Czech Government adopts highest minimum wage hike in history
As of January 2024, the minimum wage in the Czech Republic will rise by CZK 1600 [EUR 65] to CZK 18,900 [EUR 770] gross per month, or by 9.2 %. Four of the eight grades of guaranteed wages will increase, grades calculated according to how demanding a job is, the expertise it requires, and the responsibility it entails.
The highest grade of guaranteed wage will increase by CZK 3200 [EUR 130] and the three lowest will increase by CZK 1600 [EUR 65] gross per month. The Government has adopted the regulation.
Czech Labor Minister Marian Jurečka (Christian Democrats – KDU-ČSL) announced the news at a press conference after the cabinet meeting. Unions had been advocating for more significant growth for all guaranteed wages.
According to employers, the minimum wage should grow at a slower tempo, just like all other earnings in the Czech Republic, and guaranteed wages should not be correlated with the minimum. The Czech Prime Minister Petr Fiala (Civic Democratic Party – ODS) has said he agrees with that idea.
“The Government has confirmed the regulation to increase the minimum wage by 1600 crowns. This increase will be the largest in history (nominally). At the same time we will be taking gradual steps to achieve the aim of further increasing the minimum wage within the next five years, transparently and predictably, to a target value of 45 % of the average wage,” Jurečka said.
An EU directive from last year regulates adequate minimum wages, and Member States were given two years to bring it into practice. The provision recommends that these lowest earnings be the equivalent of either 60 % of the median gross wage or 50 % of the average gross wage.
The Labor Ministry originally proposed two variations of the increase as of January 2024, either CZK 2100 [EUR 85] or CZK 1600 [EUR 65]. The minimum wage would gradually rise to either 50 % of the average wage in years to come in the former instance, or to 45 % of the average wage in the latter instance.
Agreement on the issue could not be reached at the Council on Economic and Social Consensus, where employers, the Government and the unions negotiate these issues. Jurečka then said the cabinet would propose the lower wage increase.
Czech Prime Minister Petr Fiala (ODS) believes guaranteed wages should not be tied to the minimum wage. Speaking to journalists before flying to Brussels, he said he considers the arrangement an oddity the Czech Republic shares with only one other EU Member State.
“It causes many problems and also impacts employers,” Fiala told the press. He also does not consider it correct to compare minimum wages abroad with those in the Czech Republic.
The PM also pointed out that in many countries, representatives of employees and employers manage to reach agreement on the level of the minimum wage, which he would consider correct, unlike the Czech practice whereby that decision is eventually made by the Government. The Confederation of Industry, according to its vice-president Bohdan Wojnar, said it respects the Government’s decision despite having proposed the minimum wage be raised by just CZK 1000 [EUR 40].
Wojnar said the Confederation also supports the ratio of the minimum wage being 45 % of the average wage, but only if guaranteed wages would be abolished. He pointed to the uncertain economic situation for firms and the high costs of energy and raw materials.
Unions are insisting the guaranteed wages be kept. The leader of the Czech-Moravian Confederation of Trade Unions (Českomoravské konfederace odborových svazů – ČMKOS), Josef Středula, previously said efforts to abolish guaranteed wages show employers’ unwillingness to pay people what they are worth.
According to the regulation, the hourly minimum wage will rise in January from CZK 103.80 [EUR 4.23] to CZK 112.50 [EUR 4.60] gross. Monthly that is a rise from CZK 17, 300 [EUR 705] to CZK 18,900 [EUR 770] gross for full-time employment.
Workers paid the monthly minimum wage will now take home CZK 16,442 [EUR 670] net. The lowest earning should correspond to 41 % of the average wage next year.
Every following year up to 2028, that proportion should increase according to the plan by one percentage point, to 45 % of the average wage. It would then remain at that level.
For the lowest guaranteed wage, these amounts and their increases are the same as the minimum wage. Grade two should be adjusted according to the regulation as of January from CZK 17,900 [EUR 730] to CZK 19,500 [EUR 795], grade three from CZK 19,700 [EUR 800] to EUR 21,300 [EUR 870] and grade eight from CZK 34,600 [EUR 1410] to CZK 37,800 [EUR 1540] gross.
Jurečka said the guaranteed wage hike will affect, for example, caretakers and cooks in the schools as well as cultural and social services staffers. He clarified that the first three grades of guaranteed wages cover about 1.2 million people, although not all of them are solely dependent on guaranteed pay.
Entrepreneurs’ wage costs will rise next year by CZK 5.21 billion [EUR 212,500,000] after the regulation takes effect, according to estimates from the Labor Ministry. Employers in the public sector should pay about CZK 240 million [EUR 9.8 million] more for labor.
The state should receive about CZK 2.16 billion [EUR 88 million] more in deposits for health insurance and social insurance after the change. Regular valorization of guaranteed wages and their format are meant to be adjusted by a planned amendment to the Labor Code.
According to the Labor Minister, that amendment should be adopted in the first half of 2024 and would apply as of 2025. The number of grade levels for guaranteed wages should be reduced from eight to four or five.
