A German technology company transfers its Warsaw-based product team to a newly established Polish subsidiary. Six months later, business conditions shift. The company decides to reduce headcount. The HR manager asks a simple question: how much severance does each employee receive? The answer is not as simple as it looks. Polish labour law sets out a specific formula – and errors in the calculation can expose the employer to claims before the Sąd Pracy (Labour Court) and enforcement proceedings through the Państwowa Inspekcja Pracy (National Labour Inspectorate, PIP).
Severance pay under Polish labour law is a statutory entitlement for employees dismissed for reasons not attributable to them – primarily collective or individual redundancies. The amount is calculated by multiplying the employee's average monthly salary by a multiplier tied to length of service: one month's pay for up to two years of service, two months' pay for two to eight years, and three months' pay for more than eight years. The payment is capped at fifteen times the national minimum wage, currently PLN 30,000 for 2026.
This guide walks through the calculation method step by step, identifies the most common errors employers make, and maps out three business scenarios – manufacturing, IT, and foreign investor entry – where the rules apply differently in practice. It also addresses cross-border mobility issues that arise when employees hold work permit Poland status or EU Blue Card classification.
What triggers the right to severance under Polish labour law?
The right to severance does not arise automatically upon termination. It arises only when a specific legal trigger is present. Under Polish employment legislation, the trigger is a dismissal for reasons that lie entirely on the employer's side. The two main instruments are collective redundancy under the Act on Collective Redundancy and individual redundancy governed by the Kodeks pracy (Labour Code, KP). Both require the employer to demonstrate that the termination reason is not related to the employee's conduct or capacity.
Collective redundancy applies when a company employing at least twenty workers dismisses a minimum threshold of employees within thirty days. The thresholds are five employees for companies with twenty to ninety-nine workers, ten percent of the workforce for companies with one hundred to two hundred and ninety-nine workers, and thirty employees for larger employers. Individual redundancy – which also triggers severance – applies even to a single dismissal, provided the employer cannot show an employee-related reason.
A dismissal framed as mutual termination by agreement (rozwiązanie za porozumieniem stron) does not automatically trigger the statutory severance right. This is a common misconception. Employers sometimes draft termination agreements that omit any reference to redundancy as the reason, then dispute the severance claim later. Labour Courts at the district level regularly set aside such agreements when the factual background shows a genuine redundancy.
- Employment termination for reasons on the employer's side – statutory severance applies.
- Termination by mutual agreement citing redundancy – severance is negotiable but not automatic.
- Termination for cause attributable to the employee – no statutory severance entitlement.
- Fixed-term contracts terminated at expiry – no severance unless the contract was terminated early for redundancy reasons.
Employees on work permit Poland or EU Blue Card status are entitled to the same statutory severance as Polish nationals. The National Labour Inspectorate enforces this parity actively. Foreign employers entering Poland through a branch or subsidiary sometimes assume that home-country rules apply to expatriate staff. They do not. Polish law governs any employment relationship performed on Polish territory.
How is the severance amount calculated step by step?
The calculation follows three steps: determine the base salary, identify the length-of-service multiplier, and apply the statutory cap. The base salary is not simply the contractual gross salary. It is calculated using the same method as holiday pay – average remuneration over the three months preceding the termination month, including variable components such as commissions, bonuses, and overtime pay averaged over twelve months. This distinction matters enormously in practice.
Step one: establish the average monthly remuneration. Add all remuneration components paid over the reference period, divide by the number of months in that period, and express the result as a monthly figure. For employees with variable pay, the reference period for variable components extends to twelve months. A Warsaw-based IT sales manager earning a base of PLN 8,000 plus average monthly commissions of PLN 4,000 has a severance base of PLN 12,000 – not PLN 8,000.
Step two: apply the multiplier. Service of less than two years: one month's pay. Service of two to eight years: two months' pay. Service of more than eight years: three months' pay. Length of service includes all prior employment with the same employer, including periods under fixed-term contracts. It also includes service with a predecessor employer where the business was transferred under the Kodeks pracy transfer-of-undertaking rules.
