Salary not so minimum after all

While implementing into the Polish legal order the provisions of Directive (EU) 2022/2041 of the European Parliament and of the Council of 19 October 2022 on adequate minimum wages in the European Union (Official Journal of the EU L 275 of 25.10.2022), the Minister of the Family, Labour and Social Policy decided to propose changes to the definition of the minimum wage.

In the draft Minimum Wage Law (UC62), Article 15 is proposed, according to which: ‘The amount of basic remuneration of a full-time monthly employee shall not be lower than the amount of the minimum remuneration for work established pursuant to Article 6’.

Basic salary, according to Article 2(25) of the draft law, is understood as the basic and obligatory component of an employee’s remuneration without additional components to remuneration and other work-related benefits, regardless of the remuneration system.

Thus, the Minister in the draft Act assumed that an employee’s basic remuneration, without taking into account other remuneration components, allowances to remuneration or other work-related benefits, cannot be lower than the minimum remuneration set in a given year. The minimum wage under the bill is therefore understood as a ‘pure’ salary without any additional benefits.

The original intent of the bill was to fundamentally change the current legislation.

Indeed, pursuant to Article 6 of the currently in force Act of 10 October 2002 on the minimum remuneration for work (consolidated text Dz.U. 2024, item 1773), the amount of remuneration of an employee employed on a full-time monthly basis cannot be lower than the amount of the minimum remuneration established pursuant to Article 2 and Article 4.

For the calculation of the amount of the employee’s remuneration, the components of remuneration and other benefits resulting from the employment relationship to which the employee is entitled, classified according to the principles of employment and remuneration statistics established by the Central Statistical Office as personal remuneration, shall be adopted.

However, when calculating the employee’s remuneration, the following are not taken into account:

1) jubilee award; 2) severance pay due to the employee’s retirement or disability pension; 3) remuneration for overtime work; 4) allowance for night work; 5) seniority allowance; 6) special working conditions allowance.

As can be seen from the above, in the state of the law still in force, the minimum salary should not be understood as a basic salary (unless the employee’s pay conditions provide for a single component salary). The remuneration system adopted may therefore include various additional components in addition to the basic salary. These may include bonuses, awards, allowances or commissions. The components of remuneration that cannot be included in the calculation of the minimum wage are listed in the aforementioned provision. Thus, the sum of all permissible components obtained for the month worked should provide the current amount of the minimum wage.

The juxtaposition of the current Article 6 with Article 15 of the draft law clearly shows the consequences of the proposed changes. As a result of the redefined amount of the minimum remuneration for work, the basic remuneration of employees (who reach the minimum remuneration threshold, when the basic remuneration and other remuneration components are added together) will have to be increased to the threshold established by the legislator. This means a drastic increase in costs for many employers.

The bill has not yet reached the Sejm, but for the time being the Ministry, after consultations, has withdrawn from the controversial provision. However, this withdrawal does not mean that the Ministry has completely given up on equating the minimum wage with the basic salary. As one can read on the website of the Government Legislation Centre, the draft currently does not contain provisions regarding the minimum wage as the basic wage. Instead, it provides for a staged exclusion of particular components from the constituent scope of the minimum remuneration. The phased exclusion of individual components from the minimum wage will, in the Ministry’s view, ensure an adequate vacatio legis and employers will have adequate time to adjust to the new provisions. Thus, as can be seen from the above, the fact that the Ministry has withdrawn from its idea does not, however, mean that it has been abandoned altogether. The plan is to gradually exclude individual components of remuneration from the scope of the minimum wage, until a state is reached where the minimum wage means a ‘pure’ basic salary.

The work on the bill, especially that in the Sejm, may still bring many changes. We will therefore follow their progress with great attention.