Labour costs weigh on construction companies in Poland more than ever
06 Feb 2020
Business confidence among Polish construction companies tumbled early this year, with the heaviest burden, as perceived by the enterprises, coming from labour costs and tax levies. Decline in confidence is chiefly due to such factors as an over 15% increase in the minimum wage and a 10% hike in social insurance contributions faced by sole traders operating in the construction industry. On top of that, large construction businesses are required to conduct Employee Capital Schemes (PPK) or the alternative solution of Employee Pensions Schemes (PPE).
January 2020 saw construction companies reporting record-high percentages of responses citing labour costs and tax levies as major barriers to doing business, according to the latest monthly report by Spectis, “Construction market in Poland – February 2020”. An analysis of long time series reported by Central Statistical Office reveals the biggest-ever monthly surge in the relevant percentages. This practically means that the times of low-budget construction are over for good, and 2020 will be marked by rising labour costs.
Interestingly, for the first time in 30 months the shortage of skilled labourers dropped in significance, and it turned out to be the third most pressing issue due to increased severity of tax levies.
The January hike in labour costs proved to be a significantly bigger burden on small and medium-sized construction enterprises, which frequently hire workers who get paid the regulatory minimum wage. It is a relatively rare occasion for large construction companies with 250 or more employees to pay just the minimum compensation allowed by law. However, the minimum wage increase will indirectly affect the largest market players too as, for instance, subcontractors will raise their labour prices.
Furthermore, in 2020 construction companies are poised to face mounting pay pressures from Ukrainian labourers. Those migrant workers will not be left with the only option of staying in Poland as they can find employment in Germany or, alternatively, go back to their home country, which has recently witnessed a marked economic upturn and fast wage growth.
Increased rates for construction and renovation services will also have a bearing on regular citizens faced with the task of fitting out new homes or renovating existing ones. Services of this kind are generally provided by sole traders. There is no doubt that more than 300,000 Polish self-employed builders will incorporate the 10% hike in social insurance contributions into prices paid by their customers.
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