A Warsaw-based logistics company decides to reduce headcount by 12 employees following a restructuring of its distribution network. The HR manager opens the Kodeks pracy (Labour Code, KC) and immediately faces a cluster of overlapping rules: seniority thresholds, reference salary definitions, cap calculations, and deadlines that differ depending on the reason for termination. One miscalculation, and the employer faces a claim before the Labour Court (Sąd Pracy) – with interest accruing from the date payment was due.
Under Polish labour law, severance pay is owed when an employer with at least 20 employees terminates a contract for reasons that do not concern the employee. The amount is capped at 15 times the statutory minimum wage and scales with length of service: one month's salary for up to 2 years, two months' for 2–8 years, and three months' for over 8 years. Payment must be made on the last day of employment – delay triggers statutory interest and potential Labour Court claims.
This guide walks through the full calculation procedure, identifies the most common employer errors, and maps three business scenarios – manufacturing, IT, and foreign investor – where severance obligations arise in practice. Each section includes at least one concrete figure and a self-assessment checkpoint.
When does the obligation to pay severance arise under Polish law?
Severance pay under the ustawa o szczególnych zasadach rozwiązywania stosunków pracy (Act on Collective Redundancies) applies when an employer with 20 or more employees terminates contracts for reasons not attributable to the employee. The trigger is the employer's operational decision – restructuring, closure of a business unit, or elimination of a position. The reason must be documented in writing and cannot be a pretext for dismissal on grounds that would otherwise require union consultation or additional justification.
Three conditions must be met simultaneously. First, the employer must employ at least 20 people (headcount on the date notice is issued). Second, the termination must be employer-driven – economic, organisational, or technological reasons qualify. Third, the employee must be employed under an employment contract, not a civil-law contract (umowa zlecenia or umowa o dzieło). Freelancers and B2B contractors fall outside the scope entirely.
One point that regularly surprises foreign investors: mutual termination agreements (porozumienie stron) can also trigger severance if the employer initiates the agreement and the underlying reason is redundancy. The National Labour Inspectorate (Państwowa Inspekcja Pracy, PIP) scrutinises the actual reason behind any termination, not just its formal label. Disguising a redundancy as a resignation or mutual agreement to avoid severance is a recognised audit risk.
Individual redundancy – where fewer than the statutory thresholds for collective redundancy are dismissed within 30 days – still triggers severance under the same rules. Employers sometimes assume that only large-scale collective procedures carry the obligation. That assumption is incorrect and has produced claims we have defended before Labour Courts in Mazowieckie.
How is the severance amount calculated step by step?
The calculation has three components: the applicable seniority tier, the reference salary base, and the statutory cap. Each must be determined separately before the final figure can be confirmed. An error at any stage produces a result that the employee can challenge within 21 days of receiving the termination notice – and Labour Courts routinely award the difference plus interest.
Seniority tiers under Polish labour legislation work as follows:
- Up to 2 years of service – one month's salary
- Between 2 and 8 years of service – two months' salary
- Over 8 years of service – three months' salary
The reference salary is calculated using the same methodology applied to holiday pay (wynagrodzenie urlopowe). It includes fixed monthly components, variable components averaged over the preceding 3 months, and any regular bonuses. Overtime pay and one-off awards are excluded. For a part-time employee, the reference salary reflects the contractual fraction of full-time work – not the full-time equivalent.
The statutory cap stands at 15 times the minimum wage (minimalne wynagrodzenie za pracę). From 1 January 2026, the minimum wage is PLN 4,666 gross, placing the cap at PLN 69,990 gross. An employee earning PLN 30,000 per month with 10 years of service would theoretically be owed PLN 90,000 (three months) – but the cap reduces this to PLN 69,990. Employers who apply the uncapped figure over-pay; those who misread the cap under-pay and face claims.
We assisted a manufacturing client in the Silesia region (autumn 2025) in recalculating severance for 34 employees after an internal audit identified that variable quarterly bonuses had been excluded from the reference salary base. The corrected amounts totalled over PLN 480,000 – a material exposure that had been invisible in the original payroll run.
What are the most common calculation mistakes employers make?
Employer errors in severance calculation cluster around four recurring themes. Identifying them early is cheaper than correcting them after a Labour Court filing. The 21-day challenge window is short, but employees who miss it can still bring a claim under general limitation rules if the error constitutes a failure to pay wages – a distinction the Supreme Court of Poland has addressed in its case law.
The most frequent mistake is using gross basic salary instead of the full reference salary. Variable components – shift allowances, commissions, regular performance bonuses – must be averaged and included. Payroll systems that pull only the base salary field produce systematically understated figures. This is particularly common in IT companies where bonuses represent a large share of total compensation.
A second common error involves seniority counting. Polish labour law counts all periods of employment with the same employer, including earlier contracts that were interrupted. It also counts service with a predecessor employer if the business was transferred under TUPE-equivalent rules (przejście zakładu pracy). Foreign investors who acquire Polish businesses through asset deals sometimes reset the seniority clock – incorrectly – at the acquisition date.
Third, employers in group structures sometimes miscalculate by applying the 20-employee threshold to a single legal entity rather than the economic unit that actually employs the workforce. The PIP applies a substance-over-form approach. Where a group has fragmented its workforce across multiple entities to stay below the threshold, inspectors can treat the group as a single employer for severance purposes.
