The hourly labour costs in Poland increased by 10.8% in 2023, significantly exceeding the European average (5.0% for the eurozone, 5.3% for the entire EU). A study by Ayming Polska showed that 60% of companies consider labor costs too high. Wages proved to be the most problematic area, challenging as many as 82% of companies.
Employment costs are all the expenses incurred by the employer in connection with employee employment, including wages, social security contributions, and taxes paid by the employer.
In the first quarter of 2023, Poland recorded a 10.8% annual increase in nominal hourly labor costs, with a 10.7% and 10.9% increase in wages and non-wage labor costs, respectively. For the European average in the first quarter of 2023, a considerably modest increase of 5.0% in hourly labour costs in the eurozone and a 5.3% increase in the whole EU territory were recorded compared to the same period of the previous year.
In the face of rising labor costs, Poland stands out against other EU countries, and this situation poses significant challenges. Although wages are increasing, this is often a response to high inflation, which rather maintains purchasing power rather than improving actual employment conditions. This situation creates the risk of losing the competitiveness of Polish companies in the global market – comments Agnieszka Hrynkiewicz-Sudnik, Director of Consulting at Ayming Polska.
In this context, entrepreneurs should pay particular attention to where they make savings. There are operating costs, the reduction of which does not directly affect employees. There are also many external sources from which companies can draw funds to boost their budgets. Many companies still do not look at less obvious solutions such as accident insurance contribution verification or tax relief application – adds Hrynkiewicz-Sudnik.
60% of companies struggle with high labor cost levels
According to “The study of labor cost and work environment in Polish enterprises” conducted by Norstat on behalf of Ayming, 60% of CFOs and HR directors assessed labor costs as too high. This means the majority of companies are feeling the financial pressure of maintaining their workforce. Only 35% believe the costs are currently at an appropriate level. While a mere 5% of companies consider labor costs too low.
Not all costs can be reduced
In queried on main barriers preventing labor cost reduction, entrepreneurs in 83% of cases indicated that not all costs can be reduced. Indeed, cutting in the wrong areas can result in poorer quality of services or lower employee morale.
Regardless of the total expenditure pool, costs can be minimized through tax relief refunds. All a company needs to do is carry out activities that are innovative on their scale to benefit from a tax deduction for research and development. The R&D relief is available from 2016 to all entrepreneurs investing in innovations. From 2022, each company can deduct up to 200% of qualified expenses associated with development – comments Agnieszka Hrynkiewicz-Sudnik.
Lowering costs that do not directly affect employees can also offer significant support. A good example is verifying accident insurance contributions. Such an action can generate savings of up to 3% of all salaries paid in the company over the course of a year. This is important because, according to ZUS data, in 2022 as many as 70 thousand companies paid accident insurance contributions equal to or higher than their PKD code outcome – explains Piotr Radko, Director of Labor Costs Business Line, Ayming Polska.
Focusing on aforementioned barriers, 29% of companies pointed at the lack of necessary staffing to implement changes, and 25% quoted lack of time. 18% admitted they could not affording collaborations with consulting firms. For 11% of companies, the barrier was a lack of knowledge about available solutions. Only 4% of companies did not encounter any barriers in cost rationalization.
Employee wages – key cost area for companies
The area of labor costs that entrepreneurs identified as the biggest challenge is employee wages and related costs – an issue identified by as many as 82% of surveyed companies. Another significant area, mentioned by more than half of respondents, was the cost of employing, equipping, and upgrading employees’ qualifications.
The wages of employees can partly be covered thanks to the previously mentioned R&D relief. Similarly, another instrument to draw attention to is the relief for innovative employees. This benefit can be used by entrepreneurs who incurred a loss for the tax year or if the income from their business activity was lower than the amount of deductions due to R&D activity. The relief for innovative employees allows reducing the amount of advances on income tax from wages of employees directly involved in R&D work – comments the Ayming Polska expert.
Digital transformation and improvement of OSH conditions are the way forward
Digital transformation is a challenge for 36% of companies. For many of them, this implies investing in new technologies, employee training, and adapting their business model to changing market realities.
Entrepreneurs can take advantage of numerous available relief and financial assistance. Thanks to robotization relief and EU programmes such as KPO A 2.1.1., they can obtain significant financial support. These programmes aim to stimulate investment in advanced technologies, which can significantly accelerate the company’s adaptation to new conditions – says Hrynkiewicz-Sudnik.
Conversely, for 29% of companies, a serious challenge requiring appropriate financial engagement turns out to be matters related to OSH (occupational safety and health).
In this case, entrepreneurs are not left on their own. Funding programs conducted by ZUS, such as one that improves OSH conditions, enable companies to enhance the working conditions of their employees with minimal investment – explains Piotr Radko.
Interestingly, only 4% of companies see an issue in the cost related to remote work, suggesting the ongoing adaptation to this working model. As low as 2% of companies do not face any challenges related to labor costs. This only confirms how widespread this aspect of running a company.
“The study of labor cost and work environment in Polish enterprises” was carried out in Q1 2023 on three methods: individual online interviews (IDI) by Zoom with 12 CEOs/CFOs/owners and HR directors from companies employing more than 200 people, 160 CATI phone interviews with representatives of firms employing 100 workers, and 100 online CAWI surveys with managers of firms of similar employment profiles.