Step three: apply the cap. The payment cannot exceed fifteen times the national minimum wage in force on the date of termination. For 2026, the minimum wage is PLN 4,666 per month, making the cap PLN 69,990. In practice, the cap most often affects senior executives and long-tenured employees in Warsaw and Kraków where salaries significantly exceed the national average.
- Base: average monthly remuneration including variable pay components.
- Multiplier: one, two, or three months depending on length of service.
- Cap: fifteen times the current national minimum wage.
- Service: cumulative, including business transfer periods.
We secured a reversal of an underpayment claim exceeding PLN 180,000 for a manufacturing client in the Mazowieckie region (spring 2025). The employer had calculated severance on base salary only, omitting quarterly bonuses. The Labour Court agreed with our position that bonuses formed part of the remuneration base.
For a tailored strategy on severance calculation for your workforce, reach out to info@kordeckipartners.com.
What are the most common mistakes employers make in severance calculations?
Errors in severance calculation are more common than employers expect. The most frequent mistake is using gross contractual salary as the base rather than the statutory average remuneration figure. This underestimates the payment when variable components are significant. Labour Courts consistently hold that variable remuneration must be included. An employer who underpays faces a claim for the shortfall plus statutory interest, currently running at eleven percent per annum.
The second common error involves length of service. Employers count only the duration of the current employment contract and ignore prior fixed-term periods with the same entity. Under Polish employment legislation, all consecutive periods with the same employer count as a single uninterrupted period for severance purposes. A gap of one month between two contracts does not necessarily break continuity – courts examine the substance of the relationship.
The third error affects companies that have acquired Polish businesses. A business transfer under Polish employment law automatically transfers employment relationships, including accrued service. The acquiring employer inherits the entire service record of transferred employees. Failing to account for this can dramatically understate the multiplier. An employee with eight years at the target company and two additional years post-acquisition is a three-month employee, not a one-month employee.
A fourth area of risk involves the whistleblower Poland dimension. The Act on the Protection of Whistleblowers, which entered force in September 2024, prohibits retaliatory dismissal. If an employee who has reported a legal violation is subsequently dismissed and claims the dismissal is retaliatory, the employer faces not only reinstatement risk but also a separate compensation claim. Severance paid in such cases does not extinguish the retaliation claim. These are two distinct legal instruments.
Our team obtained interim protective measures for an IT sector employee in Lower Silesia (autumn 2025) who was dismissed within three months of reporting a data protection issue. The employer had calculated and paid statutory severance, believing the matter was closed. It was not.
How do the rules apply across three business scenarios?
Different business structures face different severance risks. Understanding which scenario applies to your company is the first step toward managing exposure.
Scenario one: manufacturing employer in Silesia. A production plant with two hundred and fifty employees decides to close one shift, eliminating forty positions. This triggers the collective redundancy procedure. The employer must notify the Powiatowy Urząd Pracy (District Labour Office) and consult with trade unions or employee representatives over thirty days. Only after completing this procedure can notices be issued. Severance is payable on the last day of employment. Workers with long tenure – many exceeding eight years in the automotive supply chain – are entitled to three months' pay. The payroll cost of the redundancy must be modelled before the procedure begins, not after.
Scenario two: IT company scaling down in Warsaw. A software house with fifteen employees decides to eliminate three positions. It does not meet the collective redundancy threshold of five employees in a company of this size. Individual redundancy procedure applies. Each affected employee receives individual notice with a reason. Severance is still payable if the reason is employer-side. The calculation base for software developers often includes equity-adjacent bonuses and project completion payments. These must be averaged and included. Overlooking this is the single most expensive mistake in the IT sector. Foreign employers should also review whether relocation packages paid to employees holding EU Blue Cards form part of remuneration for this purpose – generally, they do not, but the analysis is fact-specific.
Scenario three: foreign investor restructuring a Polish subsidiary. A Dutch holding company instructs its Polish subsidiary to reduce headcount by twenty percent following a group-wide reorganisation. The Polish entity employs eighty people. Ten dismissals within thirty days triggers collective redundancy. The parent company's HR team applies Dutch severance logic – a transition payment formula based on years of service and monthly salary. Polish law does not recognise this formula. Polish statutory severance applies regardless of what the group policy says. For cross-border mobility considerations, including employees relocating from other jurisdictions, see our guide on global mobility and relocating employees to Poland.
