Hiring an old-age or disability pensioner is a common situation in Polish companies, especially at a time of shortages of skilled workers. However, choosing the right form of employment is crucial for the employer's costs, mainly because of differences in the obligation to pay ZUS (Social Insurance Institution) contributions. Knowing the rules on employing people who receive old-age or disability pensions lets you optimise staff costs while staying fully compliant with the law.
Who counts as an old-age or disability pensioner under the law
In the context of employment and contribution obligations, the status of an old-age or disability pensioner is determined by having an established right to an old-age or disability pension. Simply meeting the age conditions or being unable to work is not enough – the right must be formally established by the competent institution.
An old-age or disability pensioner is defined as a person with an established right to an old-age or disability pension confirmed by an administrative decision. Such a decision is issued by ZUS or KRUS (Agricultural Social Insurance Fund), depending on which institution the person was insured with during their working life
The right to an old-age pension is acquired on reaching retirement age, which in Poland is 60 for women and 65 for men born after 31 December 1948 (Article 24(1) of the Act on Pensions from the Social Insurance Fund (FUS)). A disability pension, on the other hand, is granted to people who are unable to work, regardless of their age, provided they meet certain conditions concerning contributory and non-contributory periods.
An important point is that an old-age or disability pension may also be paid by a foreign insurance system. People receiving benefits from foreign insurance institutions are also treated as old-age or disability pensioners under the Polish rules on ZUS contributions. Many people also ask: does a contract of mandate count towards your pension?
People receiving benefits from foreign social security systems also keep the status of old-age or disability pensioners. This applies in particular to people who spent part of their career abroad and acquired the right to benefits there
Hiring a pensioner on an employment contract
An employment relationship with an old-age or disability pensioner is subject to compulsory social insurance under the Social Insurance System Act. This means that an employer hiring such a person on an employment contract must pay the full range of ZUS contributions, regardless of working hours or the level of pay. We can take over payroll and ZUS settlements for working pensioners – see our HR and payroll services.
ZUS contributions for a pensioner on an employment contract
An employer hiring an old-age or disability pensioner on an employment contract must pay the following contributions:
- Pension contribution
- Disability contribution
- Sickness contribution
- Accident contribution
- Health insurance contribution
The obligation to pay ZUS contributions for a pensioner hired on an employment contract is absolute. Working hours, the level of pay and the fact that the employee receives a pension do not matter
The exception is contributions to the Labour Fund (Fundusz Pracy) and the Guaranteed Employee Benefits Fund (FGŚP), which depend on the employee's age. These contributions are not paid for:
- Women who have reached the age of 55
- Men who have reached the age of 60
Registering a pensioner with ZUS
An old-age or disability pensioner hired on an employment contract must be registered with ZUS on the ZUS ZUA form (registration for social and health insurance) within 7 days of starting work. The insurance code used is 01 10 XX, where the fifth character of the code indicates the type of benefit received.
In the insurance title code, the fifth character indicates the employee's status. The digit 1 means a person with an established right to an old-age pension, and the digit 2 a person with an established right to a disability pension. Correct coding is essential for calculating contributions properly
Tax relief for pensioners
People who have reached the age of 60 (women) or 65 (men) and who, despite having acquired the right, do not receive an old-age pension can benefit from a tax relief if they are covered by social insurance because of their work (Article 21(1) point 154 of the PIT Act). In that case, at the employee's request, the employer does not deduct income tax advances from their pay until the limit of PLN 85,528 of annual revenue is exceeded.
Mrs Joanna is a pensioner employed in an accounting office on an employment contract. She was registered with code 01 10 1 X, and her employer pays all ZUS contributions for her – both social and health. Because she receives her pension, she cannot use the zero PIT relief for pensioners.
Hiring a pensioner on a contract of mandate
A contract of mandate (umowa zlecenia) offers more flexibility in terms of ZUS contributions when hiring old-age and disability pensioners. Contribution obligations depend on the specific situation of the person hired and their other sources of income.
Basic contribution rules for a contract of mandate
When a contract of mandate is the only form of employment of an old-age or disability pensioner, the person is covered by the following types of insurance:
- Pension insurance (compulsory)
- Disability insurance (compulsory)
- Accident insurance (compulsory)
- Health insurance (compulsory)
- Sickness insurance (voluntary)
Sickness insurance under a contract of mandate is voluntary for all contractors, including old-age and disability pensioners. The contractor decides whether to join this insurance by submitting the relevant application
Exemption from social contributions
Social insurance contributions may not be due if the old-age or disability pensioner is also employed on an employment contract with another employer and earns at least the minimum wage there. In that case only the health insurance contribution remains compulsory.
