Minimum wage set to increase

The minimum salary is to be PLN 2800 (EUR 633), and the pension adjustment should reach 3.84% - these are the proposals of the Council of Ministers for 2021. It is with this set of ideas that the ruling camp will negotiate with social partners from trade unions and employer organisations.

According to the presented plan, the lowest pension, which currently amounts to 1200 PLN (EUR 271), will increase by more than 46 PLN (EUR 10). A senior with a benefit of PLN 2,000 (EUR 452) will gain PLN 76 (EUR 17); those who receive PLN 3,000 (EUR 679) will receive an additional PLN 115 (EUR 26).

According to the information sourced by Gazeta Prawna, the original proposal was a mixed adjustment with a minimum increase of PLN 70. The Ministry of Family, Labour and Social Policy was the originator of the solution. The government, however, would rather accept a more modest variant. Now the minimum amount of the valorisation, or pension adjustment, has come close to PLN 50 (EUR 11) and this may be the final offer. The reason for this reduction may be a restraint in public finances due to the COVID-19 pandemic. This was, moreover, one of the reasons why the Ministry of Finance requested a wage freeze in the budget. The cost of pension adjustment next year is about PLN 10 billion (EUR 2.26 bln)

The government's proposal for a minimum wage of PLN 2800 (EUR 633) is slightly higher than the original one. This was PLN 2716 (EUR 614) gross (the lowest possible amount resulting from the statutory formula and forecasts for inflation and GDP growth). Either way, this means a slowdown in the path of raising the minimum wage to PLN 4,000 (EUR 905) by 2024, as set by the leader of Law and Justice Jarosław Kaczyński and the Prime Minister Mateusz Morawiecki.

The final decision on the increase in benefits is to be made in September, during the works on the state budget. For several years now, a large part of pensions has been systematically raised not as a percentage, but as a sum. The first time such an increase has been forecast was in 2015 by the then government of Civic Platform (PO) and Polish People’s Party (PSL). The reason for this was low statutory adjustments, resulting from very low inflation. As a result, until recently, the quota increases concerned the majority of pensions, and therefore these benefits grew faster than the statutory formula would suggest. It was predicted that the percentage increase in benefits results from projected inflation, to which a rate of at least 0.2 percent of real wage growth is added in a given year.

However, the percentage rate in the draft budget is only a forecast. The final version will be determined on the basis of the data on inflation and salary growth in 2020, as published by GUS at the beginning of next year. Therefore, it is possible that if inflation is higher than expected, the increase will be larger.

At the same time, the government has made other decisions concerning the consequences of adopting assumptions to the Budget Act. The minimum wage increase from PLN 2600 (EUR 588) to PLN 2800 (EUR 633) is higher than the statutory indicator. This is an unusual proposal, as previously the government proposed lower growth and only increased it in September. This constitutes a 7.7% increase in the minimum wage, so it should grow faster than the average wage. The Law and Justice party promised an increase in the minimum wage to PLN 4000 (EUR 905) in 2024, however the crisis resulting from COVID-19 has forced adjustments to that plan.