Shield 4.0 – severance pay under the new rules

The draft bill of the Anti-Crisis Shield 4.0 assumes the reduction of severance pay and redundancy compensations. The new limits are to be applied by employers who, due to the coronavirus pandemic, have recorded a revenue decline.

Shield 4.0 – lower severance pay

The draft bill of a new package act – the Anti-Crisis Shield 4.0 – assumes a reduction in the amount of severance pay and employee compensation for the termination of:

• employment relationship,
• contract of mandate,
• agency agreement
• contract for services.

If the new regulations enter into force, severance pay and redundancy compensation will be limited up to 10 times the minimum remuneration for work (currently it is PLN 2,600 gross). The maximum amount of the severance pay or redundancy compensation will therefore amount to PLN 26,000 gross.

According to the currently applicable regulations, the amount of the severance pay for the termination of employment may not be higher than 15 times the minimum remuneration for work in force on the date of termination of employment.

Severance pay and redundancy compensation reduction – who does it concern?

A lower limit on severance pay and redundancy compensation can be applied by employers who have suffered the negative effects of the COVID-19 pandemic:

• report a 25% turnover decline within a month or 15% within two months
• report a significant increase in the wage fund cost (by at least 5% per month).

Such a measure is intended to limit severance pay cuts only to cases in which companies are actually experiencing economic difficulties due to the pandemic.

Ban on competition – unilateral termination allowed

The changes proposed by Shield 4.0 also cover the ban on competition. The draft bill provides for the introduction of the possibility of unilateral termination of a non-compete agreement, which is effective after the date of termination of an agreement including such a clause.

Learn more: Shield 3.0 – important changes in the calculation of deductions from remunerations