Czech salaries are growing, but still lag far behind Germany and Austria

The average salary in the private sector in the Czech Republic has seen a year-on-year increase of 9.8 percent, reaching €1,683 (about CZK 40,324) monthly, according to a new study of average wages in 22 countries across Central and Eastern Europe conducted by consulting company Mazars.

The numbers generally align with data recently released by the Czech Statistical Office, which indicated that the average wage in the Czech Republic rose by 8.6 percent year-on-year, reaching CZK 41,265 in the first quarter of this year. However, when accounting for inflation, real wages have fallen by 6.7 percent.

Among the four countries in the Visegrád Group (which also includes Poland, Slovakia, and Hungary), the Czech Republic boasts the highest average wage when expressed in euros, according to the Mazars study.

But the Czech Republic still lags far behind its neighbors to the west. While Czech wages have been closing in on German levels since the start of the pandemic, the wage gap between the Czech Republic and Austria has widened over the past three years. 

Austria claims the highest average salary in Central and Eastern Europe, standing at €4,497 (CZK 107,746) per month, followed by Germany with €4,045 euros (96,917). In contrast, the lowest wages are found in Kosovo, at €400 euros (9,584 crowns) monthly, and Ukraine, at €469 euros (11,237 crowns).

Over the past three years, wages in the Czech Republic have risen by 23 percent according to the Mazars study. The Czech Republic sat at 34 percent of Germany's wage level in 2021 but has now reached 44 percent. Conversely, the wage gap with Austria has widened from 44 percent to 37 percent.

The study shows that average wages increased in most of the countries surveyed over the last year, with the exception of Germany, Estonia, Greece, and Slovenia, which reported declines.

The study also compared personal income tax rates throughout Central and Eastern Europe. About half of the countries have a single flat rate, ranging from ten to 20 percent. Others have progressive tax systems, with Austria, Germany, and Slovenia having a top tax rate of up to 50 percent.

The Czech Republic has two personal income tax rates: a basic rate of 15 percent and 23 percent for earnings that exceed four times the average wage. Under the new fiscal reform presented by the Czech government last month, however, the higher rate would apply to earnings that exceed three times the average wage.