Employee Capital Plans (PPK)

As of 1 January 2021, the last group of employers – companies employing less than 20 people and public finance sector entities – became covered by Employee Capital Plans.

What are Employee Capital Plans?

An Employee Capital Plan is a voluntary, private, long-term savings system available to all employees. PPKs have been developed jointly by employees, employers and the state.

The objective of a PPK is to increase the financial security and enhance employee’s private pension savings, as well as to boost the development of the economy, businesses and jobs.

A PPK covers individuals, whether employed under an employment contract or otherwise engaged, based on a contract of mandate, an agency agreement or some other service contract, including members of the supervisory board compensated for their functions, as long as they are subject to mandatory pension and disability social security insurance for this reason. A PPK does not apply to self-employed workers, i.e. businesses cooperating on a B2B basis.

An employer is required to execute a PPK management agreement and a PPK operation agreement for and on behalf of the beneficiaries.

Who is not required to introduce a PPK?

• Self-employed, i.e. sole proprietors, if they do not employ people enrolled into a PPK;
• Individuals who engage another individual to perform services, but not in connection with their business activity (i.e. employing a nanny or part-time housekeeper);
• Micro-businesses where all the employees have provided an opt-out notice; and
• Employers who have already established a PPK and that calculate and pay basic contributions to a Retirement Pension Scheme (PPE) of at least 3.5% of the salary, where at least 25% of the employees have been enrolled into the PPE.

Contributions to a PPK

Every beneficiary has an individual and registered account within a PPK to which contributions will be paid by the employers, as well as a welcome payment and annual additional payments by the Polish state.

Basic contributions are calculated and paid by the employer when paying the salary. When enrolling into a PPK, employees agree to have 2% of their salary transferred to their PPK account. Employees may also declare voluntary contributions of up to an additional 2% of the salary.

The employer’s contribution will be 1.5% of the beneficiary’s salary. These contributions are mandatory and cannot be deducted from the employees’ salary. The employer may also declare voluntary additional payments towards an employee’s PPK of up to 2.5% of their salary.

Additionally, once the statutory requirements have been fulfilled, employees will receive funds from a third source – the state. These funds include a one-off welcome payment of PLN 250 and annual contributions of PLN 240.

By when does an employer have to comply with the formalities connected with a PPK?

The last group of employers required to introduce a PPK, as of 1 January 2021, must sign a PPK management agreement by 23 April 2021, and a PPK operation agreement not later than by 10 May 2021.

These agreements must be signed with a financial institution chosen in consultation with the trade union, if any, or employee representatives operating at the company.

Opt-in and opt-out

Employees aged between 18 and 54 are automatically enrolled into a PPK, whereas employees aged 55 or over are required to individually apply to be enrolled. Every beneficiary has an opt-out and opt-in option based on a relevant declaration submitted to the employer.

New employees become eligible for auto-enrolment into a PPK within 10 days after 3 months of employment. If all the present employees have opted-out, and a new employee opts-in, the employer is required to sign a new PPK operation agreement.

This article is part of the Newsletter 01 | 2021.