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Provision for retirement, disability-pension and death severance pay in Poland: obligation, measurement and presentation

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In brief

An employee whose employment ended in connection with going on a retirement or disability pension is entitled to severance pay of one month’s remuneration (art. 92¹ § 1 of the Labour Code); the family of a deceased employee is entitled to death severance pay (art. 93). For these future benefits the entity makes accrued expenses (bierne rozliczenia międzyokresowe kosztów) and shows them in the balance sheet as provisions for liabilities (art. 39(2)(2) and (2a) of the Accounting Act). Capital companies cannot use the exemption for micro and small entities; they may refrain from making the provision when its value does not exceed the materiality threshold they have adopted (KSR 16, points 12.11 and 12.13, example 12.3). Under KSR 6, which entities may apply when adopting accounting policies (art. 10(3) of the Accounting Act), in measuring retirement and similar benefits IAS 19 Employee Benefits is applied, and gains and losses from actuarial remeasurement are always recognised in the profit and loss account (point 4.7).

Retirement severance
art. 92¹ Labour Code: one month's remuneration
Death severance
art. 93 Labour Code: remuneration for 1, 3 or 6 months
Obligation
art. 39(2)(2) and (7) of the Accounting Act
Measurement
KSR 6 point 4.7: IAS 19, remeasurement in profit or loss

On this page

This is an English translation of the Polish guide Rezerwa na odprawy emerytalne. Quotations from Polish sources are our translation.

Retirement and disability-pension severance pay (art. 92¹ of the Labour Code)

“An employee who meets the conditions for a disability pension or a retirement pension, and whose employment ended in connection with going on a disability or retirement pension, is entitled to severance pay of one month’s remuneration” (§ 1). “An employee who has received the severance pay cannot acquire the right to it again” (§ 2).

The Act on Pensions from the Social Insurance Fund grants a retirement pension to insured persons born after 31 December 1948 “on reaching the retirement age of at least 60 years for women and at least 65 years for men”, subject to the special provisions it lists (art. 24(1)).

Death severance pay (art. 93 of the Labour Code)

“If an employee dies during employment, or while receiving, after its termination, a benefit for incapacity for work due to illness, the family is entitled to death severance pay from the employer” (§ 1). Its amount “depends on the employee’s period of employment with the given employer” (§ 2):

Period of employment with the given employerDeath severance pay
less than 10 yearsone month’s remuneration
at least 10 yearsthree months’ remuneration
at least 15 yearssix months’ remuneration
  • The severance pay is due to the spouse and to other family members who meet the conditions for a survivor’s pension (§ 4); it “is divided in equal parts among all entitled family members” (§ 5).
  • “If only one family member entitled to death severance pay survives the deceased employee, that member is entitled to severance pay of half of the relevant amount set in § 2” (§ 6).
  • The severance pay is not due “if the employer insured the employee’s life and the compensation paid by the insurance institution is not lower than the death severance pay”; if it is lower, the employer pays the difference (§ 7).

Remuneration on which the severance pay is calculated

“The rules for determining the cash equivalent for leave also apply to the calculation of: … 7) severance pay due to an employee in connection with going on a retirement or disability pension (art. 92¹ § 1 of the Labour Code); 8) death severance pay due to the family of a deceased employee (art. 93 § 2 of the Labour Code)” (§ 2(1) of the Regulation of the Minister of Labour and Social Policy of 29 May 1996).

Period of employment from 2026 (art. 302¹ of the Labour Code)

From 2026 the period of employment includes, among others, periods of non-agricultural business activity for which pension, disability or accident insurance contributions were paid (art. 302¹ § 1), periods of performing a contract of mandate or an agency contract during which the person was covered by pension and disability insurance (§ 2), and “a documented period of gainful work abroad on a basis other than an employment relationship” (§ 7). The amount of death severance pay depends on the period of employment with the given employer; § 8 counts towards that period the periods under §§ 1–4 and 7 if the employee worked for that employer during them.

  • The Act of 26 September 2025 that added art. 302¹ entered into force on 1 January 2026 (art. 10). For employers that are not public finance sector units it applies “from the first day of the month following the expiry of 6 months from the date of its publication” (art. 9), i.e. from 1 May 2026 (published on 21 October 2025).
  • An employee employed on the day from which the act applies to their employer has 24 months to document these periods; the employer does not count periods not documented within that time (art. 5).
  • KSR 6: “If an obligation exists at the balance sheet date and its amount depends on legislation already enacted, that legislation is taken into account in the measurement” (point 4.12).

Who must make the provision

“Entities make accrued expenses in the amount of probable liabilities attributable to the current reporting period, arising in particular: … 2) from the obligation to provide, in connection with current activities, future benefits to employees, including retirement benefits” (art. 39(2) of the Accounting Act). They are shown “in the balance sheet as provisions for liabilities” (para. 2a).

