Determining employee remuneration – what employers should consider

By entering into an employment relationship, the employee agrees to perform a specific type of work under the direction and for the benefit of the employer, while the employer agrees to pay remuneration. Remuneration is thus a key element of the employment relationship, meaning that its determination and payment are obligations of the employer.

This often raises the question of what factors should be taken into account when determining an employee’s remuneration. Can it be determined solely by the will of the parties? What changes can be expected in the area of remuneration?

Fair remuneration

According to Article 13 of the Labour Code, employees have the right to fair remuneration. This principle is implemented, inter alia, by regulations setting the minimum wage, which will be PLN 4,300 gross as of 1 July 2024.

Polish case law defines fair remuneration as equivalence in relation to the type and nature of the work performed, as well as the employee’s qualifications and experience.

Therefore, when determining an employee’s remuneration, the employer should take into account the following criteria:

• the salary structure in the organisation,
• the average level of remuneration for the same or similar work in the relevant industry,
• the employee’s level of education,
• the level of responsibility,
• material responsibility, and
• availability.

Right to equal remuneration

When setting pay, employers must remember that employees have the right to equal pay for equal work or work of equal value. Equal pay for work includes all components of remuneration, regardless of their name or nature.

At the same time, it should be noted that work of equal value refers to work that requires comparable professional qualifications, as well as comparable responsibility and effort.

What other factors should employers consider?

The amount of remuneration and the specification of its components should be set out in the employment contract.

In addition to the above criteria, the amount of remuneration set by the employer should, in particular, take into account

• the nature of the work performed,
• the qualifications required to perform it, and
• the quantity and quality of work performed.

No discretion in determining remuneration

When offering remuneration to employees or applicants, employers must remember that it cannot be set arbitrarily. Remuneration must reflect the nature, quality and quantity of the work performed and comply with the law.

It is also important to note that the amount of remuneration may be subject to review by the Social Insurance Institution, which is responsible for paying benefits directly derived from employee remuneration.

Forthcoming changes

In the context of compensation, it is worth mentioning Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 1997, which aims to strengthen the application of the principle of equal pay for men and women for equal work or work of equal value through pay transparency mechanisms and enforcement mechanisms. This Directive aims to combat pay discrimination and eliminate the gender pay gap. Its implementation will bring about several changes for employers, including:

• ensuring that applicants have the right to be informed of the starting salary or its range for the job in question,
• prohibiting questions about previous pay,
• giving employees access to the criteria that determine pay levels and progression, and
• the obligation to provide information on existing pay gaps.

Conclusion

Remuneration is an integral part of the employment relationship and getting it right is critical to the functioning of the organisation, including combating excessive staff turnover and minimising discrimination claims. In light of the forthcoming legislative changes, it is advisable to review the existing salary structure in the organisation and the levels of remuneration offered in the relevant industry and for specific positions.

If you have any questions or concerns in this area, please do not hesitate to contact our firm.

Author:
Maria Aleksiejak, Trainee attorney-at-law (PL)