This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
On 22 April the OECD published its analysis of the taxation of employees under standard employment contracts as part of its flagship report Taxing Wages 2026 (TW2026). The study covers data for 2025 and presents tax burdens for eight model household types, differentiated by composition (single individuals, families with children) and income levels (e.g. average wages), both in Poland and across other OECD countries.
Good to know
The tax wedge – OECD methodology
The core concept used in the report is the tax wedge, defined as the difference between total labor costs (gross wages plus employer social security contributions) and net take-home pay. The indicator is expressed as a percentage of total labor costs.
For example, a tax wedge of 30% for a single individual means that taxes, social security contributions, and other levies charged on their earnings – regardless of whether they are formally paid by the employee or the employer – account for 30% of the total cost of employment.
For individuals with children, net pay also includes family-related transfers, such as the “800+” child benefit or family allowances, where applicable. Under this methodology, the 800+ benefit is treated as a negative income tax.
For this reason, one may also refer to a tax–contribution–transfer wedge.
1. The tax wedge in Poland and across the OECD
The headline chart accompanying the release of Taxing Wages typically compares the tax wedge for a single individual earning 100% of the average wage.
Interactive chart In Poland, it stood at 35% in 2025 - slightly below the OECD average by 0.1 percentage points. The highest wedges were recorded in continental European countries such as Belgium, Germany, France, and Austria, where they ranged between 47% and 53%. Much lower burdens were observed in Anglo-Saxon economies – the United States, the United Kingdom, and Australia – with the lowest levels in Latin American countries.
At the same time, Poland posted the lowest tax wedge among OECD members in its region.
An important methodological caveat is required, however. Where mandatory contributions are paid into private institutions, the OECD does not classify them as part of the tax burden on labor. As a result, they are excluded from these comparisons. This helps explain the relatively low tax wedge in countries such as Chile, which operates a private pension system, and Colombia.
A similar mechanism applies in Poland: contributions allocated to sub-accounts within the Social Insurance Institution (ZUS) – amounting to a combined 7.3% of gross wages – are not included in OECD calculations, as they are inheritable and treated as a form of private savings.
Once these contributions are factored in, Poland’s relative position shifts. The so-called wedge of mandatory payments for a single individual earning the average wage rises to around 40% of total labor costs, thus exceeding the OECD average. While it remains among the lower levels in the region, the gap narrows considerably.
2. Changes in the tax wedge: rising on frozen thresholds and benefits
How did the tax wedge for a single individual on the average wage change in 2025? In Poland, it increased by 0.3 percentage points year on year. This was driven by nominal wage growth which – combined with an unchanged tax-free allowance of PLN 30,000 (approx. EUR 7,000) – resulted in a higher effective tax and contribution burden. It is a textbook case of fiscal drag.
Interactive chart The sharpest increase in the tax wedge was recorded in the United Kingdom – up by 2.5 percentage points. The main driver was higher social security contributions announced in the first budget of the Labor government. In Estonia, the personal income tax rate was raised from 20% to 22% to finance defense spending. In Germany, contributions for health insurance and long-term care also increased. By contrast, the largest declines were seen in Australia, Latvia, and Italy – down by 1.2 to 1.7 percentage points.
In Poland, the tax wedge rose across all household types. For families with children, two factors were at play: frozen tax thresholds alongside rising nominal wages, and a real decline in the value of family transfers such as the 800+ benefit, which is paid as a fixed amount. For households without children, the increase stemmed solely from the first mechanism.
Interactive chart The impact of freezing the second tax threshold is evident in the data: over the past two years, the tax wedge for individuals earning 167% of the average wage has risen most sharply in Poland – by 3.2 percentage points. As a result, the burden on such taxpayers is now the highest since 2006. At that time, disability insurance contributions stood at 13%, compared with 8% today, and the system featured three tax brackets.
In many other countries, changes in the tax wedge reflected a mix of structural reforms and the freezing of key tax parameters.
Interactive chart 3. Poland leads in family-oriented tax preferences
Last year, the proposal for a so-called “bachelor tax” – a higher tax burden on childless individuals – sparked controversy in Poland. However, when family benefits are treated – as in the OECD methodology and in economic analysis – as part of the tax wedge, it can be argued that a form of such differentiation is already embedded in the tax system.
Interactive chart The comparison shows the difference in the tax burden between a single individual earning the average wage and a married couple (in the standard model: one spouse with no income) raising two children, where both earn the same wage. The gap reflects joint taxation – effectively a doubled tax-free allowance – as well as family transfers.
In this regard, Poland ranks first among OECD countries in terms of pro-family tax preferences. The difference between the tax wedge for a family and that for a single individual is nearly 21 percentage points, compared with an OECD average of around 9 percentage points. Poland has overtaken Slovakia, which held a higher position in last year’s ranking.
Interactive chart 4. Moderate but rising progressivity of employment income taxation in Poland at lower incomes
In Poland, the tax wedge exhibits moderate progressivity – at least for single employees on standard employment contracts earning relatively low incomes. A single individual earning 167% of the average wage faces a tax wedge roughly 6 percentage points higher than someone earning 67% of the average wage, i.e. slightly above the minimum wage.
By comparison, the OECD average is around 8 percentage points, while for OECD countries within the EU it is approximately 9 percentage points. The strongest progressivity is observed in Ireland and Israel, where it reaches around 16–17 percentage points, while the lowest is recorded in Hungary.
Interactive chart It is worth noting, however, that within this definition of progressivity, the freezing of tax thresholds itself tends to increase measured progressivity. This indicator has risen in Poland by nearly 1 percentage point. Both income groups are negatively affected by frozen thresholds, but the higher-income earner (167% of the average wage) loses more, as they are already within the second tax bracket.
Key Takeaways
- Poland offers the highest family-oriented tax preferences among OECD countries. The gap between the tax wedge for a family and that for a single individual is nearly 21 percentage points, compared with an OECD average of around 9 percentage points.
- The tax wedge is defined as the difference between total labor costs (gross wages plus employer social security contributions) and net take-home pay. It includes social security contributions, health insurance contributions, the Labor Fund levy, and personal income tax. For families with children, net wages are additionally increased by family transfers, such as the 800+ child benefit.
- The key benchmark in international comparisons is the tax wedge for a single individual earning 100% of the average wage. In Poland, it stood at 35% in 2025, which is 0.1 percentage points below the OECD average. The highest tax wedges were recorded in continental European countries – Belgium, Germany, France, and Austria – where they ranged between 47% and 53%. Significantly lower burdens were observed in Anglo-Saxon economies, while the lowest levels were found in Latin America.