Voluntary Severance Payment – When It Is Not Exempt from Social Security Contributions

On April 15, 2025, the Social Insurance Institution (ZUS) issued an important interpretation (DI/100000/43/336/2025), clarifying that a voluntary severance payment made to an employee can be exempt from social security contributions – provided that the sole reason for the payment is the termination of the employment relationship.

What is a voluntary severance payment?

Although labor law does not specifically regulate voluntary severance payments, employers often decide to grant them. Such payments are generally grounded in the principles of the Labor Code and are offered in addition to statutory severance payments (e.g., those required under collective dismissals law).

According to the applicable regulations, the contribution base for pension and disability insurance consists of income defined by the Personal Income Tax Act. This includes all monetary payments and the value of in-kind benefits or their equivalents, regardless of funding sources.

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Conditions for exemption

Income from employment can be exempt from social security contributions if it meets the criteria set out in the regulation of December 18, 1998 (§ 2 sec. 1 point 3). This exemption applies to severance payments, compensations, and other payouts made due to the termination of employment – regardless of whether they are mandatory or voluntary.

However, to qualify for the exemption, the payment must be directly and solely linked to the termination of employment.

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Key takeaway from ZUS

In its interpretation, ZUS emphasized that if the severance payment depends on additional conditions (e.g., no accusations against the employee, return of company property, confidentiality compliance), it does not qualify for the exemption. In such cases, the payment is considered to be linked to factors beyond the mere termination of the employment contract and must be subject to social security contributions.

For example, if the severance payment is conditional on an auditor's positive opinion or the absence of complaints about the employee’s work, this payment is fully subject to social security contributions.

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Implications for employer

Employers should carefully review the content of termination agreements. If the severance payment is strictly linked to the termination of employment, it can be exempt from contributions. However, if there are additional conditions (such as the absence of audit concerns), it will be subject to contributions.

This is crucial for HR and payroll departments to avoid errors in calculating ZUS contributions.