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PPK for contractors

Employee Capital Plans (PPK) is the system whose aim is to systematically gather savings by the PPK participant for payment upon reaching 60 years of age and for other purposes specified in the Act on PPK. The savings gathered in PPK come from three sources – from the participant himself, from the employer and from the state. The PPK program is voluntary and you can join it at any time and resign from it on the same basis.

To PPK can join employed people defined in art. 2 point 18 of the Act on PPK, such people also include natural persons over 18 years of age, performing work based on an agency contract or mandate contract or other contract for providing services to which, in accordance with art. 750 of the Civil Code, the regulations concerning mandate are applicable. As you can see not only people employed based on an employment contract, but also contractors can join PPK. In accordance with art. 2. point 18f of the Act on PPK they must be obligatorily subject to retirement and disability insurance, in case when an employee working on contract of mandate is voluntarily subject to the aforementioned insurance, he cannot participate in PPK.

Joining PPK does not happen automatically on the first day of starting work by an employing entity, the employer shall notify him to join PPK only after three months of employment in a given company. In accordance with art. 16 sec. 1 of the aforementioned Act, the employing entity shall conclude the agreement for managing PPK in the name and on behalf of the employed person after the third month of employment in the employing entity, no later than on the 10th day of the month following the month in which the period of three months of employment has expired, unless the employed person declares before the date of expiration of the said period not to make any payments into PPK, on the basis of a declaration submitted in writing to the employing entity, or stops being an employed person in relation to the employing entity.

The maximum PPK payments amount is about 8% of the employee’s salary, which is the basis for calculating retirement and disability pension contributions. For those who do not exceed 1.2 times the minimum remuneration, it is possible to reduce the basic contribution to 0.5% of remuneration. However, joining a contractor to PPK has a significant impact on the calculation of his remuneration. Apart from the fact that the payments financed by the employee are deducted from his salary, the part paid by the employer constitutes taxable income for the employee. The additional income arises in the month when the employer pays the contributions to the financial institution. Therefore, it is worth knowing the rates in order to be able to estimate the savings resulting from participation in PPK.