- The exemption applies only to social contributions (pension, disability, accident)
- The health contribution remains compulsory
- The condition is employment with another contribution payer
- Pay from that payer must be at least the minimum wage
The exemption from social contributions does not apply where the old-age or disability pensioner concludes a contract of mandate with an employer who also employs them on an employment contract (or where, under the mandate, they work for that employer). In that case the pay under the contract of mandate is treated as income from the employment relationship and full contributions are charged on it (Article 8(2a) of the Social Insurance System Act)
Registering with ZUS under a contract of mandate
Depending on the scope of insurance, an old-age or disability pensioner is registered with ZUS:
- On the ZUS ZUA form with code 04 11 - when covered by social and health insurance
- On the ZUS ZZA form (registration for health insurance only) - when covered by health insurance only
The registration deadline is a maximum of 7 days from the date the insurance obligation arises.
Mrs Ela is a pensioner working at two hair salons under contracts of mandate. Her total pay from both contracts is PLN 2,200 gross per month. Both principals must pay social and health insurance contributions, because the contribution base from the earliest contract – and even from both contracts combined – is lower than the minimum wage (Article 9(2) and (2c) of the Social Insurance System Act). If Mrs Ela earned at least the minimum wage from the first contract, she would be covered by pension and disability insurance under the second one only voluntarily.
Contract for specific work with a pensioner
A contract for specific work (umowa o dzieło) is the most advantageous form of engaging an old-age or disability pensioner in terms of ZUS contribution costs. It is completely excluded from compulsory social insurance, which means significant savings for the employer.
No ZUS contributions
Under a contract for specific work, the employer does not pay any ZUS contributions for the old-age or disability pensioner. The only tax obligation is to withhold and pay income tax on the remuneration, which applies to all contracts for specific work, regardless of the contractor's status. However, the ordering party must notify ZUS of the conclusion of the contract for specific work (RUD form) within 7 days of concluding it (Article 36(17) of the Social Insurance System Act). ZUS contributions for a pensioner on a contract of mandate work differently – we discuss them separately.
A contract for specific work offers the greatest contribution savings when engaging old-age and disability pensioners. The employer bears no ZUS contribution costs, which can mean savings of even more than ten per cent of the remuneration compared with other forms of employment
Exception for your own employer
The only exception to the rule of no contributions on a contract for specific work is where the contract is concluded with the person's own employer. In that case income from the contract for specific work is the basis for calculating social and health insurance contributions.
| Form of employment | Social contributions | Health contribution | Notes |
|---|---|---|---|
| Employment contract | Compulsory | Compulsory | No exceptions |
| Contract of mandate (only one) | Compulsory | Compulsory | Sickness voluntary |
| Contract of mandate (additional) | Possible exemption | Compulsory | With the minimum wage from another payer |
| Contract for specific work | None | None | Income tax only |
| Contract for specific work (own employer) | Compulsory | Compulsory | Same as employment |
The pensioner's obligation to notify ZUS
An old-age or disability pensioner who takes up paid work must notify ZUS of this and of the amount of income earned, and after the end of the calendar year – of the income from the previous year. These obligations also apply accordingly to the employer and the principal. They do not apply to pensioners who reached the age of 60 (women) or 65 (men) before taking up work (Article 127 of the Act on Pensions from the FUS). Working can affect the amount of the benefit received and in some cases lead to its suspension.
Benefits subject to suspension or reduction
Taking up paid work covered by compulsory social insurance may result in the suspension or reduction of the following benefits:
- The old-age pension of a person who has not reached the general retirement age
- Disability pension due to inability to work
- Survivor's pension payable to one person
- Part of a survivor's pension for the person earning income
- Military disability pension (in certain cases)
- Pension due to an accident at work before 2003
The rules on suspending benefits apply to income from activities subject to compulsory social insurance – also where no contributions are paid under a given contract because the person is insured under another title – and to income from work abroad (Article 104(1)–(4) of the Act on Pensions from the FUS). The benefit is reduced when income exceeds 70% of the average monthly wage and suspended when it exceeds 130% (the amounts are announced quarterly by the President of ZUS). Work under a contract for specific work usually does not affect the amount of benefits received
Consequences of not notifying ZUS
Failing to report taking up paid work may result in:
- Having to repay benefits received without entitlement
- Interest charged on amounts received without entitlement
- ZUS starting control proceedings
- Possible financial sanctions
Optimising the cost of employing pensioners
Choosing the right form of employment for an old-age or disability pensioner can bring significant savings. The key is to understand the differences between the types of contract and their impact on contribution costs.
Cost analysis of different forms of employment
With gross pay of PLN 4,000 per month, the employer's costs are as follows:
- Employment contract: full ZUS contributions (around 18-20% on top)
- Contract of mandate (only one): full social and health contributions
- Contract of mandate (additional): health contribution only (9%), deducted from the contractor's pay – the principal does not bear the cost of social contributions
- Contract for specific work: no ZUS contributions (around 18-20% savings)
The greatest savings come from engaging a pensioner on a contract for specific work, provided the nature of the work allows such a contract. It is essential that all the features of a contract for specific work set out in the Civil Code are present
Planning employment with contributions in mind
Effective cost optimisation requires long-term planning:
- Analysing the nature of the work performed
- Assessing whether different types of contract can be used
- Taking account of seasonal employment
- Monitoring changes in contribution rules
