, to rely on a statement including maximum amount, in respect of one tax remitter. A novelty in the regulation to enter into force 2023 is that the tax-reducing amount can be divided between a maximum of 3 remitters. However, its total amount may not exceed PLN 300 per month.

What ought a taxpayer bear in mind following the entry into force of the new regulations on the tax-reducing amount?

It is necessary to inform all the persons with valid order contracts, specific-task contracts and other contracts of the changes which will give rise to lower personal income tax advance payments by the company as the new year begins

Statements from taxpayers who will be entitled to deduct the tax-free amount for the first time in the new year will also require attention. This means that it will be necessary to inform employees or contractors of the upcoming changes and provided them with a PIT-2 form to fill in.

The net tax-reducing amount influencing the pay increase may result in the employee losing the right to the allowance to which he is entitled, e.g. a child allowance. The employer should therefore inform such a person in advance of all the factors influencing the net amount of pay, e.g. so that the person is not unpleasantly surprised at the time of the annual settlement.

If an enterprise cooperates with an accounting office, the latter will take over most of the above responsibilities. The accounting office will also ensure that all the new regulations are implemented in a proper and timely manner. When cooperating with a professional accounting office, the entrepreneur can be sure that his business complies 100% with all its statutory obligations while the employees may fully enjoy their benefits and rights.

The article was written in cooperation with
Monika Lesińska
HR & Payroll Team Leader
Tias Accounting and Legal Office

[1]A taxpayer’s guide. The principles of filing statements on application of the reduction of the advance payment by a tax-deductible amount. Satus at 01.01.2023. Ministerstwo Finansów / gov.pl/finanse / gov.pl/kas

[1] Applies to a person over 26 years of age who has filed a PIT-2 declaration with the employer, with the application of tax-deductible costs, without Employee Capital Plans (PPK)