Preferential Social Security – what is it?
The name preferential, or favorable, denotes an offer on better terms, usually aimed at a specific consumer or group of consumers. Social Security is no different.
New entrepreneurs can count not only on reduced contributions to the Social Security Institution, but also, if they meet the right conditions, they can benefit from “startup relief” and even complete exemption from contributions for some time. All this in support of entrepreneurship.
Social Security for new companies – start-up offer
Who exactly can benefit from preferential Social Security? In order to be as clear as possible, I will first provide a list of available discounts, and then discuss the terms of each discount.
- Unregistered activity (no contributions)
- Startup relief
- Preferential contributions – Small Social Security
- Small Social Security Plus
Unregistered activity
While this is seemingly the most tempting option, since it means not having to pay any premiums (we then do not pay not only Social Security, but also health premiums), the solution has two massive drawbacks.
First of all: an entrepreneur running a non-recorded business is not covered by social security. This is logical – no premiums means no insurance. What’s more, months worked on a non-recorded activity basis will not count towards seniority (they will be ignored when calculating a pension).
Second: the condition for carrying out unregistered activity is not to exceed an income of 50% of the minimum wage. If in any month of operation the revenue exceeds this amount, it will be necessary to register the company with CEIDG and pay the usual contributions.
Important!
It is impossible to “deregister the company,” for example, when business revenues fall below 50% of the minimum wage. In such a situation, only the entrepreneur who suspends or closes the business may be exempted from the premiums.
Startup relief
Are you starting a business for the first time or after a long break and want to take advantage of lower premiums to get into a new line of business more easily? The startup tax credit means that new entrepreneurs do not have to pay Social Security contributions for the first six months. During this time, however, they are required to pay health premiums. This saves a lot of money, but involves (as in the previously described point) a lack of social security benefits. This means that in the event of illness or necessary rehabilitation, the entrepreneur will not benefit from sick pay and other health benefits.
Important!
The startup tax credit is optional – when you set up your business, you can choose to use preferential contributions right away, which will make you pay more, but keep your Social Security benefits.
There are two conditions for taking advantage of the startup relief:
- the business you are undertaking is your first or you are undertaking it again after a break of at least 60 months from the closure, or suspension, of your previous business;
- as part of your newly opened business, you do not provide services to your former employer (if you cooperated in this or the previous calendar year).
It is also worth remembering that the period during which an entrepreneur takes advantage of the startup relief does not count towards pension and annuity.
Preferential contributions, or Small Social Security.
After the first six months of operation, the current tax system leaves the entrepreneur little choice: from now on he must pay preferential contributions. However, they are not due to everyone without exception.
The conditions that must be met in order to pay preferential Social Security contributions are analogous to those listed for the startup relief: within the framework of the business, the entrepreneur cannot perform work that he or she has previously performed for a former employer (this applies to the current and previous calendar year), and also the business just opened must be the first one for at least 60 months.
Important!
The period for which you can pay preferential Social Security is 24 months – this does not include the period of the startup relief. This means that a total of lower premiums can be paid for as long as 30 months.
An important element of Small Social Security is the amount declared – preferential contributions are paid on the amount the entrepreneur declares, which is not less than 30% of the minimum wage. However, nothing prevents you from increasing the amount of your contribution (in order to receive higher benefits in the future – for example, sickness, maternity or care benefits).
How much is the Small Social Security?
In 2021, the amount of Small Social Security is a minimum of PLN 647.59, while not exceeding the amount of the lump sum contribution(PLN 1457.49).
Small Social Security Plus
The final step, making it easier for young companies to enter the market, is a relatively new solution – Small Social Security Plus, introduced in February 2020.
Who can benefit from Small Social Security Plus?
This facility is available to a smaller group of entrepreneurs – the key condition is revenues not exceeding PLN 120,000 in the entire previous calendar year. If they fall within the range, the entrepreneur can take advantage of Small Social Security Plus.
Before this can happen, however, it is necessary to submit a set of application documents – deregistration from insurance ZUS ZWUA (with an insurance title code beginning with 05 70 or 05 72) and social security notification ZUS ZUA (with a title code beginning with 05 90 or 05 92) or ZUS ZZA – If subject only to health insurance.
Important!
If an entrepreneur has been in business for more than 24 months, but his or her income in the previous calendar year declined to less than PLN 120,000, he or she can take advantage of Small Social Security Plus. To do so, he should deregister from insurance with a ZUS ZWUA, and then report to insurance with a ZUS ZUA.
Who can’t take advantage of Small Social Security Plus?
In addition to companies that do not meet the income criterion, entrepreneurs in their first year of business are also not eligible for Small Social Security Plus. What’s more, if they meet the conditions to pay preferential Social Security contributions, they also cannot voluntarily switch to Small Social Security Plus (which is actually a continuation of Small Social Security).
What to do when there are not enough funds to pay Social Security?
The Social Security payment deadline is approaching and you lack the funds to pay your obligations? You have several options. In particular, it’s worth looking into PragmaGO’s Social Security payment installment option. All you have to do is fill out a simple application, accept the terms and conditions with an SMS code, and the funds to pay Social Security premiums will be credited to your account. You can pay back the borrowed amount later in 3, 6, 9 or even 12 installments. You are the one who chooses the optimal repayment period for you. What’s more, you can also finance other taxes such as PIT, CIT and VAT.
Summary
If an entrepreneur starting a business for the first time (or at least 60 months after closing or suspending a previous one) wants to pay the lowest possible premiums, he can plan his path this way:
- Will first take advantage of the startup relief, during which it will pay only health premiums (6 months);
- He will then switch to Small Social Security, which will make him pay preferential Social Security contributions and a health contribution in full (24 months);
- Finally, he will start paying standard contributions or, if he meets the conditions, take advantage of the Small Social Security Plus (until he exceeds the income limit).
Thus, the entrepreneur will spend a total of as many as the first 30 months of business on a preferential basis.
