MPs from the ruling Law and Justice (PiS) party’s junior coalition partner, Porozumienie (Agreement), have declared during the opening session of the new parliament that they will vote against PiS’s proposal to abolish the upper limit on social-insurance (ZUS) contributions from high earners.
“No MP [from Agreement] will vote for the abolishment of the limit on ZUS contributions”, declared Kamil Bortniczuk, an Agreement MP, in an interview with money.pl on Wednesday. “Agreement was not consulted about the bill.”
The development may be a signal of how PiS’s two coalition partners, which strengthened their position in the ruling camp at last month’s elections, may be more assertive in the new parliamentary term.
Currently, Poles pay ZUS contributions proportionally to their salaries. There is, however, an upper limit, which is equivalent to thirty times the average salary.
With the forecast average 2020 salary of 5,227 zloty (1,215 euros), for example, this would mean that anybody earning more than 157,000 zloty per month would only pay social contributions up to this level. If that limit was abolished, ZUS contributions would be calculated from the entire salary.
That would add extra costs for employers – who, according to experts, would probably lower salaries as a consequence. But abolishing the limit would, according to the government’s estimates, bring in an extra 5 billion zloty annually to the treasury.
In August this year, the PiS-led government approved a plan for Poland’s first post-1990 balanced budget, promising to cut the deficit entirely, despite generous plans for social spending. The budget plan now has to be approved by the new parliament.
It is often forgotten that PiS rules at the head of a coalition, known as the United Right, with two smaller right-wing parties, Agreement and United Poland (Solidarna Polska).
In last month’s elections, although the United Right’s majority remained the same as that won in 2015, the two smaller parties doubled their number of seats. This put them and their leaders, Deputy Prime Minister Jarosław Gowin and Justice Minister Zbigniew Ziobro, in a stronger position within the ruling camp.
Gowin, the leader of the more moderate and business-friendly Agreement, has repeatedly said that the government overestimates the potential gains of abolishing the ZUS limit. He argues that the highest-earning individuals would simply switch to a different form of an employment in order to avoid paying higher taxes.
Last Saturday, Agreement’s board adopted an official resolution opposing the idea of abolishing the limit. Without Agreement’s support, the rest of the United Right would not have enough votes to pass the ZUS changes alone – or to approve the budget plan.
Another deputy prime minister, Jacek Sasin of PiS, declared on Thursday morning that his party will “keep [trying to] convince our partners from the Agreement to support this solution”.
There are also rumours about PiS discussing the issue with the Left (Lewica), which has not pronounced its position on the issue yet but could be look favourably upon a proposal to increase the social-insurance contributions of the wealthiest.
The decision to scrap the social-contribution limit would have far-reaching consequences. Polish pensions are calculated on the basis of the amount of social contributions gathered during a person’s working life. If there were to be no limit on ZUS payments, the future pensions of the highest-earning individuals would translate into significantly higher pensions, putting an extra pressure on already overburdened social insurance system.
Main image credit: Piotr Drabik/Flickr (under CC BY 2.0)
Monika Prończuk is the deputy editor of Notes from Poland. She was previously the Nico Colchester fellow at the Financial Times, acting FT Poland correspondent, and journalist at OKO.press, an independent fact-checking media outlet. Her articles have appeared in Quartz, Financial Times, Politico, Gazeta Wyborcza and Tygodnik Powszechny.
