09 11 2017

Mandatory labor fund (FP) premiums and low salaries

The employer’s responsibilities tied to the payment of Labor Fund premiums are regulated by the Law from 04.20.2004 on the promotion of employment and labor market institutions. The amount of the premium is calculated as 2.45% of the contribution basis. The starting point for calculating the size of the Labor Fund premium is the contribution basis for retirement-pension premiums in the case of people who are receiving at least the minimum salary for work as calculated on a month-to-month basis. The 30-times monthly average salary limit does not apply when assessing the contribution basis for Labor Fund premiums.

There are no doubts about the general rules for calculating Labor Fund premiums. The matter becomes complicated when the employee (or contractor) receives incomes from several sources and does not reach the minimum salary level from neither of these sources. In such a case, in order to establish the requirement to pay Labor Fund Premiums, one has to consider the total sum of revenue obtained in a given month. Thee premiums will be owed for each type of insurance in the case when the total sum that is the basis for the contribution size equals at least the minimum salary. In such a case, the insured is required to submit an appropriate declaration to each payer, with whom they fall under social insurance. However, not every employee (contractor) remembers this obligation and it is only when the Social Insurance Institution analyzes the insured’s account that they indicate underpaid premiums.

Another problematic situation is when the employee performs their work over a period shorter than a full month and therefore does not achieve the minimum salary, i.e. because employment began or was terminated during the month, due to absence in relation to sickness or non-paid leave. In such a case, one has to check what the contribution basis would have been if the employee performed their work over a full month. This is because what matters is not the actual size of the salary, but the remuneration amount calculated over a period of the whole month. When it turns out after the calculation that the income that is the contribution basis at least equals the minimum salary amount, then a Labor Fund premium needs to be deducted from that contribution basis. In the case of an employee that is not hired full time, the requirement to make Labor Fund premiums depends on the remuneration amount specified in the employment contract. Unfortunately, it sometimes happens that the payroll systems that don’t distinguish between different reasons for paying a small remuneration do not calculate and charge Labor Fund premiums, which therefore creates a default that the Social Insurance Institution later claims, with interest.

Author: Aneta Łopińska, Consultant, Social Insurance and Work Environment Department


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