For companies that have used equity incentives as part of their compensation structure, severance base calculations may also intersect with share plan mechanics. Our analysis of ESOP structuring for Polish startups and tech companies addresses the employment law treatment of vested and unvested options on termination.
Specific compliance obligations for Spanish companies operating in Poland – including employment structuring considerations – are covered in our guide on employment law compliance for Spain companies in Poland.
Each scenario involves a different timeline. Individual redundancy notice periods range from two weeks to three months depending on length of service. Collective redundancy adds a mandatory thirty-day consultation period before notices can be issued. Budgeting for both the severance cost and the notice period payroll is essential before announcing any restructuring.
What should employers prepare before initiating a redundancy?
Preparation before the first notice is issued determines whether the process is defensible. A poorly documented redundancy – even one where the severance calculation is correct – can be challenged on procedural grounds. Labour Courts in Warsaw and Kraków regularly reinstate employees not because severance was miscalculated but because the selection criteria for redundancy were not documented or applied consistently.
The following checklist covers the minimum preparation required before issuing any redundancy notice:
- Map the redundancy trigger: is this individual or collective? Count affected employees over a rolling thirty-day window.
- Calculate the correct severance base for each affected employee, including variable pay averaged over the correct reference period.
- Verify length of service, including prior fixed-term periods and any business transfer history.
- Document the selection criteria if multiple employees hold the same or equivalent role.
- Check for protected categories: pregnant employees, employees on parental leave, employees who have recently reported a legal violation under the Whistleblower Act.
The employment lawyer Warsaw-based practitioners most often encounter in Labour Court proceedings are not there because the employer acted in bad faith. They are there because the employer acted quickly, without documentation, and assumed the severance payment would resolve all claims. It rarely does. A reinstatement claim (przywrócenie do pracy) can expose the employer to back-pay liability for the full period of litigation – often twelve to twenty-four months at Warsaw district courts.
Personal liability risk is real in this context. Board members of Polish limited liability companies (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) may face personal liability for unpaid employee claims if the company becomes insolvent during or after a restructuring. This precludes any assumption that the matter can be resolved by winding down the entity.
Specific attention is warranted for companies that use employment agency arrangements or civil-law contracts (umowy zlecenia) alongside employment contracts. If the Labour Court reclassifies a civil-law arrangement as an employment relationship – a common outcome where the indicia of employment are present – the reclassified employee acquires full severance rights retroactively. The financial exposure in such cases can be substantial and is irreversible once judgment is issued.
To receive an expert assessment of your redundancy exposure before the process begins, contact info@kordeckipartners.com.
Frequently asked questions
Q: Does severance pay apply to employees on fixed-term contracts in Poland?
A: Yes, provided the fixed-term contract is terminated early by the employer for reasons that lie on the employer's side – typically redundancy. If the contract simply expires at the end of its term, no statutory severance is payable. Length of service under a fixed-term contract counts toward the multiplier for any subsequent employment with the same employer.
Q: How long does the employer have to pay severance, and what happens if payment is late?
A: Severance must be paid on the last day of employment. Late payment triggers statutory interest, currently eleven percent per annum under Polish civil law provisions applicable to employment claims. If the employer is also found to have acted in bad faith – for example, by deliberately understating the calculation base – the Labour Court may award additional compensation. The limitation period for severance claims is three years from the date payment fell due.
Q: Does signing a termination agreement waive the employee's right to severance?
A: Not automatically. A termination by mutual agreement is a separate legal act from the statutory right to severance. If the underlying reason for the agreement is employer-side redundancy, and the agreement does not explicitly and knowingly waive the severance entitlement, the employee retains the right to claim it. Labour Courts apply a protective interpretation in favour of employees. Employers should ensure that any termination agreement either expressly includes severance or documents the employee's informed waiver of the entitlement.
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.