Poland’s PiS Government are set to hit sole-traders and entrepreneurs with a body-blowing ZUS hike – the largest ever in history.
The compulsory monthly ZUS payments, which are generally the same for all sole-traders regardless of income, increased by almost 90zł in February. By the end of this year, the significant rise will result in entrepreneurs becoming over 1,000zł worse off compared to 2018.
ZUS also rose by over 55zł in 2017 and roughly 50zł in 2016, while in In 2015 the increase was 30zł. As a result of these increases, freelancers will pay 2,670zł more in 2019 than they did three years ago. In 2020 that figure will rise by around 1,356zł.
The increases are a result of ZUS rates being calculated in relation to the average salary in Poland, which has gone up in recent times. These rises have occurred under both PO and PiS administrations. In 2020 the minimum wage will rise, which naturally increases the country’s average salary.
As is currently the case, businesses under two years old can nonetheless pay the lower ‘mały ZUS’ rate (555.89zł). New business are also exempt from paying ZUS for the first six months.
This year the ‘mały ZUS’ rate has also been open to entrepreneurs whose income averaged below 5,250zł per month in 2018. However several conditions apply. Notably, the 5,250zł figure refers to revenue, not profit, therefore many businesses (e.g. small shops) simply won’t meet the requirements for applying to the ‘mały ZUS’ rate.
Those looking to benefit from the lower ZUS rate in 2020 will have to deliberately earn less than 5,250 on average this year.
Freelancers who don’t meet the criteria will simply have no option but to stump up for the flat-rate ZUS. Therefore the system seems to benefit low earners and high earners, but punishes those in-between.
The massive increases will almost certainly result in a number of sole traders making changes to the way they conduct business. Given that tax-optimization can only do so much for their bottom line, sole traders will inevitably have to raise prices or do more work cash-in-hand.
Poland’s national insurance system is arguably one of the country’s most despised public institutions. Many Poles doubt that they’ll ever see the money come back to them when they retire, while other critics say ZUS makes it too expensive to run a small business or employ workers legally. Very few politicians have suggested any radical reforms to the system though, so Polish residents cannot expect much to change in the near future at least.