Czech minimum wage should increase to 45 percent of the average wage

The Czech Republic increased its minimum at the beginning of this year, but it should see some even more significant rises in the near future. Under a 2022 EU directive set to be adopted by the end of this year, member states should guarantee a minimum wage of 60 percent of the median gross wage or 50 percent of the average gross wage.

The Czech government will meet this week to discuss a new amendment to the labor code that will increase the minimum wage to 45 percent of the country's average wage within the next five years. Under the proposed changes, the minimum wage would be increased from its current level of CZK 18,900 monthly, which corresponds to about 41 percent of the country's average monthly wage.

The proposed amendment also includes an overhaul in so-called guaranteed wages. Instead of the current system, which ties eight levels of guaranteed wages to expertise, responsibility, and job difficulty, the new proposal aims to streamline the process by reducing the number of guaranteed wages to four.

The Ministry of Labor argues that such adjustments are necessary to comply with EU directives. According to the proposed amendment, the minimum wage calculation would change each year, and rely on the predicted average wage for the upcoming year which would be announced in advanced by the Ministry of Finance each August.

The government would then set a coefficient taking into account various factors such as purchasing power, living costs, wage levels, and productivity. This coefficient would be determined for a two-year period, providing stability and predictability for both employers and employees.

The amendment also aims to address concerns regarding wage differentials based on education level. It proposes different minimum wage levels based on educational levels, with university graduates receiving higher minimum wages compared to those with basic education.

The potential impact of these changes on employers and the state budget has also been evaluated. The Ministry of Labor estimates that for every one percentage point increase in the minimum wage relative to the average wage, employers would incur additional costs while contributing to increased social and health contributions for the state budget.

Overall, the proposed amendment seeks to strike a balance between ensuring fair compensation for workers and considering the economic implications for employers and the state while falling in line with the new EU directive.