The rules on severance pay in detail

If termination is for old age retirement or invalidity, the employee is entitled to a retirement severance payment of one month's remuneration.

Otherwise, statutory severance pay is payable only in the case of dismissals for economic, technical or organisational reasons (collective or individual) if the employer has at least 20 employees. Statutory severance pay is calculated on the basis of the employee’s length of service as follows:

  • one month’s salary where the employee has less than two years’ service;
  • two months’ salary where the employee has between two and eight years’ service; and
  • three months’ salary where the employee has over eight years’ service.

Statutory severance pay is capped at PLN 33,750 in 2019 (approximately EUR 7,850). In 2020 it will be capped at PLN 39,000 (approximately EUR 9,285). When calculating statutory severance pay, an employer must take into account both fixed and variable pay components. The calculation should include the amount paid to the employee in the last month of employment. Variable pay components that are payable for periods of up to one month (e.g. monthly bonuses), should be included in the severance package based on the average over the past three months of employment. Variable pay components payable over longer periods (e.g. a quarterly or annual bonus), should be incorporated based on the average received over the last 12 months of employment.

Note that other (higher) mandatory payments may be provided in employment agreements or in the internal regulations of the company. This is most often applied to senior executives.

In cases where termination is by mutual agreement, the employer may also pay additional compensation.

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Author: Raczkowski Paruch

Date: December 2019