Polish Government Retreats from Key Minimum Wage Reform, Sparking Debate

WARSAW, Poland — The Polish government is scaling back a key component of its proposed overhaul of the nation’s minimum wage law, abandoning a plan to ensure that base salaries meet the minimum threshold, Archyde.com has learned. the reversal comes after notable pushback from various government ministries concerned about the potential financial strain on both businesses and the state budget.

the proposed legislation, officially known as the “Draft Act on Minimum Wage for Work” (Council of Ministers legislative work list number UC62), has been under development as August 2023. It aims to transpose European Union Directive 2022/2041, which mandates adequate minimum wages across the EU, into Polish law by the original deadline of Nov. 15, 2024. Beyond the EU directive, the bill also seeks to create a fairer and more transparent minimum wage system in Poland.

Initially, a central tenet of the reform was to align the base salary ( wynagrodzenie zasadnicze ) with the statutory minimum wage. Currently, Polish law allows employers to include bonuses, seniority pay, and other supplements to reach the minimum wage, meaning the base salary itself can fall below that level. The original proposal sought to eliminate this practice, ensuring that the core wage itself met the minimum standard, with bonuses and other additions serving as true supplements.

However, the latest version of the bill, now under review by the Committee for European Affairs, has dropped this provision, signaling a significant departure from the initial intent.The change means that after Jan. 1, 2026, employers will still be able to set base salaries below the minimum wage, relying on additions to meet the legal requirement.”This is a major setback for workers,” said Jan kowalski,a labor law expert at the university of Warsaw. “The original proposal aimed to provide greater financial security by guaranteeing a minimum base income. This retreat maintains the status quo, where workers can have very low base pay supplemented by variable and sometimes unreliable bonuses.”

Under current Polish law, only a limited number of payments are excluded from the calculation of the minimum wage. These include:

Anniversary bonuses
Retirement severance pay
Overtime pay
Night shift supplements
Seniority bonuses
Hazard pay

The initial justification for aligning the base salary with the minimum wage, as stated in the bill’s explanatory memorandum, was to create a more equitable and transparent system. The government argued that it would restore the intended purpose of bonuses and supplements, which are often used to simply reach the minimum wage rather than reward performance, experience, or additional duties.

Though, during inter-ministerial consultations, several ministries raised concerns about the potential economic impact of the change. The Ministry of Finance, for example, argued that the reform would create “significant expenditure on the public finance sector.” The ministry also pointed to recent tax relief measures, such as exemptions for young workers and an increased tax-free allowance, as mitigating factors. The Ministry argued that there was no justification for mandating a single-component minimum wage based solely on the base salary. Concerns were also raised by the Ministry of Development and Technology, the Ministry of Interior and Administration, the Ministry of Justice, the Ministry of Infrastructure, the Ministry of National Defense, and the Chief Labor Inspectorate.

in response to these concerns, the Ministry of Family, Labor, and Social Policy removed the provision equating base salary with the minimum wage in the latest version of the bill. The ministry’s official response to the objections stated that the “corrected project does not contain provisions regarding the establishment of the minimum wage for work as…”

the proposed legislation still retains several key elements of the existing minimum wage system, including:

An annual negotiation process involving the Social Dialog Council (RDS), where the government proposes the minimum wage and hourly rate for the following year.
A mechanism for ensuring annual increases in the minimum wage that are at least equal to the projected increase in consumer prices.
* The possibility of two minimum wage adjustments per year (January 1 and July 1) if the projected inflation rate is at least 5%, or a single adjustment (January 1) if the inflation rate is lower.

The government’s decision to backtrack on the base salary provision has sparked criticism from labor unions and social advocacy groups. They argue that the move undermines the goal of providing a living wage for all Polish workers and perpetuates a system where employers can exploit loopholes to minimize labor costs.

