Updated by Karol Karpinski on 27.02.2014
The social protection system in Poland has been frequently reformed since the country's transition to market economy in the early 1990s. The most significant overhaul to date occurred in 1999, when the pay-as-you-go old-age pension insurance was substituted by a two-tier system of publicly managed "notional defined contribution" pensions and privately operated pension funds based on defined contribution. At the same time, the general revenue financing of health care ended with the introduction of a mandatory health insurance. Subsequent reforms have altered the institutional structure of social protection and reduced the role of privately-operated pension funds, but the basic principles of financing have remained unchanged.
Old age, disability and survivors pensions, as well as various family/children, sickness and employment injury benefits are managed nationally by the Social Insurance Institution (ZUS), financed by contributions levied on wages and paid by both employees and employers. Healthcare operates in a single-payer system, where the National Health Fund (NFZ) collects the health insurance contributions from employees and contract medical services with a range of private and public providers. Unemployment benefits and labour market policies are financed from the employers' contributions to the Labour Fund and administered by local governments. The local government is also responsible for operating social assistance schemes.
The common social insurance system excludes self-employed farmers and their families, who are covered against the same contingencies by the Agricultural Social Insurance Fund, financed by lump-sum contributions and subsidies from the general revenue.
Owing to mandatory social insurance for employees and statutory provisions for the coverage of unemployed persons, Poland has succeeded in providing nearly universal coverage across most of the branches of social protection. However, the reported rise in the number of precarious workers, whose employment relationship is "disguised" as discussed in the ILO Employment Relationship Recommendation, 2006, threatens to increase coverage gaps, as workers on certain kinds of contracts that do not constitute a legal employment relationship are exempt from mandatory social insurance.
Despite wide social protection coverage, poverty has not been eliminated. Although, according to the Eurostat data, the share of people at risk of poverty or social exclusion nearly halved since 2005, in 2011 6.7% of the households were at risk of extreme poverty (defined as being unable to meet elementary subsistence needs: food, shelter, clothing, basic toiletries and medication). Poverty is most prevalent among rural households, families with four or more children, unskilled workers and the unemployed.