  • Exemption. “A micro entity and a small entity may refrain from making accrued expenses relating to future benefits to employees, including retirement benefits” (para. 6). A small entity did not exceed, in the current and the previous financial year, at least two of three thresholds: PLN 33,000,000 total assets, PLN 66,000,000 net revenue from sales, 50 persons average annual employment in full-time equivalents (art. 3(1)(1b)). For the purposes of art. 39(6), entities treated as large “regardless of their balance sheet total, net revenue from sales of goods and products and average annual employment in the financial year” include entities operating under the Banking Law, the insurance and reinsurance legislation and the legislation on cooperative savings and credit unions (art. 2(1)(3)), issuers of securities admitted to trading on a regulated market or in an alternative trading system, domestic payment institutions and electronic money institutions (art. 3(1h)).
  • No exemption (para. 7): public finance sector units, unless separate provisions state otherwise; capital companies; limited joint-stock partnerships; general and limited partnerships all of whose partners with unlimited liability are capital companies, limited joint-stock partnerships or companies from other countries with a similar legal form. KSR 16 confirms: “Because of the legal form, the simplification does not apply” to these companies (point 12.11). In example 12.3 a limited liability company that is a small entity refrained from making the provision; the standard assesses this as incorrect.
  • Materiality. An entity may apply simplifications “if this does not have a materially adverse effect on fulfilling the obligation set out in para. 1” (art. 4(4)); “Individual items cannot be regarded as immaterial if all immaterial items of a similar nature are regarded as material in aggregate” (art. 4(4a)). The provision may be omitted if this does not have a materially adverse effect on a true and fair presentation of the entity’s position; “This, however, requires a materiality threshold on initial recognition to be set in the accounting policies” (KSR 16, point 12.13).

Measurement under KSR 6 and IAS 19

  • Status of KSR 6. “In matters not regulated by the act, when adopting accounting policies, entities may apply the national accounting standards issued by the Accounting Standards Committee” (art. 10(3) of the Accounting Act). More on the page KSR 6.
  • Basis and method. “The basis for measuring provisions for future employee benefits is labour law, pay regulations, collective agreements and other binding agreements between employers and employees.” The estimate “should take into account the employer’s mandatory charges under the legislation in force at the date of the estimate (e.g. pension and disability contributions)”. In measuring retirement and similar benefits, the entity applies IAS 19 Employee Benefits, “except that gains and losses from actuarial remeasurement are always taken to the profit and loss account under other operating income or other operating expenses” (KSR 6, point 4.7).
  • Difference from IAS 19. KSR 6 requires these gains and losses to be recognised in the profit and loss account, “whereas IAS 19 – in other comprehensive income” (point 1.6(e)).
  • Discount rate. It is set on the basis of “market yields on high-quality corporate bonds or market yields on government bonds, depending on the choice made by the entity in its accounting policies” (KSR 6, point 4.10). Discounting may be omitted “on the basis of the materiality principle” (KSR 16, point 12.14).
  • Tax. “Provisions are measured before income tax. The tax consequences of making provisions and of changes in them are the subject of KSR 2” (KSR 6, point 4.11).
  • Review. At least at each balance sheet date the entity reviews whether the provision is justified and its amount (KSR 6, point 4.14).

Selected official data on interest rates, wages, inflation, mortality and the pension age are on the page Założenia aktuarialne (in Polish).

Presentation in the financial statements

  • Balance sheet (Appendix 1 to the Accounting Act), liabilities B.I.2: “Provision for retirement and similar benefits”, split into long-term and short-term. Long-term are provisions or their parts “whose expected date of use is more than 12 months after the balance sheet date”, short-term those “whose expected use will take place within 12 months of the balance sheet date” (KSR 6, chapter V).
  • Profit and loss account: the provision is made “as a charge to costs directly related to operating activities in the current period” (KSR 6, point 3.14(c)); remeasurement gains and losses under other operating income or expenses (point 4.7); the increase in the provision due to the passage of time “is recognised as a finance cost” (point 4.10).
  • Release of the provision. “Liabilities recognised as accrued expenses reduce the costs of the reporting period in which it was established that these liabilities did not arise” (art. 39(5) of the Accounting Act).
  • Notes (KSR 6, point 5.1): the purpose, the balance at the beginning of the period, provisions made during the period “including increases in existing provisions, e.g. as a result of their growth during the period due to the passage of time and the effects of changes in the discount rate”, amounts used, unused amounts released and the balance at the end of the period.

Contributions and corporate income tax

  • Contributions. “The following income does not form the basis for assessing contributions: … 2) severance pay due in connection with going on a retirement or disability pension” (§ 2(1) of the Regulation on the detailed rules for determining the basis for assessing pension and disability insurance contributions).
  • CIT. Under art. 16(1)(27) of the Corporate Income Tax Act, “provisions … made in accordance with the Accounting Act or IAS, other than those specified in this Act as such a cost, are, however, not tax-deductible costs”.

Sources

We calculate your employee benefit provision under IAS 19 and the Polish Accounting Act.

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