We explain the phenomena of work function (WF) variations of polycrystalline palladium film due to adsorption and absorption of hydrogen. A small increase of the WF observed at temperatures above 120 K is an indication of a spontaneous formation of H - ions at the surface, subsequently dissociating to electrons and neutral atoms which completely desorb at temperatures above 400 K. A large lowering of the WF at low temperatures (about 2 eV at 78 K) is associated with the formation of PdH. This process is treated quantitatively in the frame-work of the metallic plasma model. The mechanism of the isotope effect on the lowering of the WF is explained by the vibrational frequency difference of H and D atoms confined in the palladium lattice.