A German technology company opens a Polish subsidiary in Warsaw. After 18 months, a restructuring triggers collective redundancies affecting 40 employees. The HR director asks a straightforward question: how much severance does each employee receive? The answer depends on seniority, base salary, and a series of statutory caps that catch many foreign employers off guard.

Under the ustawa o szczególnych zasadach rozwiązywania z pracownikami stosunków pracy z przyczyn niedotyczących pracowników (Act on Collective Redundancies), Polish law entitles dismissed employees to severance pay calculated as a multiple of monthly salary – one, two, or three months depending on length of service. The payment is capped at 15 times the national minimum wage in force on the dismissal date. Employers who miscalculate or delay payment face claims before the labour court within three years of the breach.

This guide covers the full calculation method step by step, explains the three main business scenarios, identifies the most common employer mistakes, and answers the practical questions that arise most often. It applies to redundancy-driven dismissals – not to termination for cause, which follows different rules under the Kodeks pracy (Labour Code, KP).

How is severance pay calculated under Polish law?

Severance entitlement is tied to two variables: the employee's length of service with that employer and the gross monthly salary used as the calculation base. The multiplier structure is straightforward. Employees with fewer than two years of service receive one month's salary. Those employed for two to eight years receive two months. Employees with more than eight years of service receive three months. Each bracket is measured from the date the employment contract was concluded to the date the notice period expires.

The calculation base is the employee's gross monthly salary as defined in the regulations on calculating equivalent pay for leave. In practice, this means fixed remuneration components – base salary, fixed allowances – averaged over the three months preceding dismissal. Variable bonuses, commissions, and overtime supplements are excluded unless the employment contract or company remuneration regulations specify otherwise. This distinction matters: a Warsaw-based sales employee earning a modest base but large commissions may receive far less severance than the total compensation figure suggests.

The statutory cap limits the total severance payment to 15 times the minimum wage. As of 2025, the national minimum wage in Poland stood at PLN 4,300 gross per month, placing the cap at PLN 64,500. Employers operating in sectors with high earners – technology, finance, real estate – must apply this ceiling even where the contractual salary would otherwise produce a higher figure. The cap is recalculated using the minimum wage in force on the day the employment relationship ends, not the date the redundancy programme was announced.

One practical checkpoint: the National Labour Inspectorate (Państwowa Inspekcja Pracy, PIP) regularly audits payroll records for collective redundancy procedures. Errors in the calculation base – particularly the inclusion of incorrect salary components – are among the most frequent findings during inspections. Employers should document the calculation methodology and retain supporting payroll data for at least three years.

What triggers the obligation to pay severance?

The severance obligation arises when the employer terminates the employment contract for reasons not attributable to the employee. This covers three distinct situations: individual redundancy affecting a single post, group redundancy within a 30-day window meeting statutory headcount thresholds, and mutual termination by agreement where the employer's economic reasons are the documented cause. The Act on Collective Redundancies applies to employers with at least 20 employees. Smaller employers may rely on the general provisions of the Labour Code, which also provide for severance in certain redundancy situations, though the calculation rules are identical.

The headcount thresholds for collective redundancy procedures are: at least 10 employees where the employer employs fewer than 100 people, 10 percent of the workforce where the employer employs between 100 and 299 people, and at least 30 employees where the employer employs 300 or more. When these thresholds are met within a 30-day period, the employer must notify the District Labour Office (Powiatowy Urząd Pracy, PUP) and, where applicable, the company trade union or employee representatives. Notification must precede the first notice of termination by at least 20 days for smaller redundancies or 30 days for larger ones.

We secured a successful challenge to a PIP enforcement decision exceeding PLN 180,000 in unpaid severance for a logistics client in the Mazowieckie region (autumn 2025). The employer had incorrectly excluded a fixed monthly transport allowance from the calculation base. Correcting that single component brought every individual payment within the statutory framework and resolved the inspection finding.

Employers using fixed-term contracts should note that severance applies equally to those contracts when terminated by the employer for economic reasons. The length-of-service calculation counts the entire period of continuous employment, including successive fixed-term contracts with the same employer. Gaps of more than one month between contracts may break continuity – a point that employment lawyers in Warsaw frequently raise during due diligence on acquisitions.

What are the three key business scenarios for severance calculation?

Three scenarios illustrate how the rules apply across common business structures in Poland. Each scenario highlights a specific decision point that changes the outcome.

Scenario 1 – Manufacturing plant restructuring. A Silesian manufacturing company employs 250 workers and closes one production line, making 30 positions redundant. The affected employees have between one and 12 years of service. Those with under two years receive one month's salary; those with two to eight years receive two months; the most senior workers receive three months. The employer must consult employee representatives and notify the PUP at least 30 days before issuing the first termination notice. Failure to observe the 30-day window renders the terminations procedurally defective, exposing the company to reinstatement or compensation claims before the labour court.

Scenario 2 – IT company individual redundancy. A Warsaw-based software house eliminates a single project manager role. The employee has nine years of service and a gross monthly base salary of PLN 18,000. The entitlement would be three months at PLN 18,000, producing PLN 54,000 – below the PLN 64,500 cap. The employer pays PLN 54,000. Had the base salary been PLN 25,000, the uncapped figure would be PLN 75,000, but the statutory ceiling would reduce the payment to PLN 64,500. The employer documents the cap application in writing and retains the payroll extract used to determine the minimum wage reference figure.

