Pains and gains of Poland’s transformation from a low-cost to a value-for-money investment destination

Poland has undergone a significant transformation in recent years and is no longer perceived by investors as an inexpensive market, as costs – especially labour – continue to rise. While some investors find Poland increasingly expensive, others still do not perceive it as an obvious choice for advanced investment projects. However, Poland’s greatest asset remains its human capital, their availability, skills and experience.

Wages in Poland have risen dynamically, with an average salary increase in the business sector reaching 48% from December 2020 to December 2024. It has been largely due to regular hikes in the minimum wage, which is estimated to affect up to 30% of the workforce. Although the salaries for professionals and experts have not grown as rapidly, there has still been noticeable progress.

The rising costs associated with recruiting and retaining staff in Poland have caused investors to face several uncertainties. In some cases, companies have recalculated employment costs and came to the conclusion that the cost optimisation Poland currently offers is insufficient. Some investors have opted for cheaper alternative locations or scaling back ongoing investments.

Undoubtedly, Poland is moving away from being a low-cost destination for reliable labour. While the high quality of the Polish workforce, known for their work ethic and experience in executing various investment projects, is continuously an internationally recognised asset, Poland is still not yet widely perceived as a suitable market for the most advanced, skills- and technology-demanding projects.

This perception should change, as evidenced not only by positive assessments of the attitudes and skills of Polish workers but also by an extensive portfolio of successful foreign direct investments in the fields of business services, technology, and manufacturing.

Goodbye cost reduction projects, welcome expertise-focused investments
The projects that Poland loses most often are those that have a strong focus on cost-cutting from the outset. Investments that aim to create 30-40 jobs in Poland are often deemed financially unviable for companies, as the cost optimisation with the necessary legal, logistical, and organisational efforts is minimal. Currently, it is more profitable to invest in Poland when projects involve a larger investment scale, for example the employment of 100+ FTEs. It is projects of this calibre that are increasingly making their way into the Polish market.

Paradoxically, the decline in investments driven solely by cost savings, in the long run, might be good news for the country. After all, our goal should not be to compete with less developed economies in South-Eastern Europe or some low-cost locations in Asia, South America or Africa, but to aspire to reach the standards of Germany or Ireland. Although this transitional phase is not without its challenges, it will eventually lead to an economy founded on knowledge, technology, and future-proof skills.

In the coming years, we can expect more and more value-adding investments that engage our top talent for 10+ years or even several decades, and initiate upskilling processes in forward-looking fields. For example, in the coming years, the establishment of more R&D centres in Poland should be expected, which is typical of markets characterised by high quality rather than low cost.

Moreover, many businesses investing in Poland value the cultural proximity and work ethic that mirror their country’s standards. In a world of economic and geopolitical uncertainty, companies from Germany, Scandinavia or the UK are increasingly interested in nearshoring, with Poland being one of the most significant beneficiaries.

Poland’s greatest asset: the talent pool
Poland is a large country with a competitive workforce within Europe. Despite unfavourable demographic trends, the local labour market still provides opportunities to effectively build and scale teams without significant challenges. For instance, if the initial phase of an investment, which involves hiring 80 people, is successful, there is potential to expand this project by an additional 100 FTEs.

Another advantage of Polish human capital is its quality. Poland has many employees with high-level skills, business maturity, and valuable experience. Additionally, the talent pool in Poland is quite diverse. Investors can successfully acquire manufacturing staff focused on technical and engineering skills but also IT and white-collar workers with proficiency in foreign languages, who excel in business service centres.

Investors also appreciate the flexibility and resourcefulness of the local workforce. Polish workers easily adapt to new circumstances, seek better solutions, are willing to learn new things and take responsibility for more challenging tasks. In addition, they are quick to learn new software applications while navigating internet tools with ease. In this regard, Poles are more similar to the digitally advanced populations of Estonia and Finland than to those of more traditional, paper-driven societies.

The flexibility is also reflected in the legal framework available in the Polish market, which is open to problem-solving. Poland not only permits various forms of employment (apart from permanent contracts of employment there is a variety of non-permanent solutions) but also has a workforce that is eager to upskill, reskill and adapt to new demands.

Successful investments lead to new opportunities
Investors who have placed their trust in Poland and experienced the quality of the local workforce often choose to establish additional businesses there. It is common for a company that has opened a business service centre in Poland to expand its local operations by adding a manufacturing plant after a few years. In turn, some organisations that initially entered Poland with production facilities, eventually enhanced their presence by establishing an R&D centre. The number of such examples is on the rise.

The increasing number of roles with international responsibilities being located in Poland can also attest to how well Polish employees are performing. Investment projects in the country more and more often involve creating regional or global decision-making centres for international companies. Investors are becoming convinced that the local talent pool can support the development of the entire organisation. As a result, even as entry-level, transactional, and lower-paid positions are disappearing from Poland, the number of expert, knowledge-intensive and well-compensated roles is increasing.

Many investors remain highly interested in locating their projects in Poland. Global, well-established brands tend to focus on the largest and most prestigious locations, primarily Kraków and Warsaw, as they believe these cities are most likely to attract top talent. Others, on the other hand, are increasingly considering Tier 2 (e.g. Poznań) or even Tier 3 cities like Szczecin and Bydgoszcz. These smaller urban centres allow greater cost optimisation, without sacrificing the potential to benefit from a skilled workforce.

Things to consider
Poland needs to take proactive measures to maintain its investment attractiveness amid challenges like negative demographic trends, an absence of a clear migration strategy and a geopolitical situation. A significant concern is also disappearance from the labour market of people who could still work, but whose skills do not align with employer needs.

Recently, we have observed difficulties in leveraging the potential of unemployed professionals. Although they have valuable experience and specific skills, securing new jobs can prove to be difficult, and even minor skill gaps can act as barriers. Therefore, it is in the interest of both workers and investors to tap into these talents and provide opportunities for upskilling or reskilling, especially given the technological advancements.

The rise of robotics, digitalisation, and artificial intelligence is reducing the demand for human labour. A few years ago, companies would reduce 100 jobs in their home countries, to hire 150 people in Poland. Now, the trend has shifted to cutting 50 jobs, and hiring only about 30-50 in Poland. As intelligent automation continues to change talent demands, it becomes critical to invest in the development of digital skills among workers.

In the face of uncertainty, global enterprises have fewer large-scale investments to place. In this context, Poland should focus on nurturing businesses that have already invested in the country. It is vital to demonstrate to these investors that further growth is possible through grants and reskilling initiatives. Investors need to recognise that instead of focusing solely on cost and relocating to Asia, it is beneficial to consider a broader perspective that values the quality and skills necessary to maintain critical processes in the organisation. And when it comes to human capital, there is no shortage of quality in Poland.