Does the Start-Up Relief Really Pay Off?

The regulations exempt certain entrepreneurs from paying social insurance contributions for six full months and allow them to benefit from lower contributions for two years. Would you like to learn the conditions for using these reliefs and their consequences? Be sure to read this article!

New entrepreneurs and those returning to business after a long break do not have to pay social insurance contributions for an entire six months.

“The right not to pay ZUS contributions for six months is granted to entrepreneurs by the ‘Business Constitution’, whose provisions entered into force on 30 April 2018,” explains Iwona Kowalska, spokesperson for the Lower Silesian ZUS. “This arrangement, commonly known as the ‘start-up relief’, is intended to help people starting or returning to their own business, but it also entails certain adverse consequences that you need to know about.”

What are the conditions for using the start-up relief?

You can use the start-up relief—that is, pay no social insurance contributions for six calendar months—if you start a business for the first time or resume one after at least 60 calendar months have passed since its last suspension or closure, and you do not perform for a former employer work that you performed for them as an employee in the current or preceding calendar year.

Important!

While using the start-up relief, you are compulsorily covered by health insurance. You pay contributions only for this insurance.

How should the “relief” six months be counted?

You can use the start-up relief for a maximum of six calendar months from the start of your business. If you start your business on the first day of a month, that month counts as the first of the six months of relief. If you start your business during a month, however, you count the relief period from the following calendar month.

Example

Mr Adam started a business on 7 May 2018. He met the conditions for using the start-up relief. The six months for which he will not pay social insurance contributions will end on 30 November 2018.

Important!

You cannot extend the start-up relief if you suspend your business while using it.

Example

Ms Maria started a business on 4 May 2018. She met the conditions for using the start-up relief. However, she suspended her business from 1 June 2018 to 31 July 2018. After resuming it, she will be able to use the relief for another four calendar months.

What are the consequences of not paying social insurance contributions?

If, while using the start-up relief, you become ill, care for a child or sick family member, or have a child, you will not receive sickness benefit, rehabilitation benefit, maternity benefit or care allowance, that is, benefits payable under sickness insurance.

While using the start-up relief, you will also not be entitled to benefits for incapacity for work caused by an occupational accident or occupational disease (sickness benefit, rehabilitation benefit), which are payable under accident insurance.

The period during which you do not pay pension insurance contributions will also not be included when determining entitlement to a pension and will not increase its amount. If you were born after 31 December 1948, you will receive a pension when you reach retirement age (60 for women, 65 for men) and prove any period of insurance.

However, if your benefit is lower than the minimum pension, it will be raised to that amount only if you prove at least 20 contribution and non-contribution years (women) or 25 such years (men).

To become entitled to a disability pension, it is not enough to be incapable of working. You must also prove the required contribution and non-contribution period (which depends on the age at which you became incapable of working) and that your incapacity arose during those periods or within 18 months of their end.

Example

Mr Michał (born in April 1983) applied for a disability pension in June 2018. He documented six years of employment. From April 2016 to April 2018, he was not covered by pension or disability insurance. In May 2018, he started a business and used the start-up relief. A medical examiner determined that he had partial incapacity for work, which arose in May 2018. However, Mr Michał received a decision refusing the pension because his incapacity for work did not arise during contribution or non-contribution periods or within 18 months of the end of those periods.

Important!

You may opt out of the start-up relief and register for social insurance. However, you will be able to use such relief again only after 60 calendar months have passed from the date your business ended or was suspended.

Example

Mr Stanisław will use the start-up relief for two months—from 1 June 2018 to 31 July 2018. Then, from 1 August 2018, he will register for social insurance. If, for example, in October 2018 he decides that opting out of the relief was a mistake, he will not be able to use it again either from 1 August 2018 or from 1 October 2018.

Who can use the preferential contribution base?

If you use the start-up relief for six months or opt out of it earlier, you can pay social insurance contributions based on the so-called preferential contribution assessment base. For the following 24 calendar months, you will pay contributions based on an amount you declare, but not less than 30% of the minimum wage. You are entitled to pay social insurance contributions based on this assessment base if you meet all of the following conditions:

• you do not conduct, and during the 60 calendar months preceding the date you began conducting business did not conduct, any other non-agricultural business activity
• you do not conduct business for a former employer for whom, before starting your business (in the current or preceding calendar year), you performed duties falling within the scope of your business activity.