Scenario 3 – Foreign investor entering Poland. A Dutch retail group acquires a Polish chain and, within six months, integrates the back-office functions, making 15 administrative employees redundant. The employees had been employed by the Polish entity before the acquisition. Under Polish labour law, the transfer of undertaking (governed by the Kodeks pracy provisions on business transfers) preserves employment continuity. Service years accrued before the acquisition count toward the severance multiplier. The Dutch parent – accustomed to Dutch severance formulae – must apply Polish statutory rules, not the transition payment rules under Dutch law. Seeking advice on employment law compliance for foreign companies in Poland before completing the integration avoids costly miscalculations.

What mistakes do employers most often make?

Calculation errors cluster around four recurring points. First, employers frequently use the net salary figure rather than gross salary as the calculation base. Polish law is unambiguous: severance is calculated on gross remuneration. Using net figures systematically understates the payment and triggers personal liability of the HR director or CFO who signed off the payroll run. Second, employers miscount the length of service by measuring from the most recent contract rather than from the beginning of continuous employment. A fixed-term contract renewed annually for six years still produces a two-month entitlement, not one month.

Third, the statutory cap is sometimes misapplied by using the minimum wage from the date the redundancy programme was announced rather than the date the contract ends. If the minimum wage increases between announcement and termination – as it did twice in 2024 – the cap rises accordingly. Employers who calculated the ceiling at the earlier figure underpay affected employees. Fourth, severance is sometimes confused with the notice-period payment. They are separate obligations. An employee dismissed with three months' notice and three months' severance receives both. Offsetting one against the other is unlawful under the Labour Code.

Our team obtained a reversal of an underpayment finding for an IT services client in Lower Silesia (winter 2025). The employer had applied the minimum wage from the announcement date rather than the termination date, understating the cap by approximately PLN 3,000 per affected employee. Across 22 employees, the total exposure was PLN 66,000 – resolved through a corrected payroll run and documented recalculation submitted to the PIP inspector.

Employers with employees holding a work permit in Poland or an EU Blue Card should confirm that the employment agreement specifies Polish law as the governing law. Where the contract is silent, the employer risks a dispute about which national rules apply – a question that an employment lawyer in Warsaw should address before the redundancy process begins. Whistleblower Poland regulations also interact with redundancy: employees who have reported irregularities enjoy enhanced protection against dismissal for 12 months after their report.

What to prepare before issuing redundancy notices:

  • Payroll records for the three months preceding dismissal, broken down by fixed and variable components
  • Employment contract dates for each affected employee, including all predecessor contracts
  • Current national minimum wage figure and the resulting statutory cap amount
  • Written notification to the District Labour Office and employee representatives
  • Calculation worksheet documenting the multiplier, base, and cap application for each employee

Specific situations – particularly where the employer's registered office is outside Poland or where the redundancy intersects with a business transfer – require tailored analysis. A real estate company managing properties across multiple voivodeships, for instance, may need to consider whether employees based at different locations share a single employer entity for headcount threshold purposes. Questions about property-related employment structures can arise in conjunction with advice on real estate law in Poland.

Every specific redundancy situation carries consequences that are difficult to reverse once termination notices are served. Procedural defects – wrong notice period, missing PUP notification, incorrect calculation – cannot easily be corrected after the fact. To receive an expert assessment of your company's severance obligations before the process begins, contact info@kordeckipartners.com.

Frequently asked questions

Q: Does severance pay apply when the employee and employer agree to terminate the contract by mutual consent?

A: It depends on the documented reason. Where the termination agreement explicitly states that the employer's economic or organisational reasons are the cause, Polish courts and the PIP treat the payment obligation as equivalent to that arising from unilateral redundancy dismissal. Where the agreement is silent on the reason, the employer is not automatically obligated to pay statutory severance – though contractual or company-policy entitlements may still apply. Employers should document the reason for any termination agreement carefully to avoid ambiguity.

Q: How long does the employer have to pay severance after the employment contract ends?

A: Polish labour law does not set a separate deadline for severance distinct from the general rule on final salary payment. In practice, severance is due on the last day of employment or on the next regular payroll date immediately following termination. Delay exposes the employer to statutory interest calculated at 11.25 percent per annum (the reference rate applicable in 2025 plus eight percentage points) from the due date. An employee may also claim compensation before the labour court within three years of the breach.

Q: Is severance pay subject to income tax and social security contributions in Poland?

A: Statutory severance paid under the Act on Collective Redundancies is exempt from personal income tax up to the amount calculated according to the statutory formula. Amounts paid above the statutory entitlement – for example, under a negotiated settlement or enhanced redundancy scheme – are taxable as employment income. Severance is also exempt from social insurance contributions (ZUS) in full, regardless of the amount, provided the payment is made on the basis of the statutory redundancy rules. Employers should apply the correct payroll tax treatment at the point of payment, as corrections after the tax year end are administratively burdensome.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to employment law, redundancy procedures, and workforce restructuring. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.