Fourth, the timing of payment causes problems. Severance must be paid on the last day of the employment relationship – not on the next regular payroll date. Late payment triggers statutory interest at 11.25% per annum (the rate applicable from early 2026) from the due date, compounding daily.
How do three business scenarios affect the calculation?
Severance obligations look different depending on the type of business and workforce structure. Three scenarios illustrate how the same statutory rules produce different practical results – and where each sector's specific risks concentrate.
Manufacturing company (Małopolska region). A factory with 180 employees eliminates a production line, making 22 positions redundant. The workforce includes shift workers with variable pay components and employees on different seniority tiers. The employer must average variable pay over 3 months for each affected employee individually. Collective redundancy procedures apply (notification to the District Labour Office, Powiatowy Urząd Pracy, PUP, and union consultation), adding a minimum 20-day consultation period before notices can be issued. Severance is due on the last day of each individual's notice period – which may differ by employee depending on their length of service and contractual notice terms.
IT company (Warsaw). A software house with 35 employees terminates 4 contracts due to loss of a major client. Collective redundancy thresholds are not met (fewer than 10 employees in a company of this size). Individual redundancy rules apply. Each affected employee holds a base salary plus a regular monthly bonus. The bonus must be included in the reference salary. Two of the four employees hold a work permit Poland or EU Blue Card – their severance calculation follows identical rules to Polish nationals, but the employer must also notify the relevant voivodeship office of the termination within 7 days to avoid a separate administrative penalty.
Foreign investor entry (Lower Silesia). A German group acquires a Polish production subsidiary through a share deal. Post-acquisition, it restructures the management layer, terminating 6 senior managers. Their employment contracts were concluded before the acquisition. Seniority counts from the original hire date. Two managers earn above the cap threshold, so the PLN 69,990 ceiling applies. The investor's German HR team initially calculated severance using German rules – a common error that an employment lawyer Warsaw familiar with cross-border structures should catch at due diligence stage. We identified this discrepancy for a Lower Silesia client (winter 2025) before the termination letters were issued, avoiding claims that would have exceeded EUR 120,000 in aggregate.
What should employers prepare before issuing termination notices?
Preparation before notice is issued determines whether the severance process runs cleanly or becomes litigation. The checklist below covers the minimum documentation employers should assemble. Missing items do not delay the obligation to pay – but they make it harder to defend the calculation if challenged.
- Full employment history for each affected employee, including any predecessor employer periods
- Reference salary calculation sheet showing all variable components averaged over 3 months
- Confirmation of current minimum wage and the resulting cap figure
- Evidence of the organisational reason for termination (board resolution, restructuring plan, or equivalent)
- Notification letters to the PUP (where collective redundancy thresholds are met) and union consultation records
For employers with foreign nationals on their payroll, the development agreements in Poland and any training cost recovery clauses must be reviewed before the termination date. Recovery clauses in training agreements may be unenforceable if the termination is employer-driven – attempting to offset training costs against severance is a recognised source of Labour Court claims.
Employers should also consider whether any affected employees hold protected status. Pregnant employees, employees on parental leave, employees within 4 years of retirement age, and trade union representatives benefit from enhanced protection. Severance may still be owed in some circumstances, but the termination procedure differs materially. Ignoring protected status does not reduce the severance obligation – it adds an additional layer of liability.
A specific self-assessment checkpoint: before signing any termination notice, confirm in writing that the reference salary figure has been verified by payroll and reviewed by an employment lawyer. A five-minute check at this stage costs a fraction of the interest and legal fees that accrue once a claim is filed.
Specific situations require tailored advice. If your company is restructuring and the affected workforce includes employees on varying contract types, foreign nationals, or individuals approaching retirement age, the interaction of multiple rules creates exposure that a standard payroll calculation will not capture.
To receive an expert assessment of your severance obligations before termination notices are issued, contact info@kordeckipartners.com.
Frequently asked questions
Q: Does severance apply when an employee resigns?
A: No. Severance under Polish labour law is triggered only when the employer terminates the contract for reasons not attributable to the employee. An employee who resigns voluntarily forfeits the right to statutory severance, regardless of length of service. The exception arises where the employee terminates due to a serious breach by the employer – in that case, the Labour Code treats the termination as equivalent to an employer-initiated dismissal for severance purposes.
Q: How long does the employer have to pay severance, and what is the interest rate for late payment?
A: Payment must be made on the last day of the employment relationship – not on the next standard payroll date. Late payment triggers statutory interest at the rate set by the National Bank of Poland (Narodowy Bank Polski, NBP), currently 11.25% per annum from early 2026, calculated from the due date. The employee does not need to send a demand letter; interest accrues automatically from the day after the due date.
Q: Is contractual severance in excess of the statutory amount taxable?
A: Statutory severance paid under the collective redundancy rules is exempt from personal income tax up to the statutory cap of 15 times the minimum wage. Any amount paid above that cap – whether under a contractual agreement or a settlement – is subject to income tax and social security contributions in the normal way. Employers who agree enhanced severance packages should model the tax cost for both the company and the employee before committing to a figure.
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, workforce restructuring, and cross-border mobility. 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.