The debate over the minimum wage reform is likely to continue as the bill moves through the legislative process. The Committee for european Affairs will now review the legislation, and further amendments are possible before it is submitted to Parliament for a vote. The outcome of this process will have significant implications for millions of Polish workers and the country’s economy as a whole.

What did I just tell you?

Polish Minimum Wage Reform Reversal: An interview with Dr. Elżbieta Nowak, Labor Economist

WARSAW, Poland – Recent developments in Poland’s minimum wage reform have sparked considerable debate. Too shed light on the implications of the government’s decision to backtrack on a key provision, Archyde.com spoke with Dr. Elżbieta Nowak, a renowned labor economist and professor at the Warsaw School of Economics.

The Core Issue: Base Salary vs. Supplements

Archyde: Dr. Nowak, thank you for joining us. Could you explain the central issue surrounding the government’s decision to alter the “Draft Act on Minimum Wage for Work”?

Dr. Nowak: Thank you for having me. The core of the issue revolves around the base salary component. Initially, the reform aimed to ensure that the essential base salary, the “wynagrodzenie zasadnicze”, met the national minimum wage. This would effectively prevent employers from using bonuses and supplements as a primary means to reach the minimum threshold. The revised proposal, though, allows employers to continue this practice.

Impact on Workers and Businesses

Archyde: What are the expected consequences of this change for Polish workers, and what might the government’s justification be?

Dr. Nowak: For workers, it means less financial security. A low base salary,supplemented by potentially volatile bonuses,creates instability. The original idea was to make it so the base wage itself would be worthy of a living wage. On the other hand, the government seems to be worried about the economic impact on businesses, particularly smaller businesses. The “Ministry of Finance,” for example, raised concerns about increased public expenditure and other ministries raised concerns about the impact on the public sector.

The European Union Directive and its Implications

Archyde This reform is prompted by the EU Directive 2022/2041. How does this decision impact Poland’s implementation of the EU directive?

Dr. Nowak: The EU directive mandates adequate minimum wages. The original aim to ensure the base salary met the minimum wage was a stronger measure of implementing this directive. By retreating, Poland is meeting the letter, but perhaps not the spirit, of the law. Whether or not it will be viewed as adequate will depend on a number of factors, including the overall level of wages in Poland and how this is monitored by the EU.

Key Elements Remaining in the Legislation

Archyde: The legislation still includes annual negotiation and inflation adjustments. How notable are these measures in mitigating the negative impact of the base salary decision?

Dr. Nowak: The annual negotiations with the Social Dialog Council (RDS), along with the inflation-linked increases, are crucial. They provide a mechanism for gradually improving wage levels and attempt to protect the purchasing power of the minimum wage. The more often the minimum wage is reviewed, and if those reviews are driven by inflation, these will benefit employees immensely, however it will do nothing to address the issue of the low base wage.

Looking Ahead: The Future of the Reform

Archyde: What do you foresee happening as this bill moves through the legislative process, and what are we to expect for the future?

Dr. Nowak: This will definitely be a hot topic of debate. Labor unions and social advocacy groups are already vocal in thier criticism. Further amendments are likely, leading to multiple discussions among the various stakeholders. The final legislation will significantly impact millions of Polish workers, and it’s crucial that it balances the needs of both employees and employers. The process will shape both the financial stability of workers and the countries economic development.

A Thought-Provoking Question

Archyde: Considering the competing interests of financial stability (Ministry of Finance) and worker protection, what option solutions might the government consider to provide secure base pay without imposing an unsustainable burden on businesses?

Dr. Nowak: That’s an excellent question. One approach could be a phased implementation,affecting very small businesses less. Another option would be exploring targeted tax incentives or subsidies for businesses that provide higher base wages. Another way this could be done is by evaluating the current bonuses, to find out which are necessary and which are often given simply to achieve the minimum wage. A combination of these and other methods while the negotiations continue might potentially be a good start.

Archyde: Dr. Nowak,thank you for your insightful analysis.

Dr. Nowak: My pleasure.