ZUS cap persuades expats to be paid here
The reality, though, is that it is questionable whether many expats will shift their paycheck to Poland from their homeland because the new pension law does not clearly outline if and when foreigners will gain access to their pensions here.
As a result of the recent pension overhaul, ZUS payments do not have to be made on annual earnings above zl. 50,000, excluding an approximate 5% tax that goes toward sickness and accident insurance. Any salary earned in addition to this amount can be invested or spent at the employee's discretion.
"It gives me more flexibility as to how I can plan my future savings. It doesn't all go into ZUS," said Laura Hopper, an American working as an equity analyst for Societe Generale.
With this new cap, it could be more advantageous for foreigners to be paid in Poland instead of splitting their income between here and their own nation, Hopper said.
The change will encourage more foreigners to be paid onshore "because being paid offshore was a way to avoid paying contributions," said Agnieszka Chlon, an economist in the plenipotentiary for social security reform. "If this contribution is not that significant it may be more advantageous for that person to be paid in Poland."
The new system could spur an increase in the number of expats paid in Poland, concurred Karen Kwiatkowska, a senior manager for accounting firm PricewaterhouseCoopers. "Given the high rate of social insurance, in the past when expats weren't going to get anything for it" it was common to have salaries split between on and offshore accounts, she said.
Before the zl. 50,000 cap was introduced, employers had to pay 45% of an employee's gross salary in Poland to ZUS. That frequently limited how much money an employer was willing to pay an expat here.
"Being fully paid by a Polish company will be a more common practice than in the past," said Andrzej Marczak, manager of the personal income tax department at accounting firm Ernst & Young. But other factors remain that encourage offshore payments, including the desire to be paid in hard currency and lower social security taxes in a home country, he said.
But the biggest question is how expats will be able to finally get their hands on the pension accrued in Poland.
Overall, pension reform in Poland has been done for Poles, said Jim Kernan, a consultant with the U.S. Agency for International Development (USAID), who is employed by PricewaterhouseCoopers. Now Poland must consider how it will harmonize its pension system with the potential increase of foreign workers in the country.
For foreigners to eventually be able to receive the state-funded portion of their pension here, Poland must have a tax agreement with the foreign employee's country of origin, said Franciszek Zalewski, an employee at the ZUS press office. Currently, agreements exist only with the Czech Republic and Germany.
As a result of the recent pension overhaul, ZUS payments do not have to be made on annual earnings above zl. 50,000, excluding an approximate 5% tax that goes toward sickness and accident insurance. Any salary earned in addition to this amount can be invested or spent at the employee's discretion.
"It gives me more flexibility as to how I can plan my future savings. It doesn't all go into ZUS," said Laura Hopper, an American working as an equity analyst for Societe Generale.
With this new cap, it could be more advantageous for foreigners to be paid in Poland instead of splitting their income between here and their own nation, Hopper said.
The change will encourage more foreigners to be paid onshore "because being paid offshore was a way to avoid paying contributions," said Agnieszka Chlon, an economist in the plenipotentiary for social security reform. "If this contribution is not that significant it may be more advantageous for that person to be paid in Poland."
The new system could spur an increase in the number of expats paid in Poland, concurred Karen Kwiatkowska, a senior manager for accounting firm PricewaterhouseCoopers. "Given the high rate of social insurance, in the past when expats weren't going to get anything for it" it was common to have salaries split between on and offshore accounts, she said.
Before the zl. 50,000 cap was introduced, employers had to pay 45% of an employee's gross salary in Poland to ZUS. That frequently limited how much money an employer was willing to pay an expat here.
"Being fully paid by a Polish company will be a more common practice than in the past," said Andrzej Marczak, manager of the personal income tax department at accounting firm Ernst & Young. But other factors remain that encourage offshore payments, including the desire to be paid in hard currency and lower social security taxes in a home country, he said.
But the biggest question is how expats will be able to finally get their hands on the pension accrued in Poland.
Overall, pension reform in Poland has been done for Poles, said Jim Kernan, a consultant with the U.S. Agency for International Development (USAID), who is employed by PricewaterhouseCoopers. Now Poland must consider how it will harmonize its pension system with the potential increase of foreign workers in the country.
For foreigners to eventually be able to receive the state-funded portion of their pension here, Poland must have a tax agreement with the foreign employee's country of origin, said Franciszek Zalewski, an employee at the ZUS press office. Currently, agreements exist only with the Czech Republic and Germany.