If you opted out of the start-up relief, the 24 calendar months during which you can pay contributions based on the preferential assessment base are counted from the date you become covered by social insurance—that is, the date you indicate in your application, but not earlier than the date on which you submit it.

Example

Mr Jacek started a business on 1 June 2018. He wants to use the start-up relief only until 30 September 2018. He intends to register for social insurance (using form ZUS ZUA) from 20 October 2018. If he does so, he will be covered by social insurance from 20 October 2018. He will be able to pay contributions based on the preferential assessment base for 24 months, until 31 October 2020.

Important!

If the start-up relief period expires and you meet the conditions for using the preferential contribution assessment base, you count the 24 calendar months from the date you become covered by social insurance.

Example

Ms Lidia started a business on 1 May 2018. She will use the start-up relief for six months. After that period, she wants to pay contributions based on the preferential assessment base. The 24-month period of paying social insurance contributions based on that assessment base will begin on 1 November 2018 and last until 31 October 2020.

You determine the assessment base for sickness and accident insurance contributions in the same way as the assessment base for pension and disability insurance contributions, except that:

• you do not apply the limit corresponding to thirty times the projected average monthly wage in the national economy for a given calendar year, specified in the Budget Act
• you may not set the assessment base for voluntary sickness insurance contributions at an amount higher than 250% of the projected average monthly wage.

Important!

The lowest assessment base for social insurance contributions is 30% of the minimum wage. You may declare that you will pay contributions based on a higher amount.

What are the effects of paying lower social insurance contributions?

Your decision to use the preferential contribution assessment base will affect the amount of benefits to which you are entitled:

• under sickness insurance (including sickness benefit, rehabilitation benefit, maternity benefit and care allowance)
• under accident insurance (including sickness benefit and rehabilitation benefit).

These benefits are calculated based on the assessment base for sickness or accident insurance contributions. If you declare an amount equal to 30% of the minimum wage, that amount will be used to calculate the benefits to which you are entitled.

What about health insurance?

If you conduct business and use the start-up relief or pay social insurance contributions based on the preferential assessment base, you are compulsorily covered by health insurance. You calculate the contribution based on a declared amount, not lower than 75% of the average monthly wage in the enterprise sector in the fourth quarter of the preceding calendar year, including profit distributions. The minimum contribution assessment base, and consequently the amount of the health insurance contribution, applies from 1 January to 31 December of a given year.

Important! You must always pay the health insurance contribution in full for the entire month, even if you conducted business for only part of the month (for example, if you received sickness or accident insurance benefits).

Example

Ms Anna started a business on 15 May 2018 and will use the start-up relief. For May and each subsequent month of 2018, she must pay a health insurance contribution of no less than PLN 319.94.

Are you conducting business without registering it in CEIDG?

If you conduct unregistered business activity, you do not have to register as an entrepreneur in the Central Register and Information on Business (CEIDG). You do not pay any insurance contributions. However, if you do not meet the conditions for conducting such activity (the conditions can be found at www.biznes.gov.pl), you must register your business in CEIDG and register for insurance.

What are the consequences of conducting unregistered business activity?

While conducting unregistered business activity, just as while using the start-up relief, you are not covered by social insurance and therefore do not have the protection guaranteed by that insurance—you are not entitled to benefits, including in the event of illness or maternity.

The period during which you conduct unregistered business activity will also not be included when determining entitlement to pension or disability benefits or benefits payable to your family members. You will also be unable to apply for long-term benefits under accident insurance, nor will your family members be able to do so in the event of your death, because you are not covered by pension or disability insurance and therefore not by accident insurance.

Example

Ms Julia has been conducting unregistered business activity since May 2018. Her monthly income from it is PLN 900, so it does not exceed 50% of the minimum wage. In June 2018, while performing duties related to her business, Ms Julia had an accident. She applied for a disability pension due to an occupational accident. Because Ms Julia was not covered by accident insurance on the day of the occupational accident, we cannot grant her an accident pension.

Who pays the contribution to the Labour Fund (FP)?

You do not pay the Labour Fund contribution for yourself from business activity when the monthly equivalent of the assessment base for compulsory pension and disability insurance contributions is lower than the minimum wage. If you have several grounds for insurance, you add the assessment bases together and compare the total with the minimum wage.

Where can you find more information?

On the website www.zus.pl, through the Telephone Service Centre at 22 560 16 00; by email: cot@zus.pl, and at your nearest ZUS office.