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13 March 2019

Poland: tacking stock of recent reforms made without consultation with the social partners

An EU assessment of Poland’s recent reforms has criticised the government for the lack of consultation with social partners. The study is critical of the low quality of the legislative process, which marginalises the social partners and other stakeholders in the law-making process. In the meantime, the government is continuing with what it calls a ‘business friendly’ reform strategy.

The last decennia of reform in Poland has been assessed in several recent reports. An EU-study that was published in February 2019 provides an analysis of four areas of structural reforms undertaken in the period 2013–2018. An important part of the analysis is dedicated to labour market developments in that period. On the surface, the situation looks promising, with a decrease in the unemployment rate from 13.4% to 6.6%, and an increase of the employment index from 60% to 66.1%. However, as confirmed in other studies, the labour participation rate stays below the EU average with huge regional and sectoral disparities in employment. The most dynamic employment growth in the period 2013-2017 occurred in the private sector. In 2017, job creation was the highest in transportation and storage, followed by education and real estate.

The study also provides a list of changes in the pension system that are relevant for workers:

a. Open Pension Funds’ reform that caused the transfer of more than 50% of pension fund assets, domestic sovereign bonds, to the social security system (run by the Social Insurance Institution, ZUS).

b. A reduction in the statutory retirement age that became effective on 1 October 2017 and restored the statutory retirement age of 65 years for men and 60 years for women.

c. A planned new pension system: employees’ capital pension scheme (a draft bill has been adopted by the government and is planned to come into force in the spring of 2019).

The EU-study is, furthermore, dedicated to several measures that aim to foster business growth and improve the business environment, such as ‘Strategy for Responsible Development’, ‘Constitution for Business’ and ‘Constitution for Science’. But the EU-study also criticises the low quality of the law-making process as usually being too fast and lacking the participation of social partners and other stakeholders. This absence of consultation was earlier signalled in another EU-report. Consultations are often conducted in bad faith, with no intention of taking the comments on board. This applies to more than every third act (39%). For instance, the ‘Constitution for Business’ was critically received by the trade unions as it introduced for entrepreneurs starting a business an exemption from social security contributions for the first 6 months. In addition, after the expiry of this 6-month period, the entrepreneur can apply a so-called ‘small ZUS’ for the next two years. The consequence for workers is that this period will not be taken into account for the calculation of retirement or pension benefits and will not allow the beneficiary to claim sickness benefit. These criticisms were ignored, however.

Moreover, the government announced, late in 2018, a fiscal reform which had the aim of making income tax simpler and more transparent. The new tax system will have separate regulations for taxpayers who derive their income exclusively from employment and those who report business income. It will be introduced almost in parallel with a plan to cut corporate income tax for small and medium-sized enterprises across the country from 15 to 9% (after an earlier cut from 19 to 15%). The initiative fits in with the government’s policy to make life easier for the country’s businesspeople. In addition to cutting taxes, the government is lowering social insurance contributions for small businesses.

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