Czech Republic to Gradually Increase Minimum Wage
14.08.2024
14.08.2024
The Czech Republic is set to implement a phased increase in its minimum wage, with the ultimate goal of reaching 47% of the average wage by 2029. This follows an amendment to the Labour Code, approved by both houses of parliament in July.
Currently, the minimum wage stands at 41.1% of average earnings. From next year, a guaranteed wage based on job complexity and responsibility will primarily apply to public sector roles.
The Czech Republic is aligning its minimum wage policies with EU directives, which recommend a minimum wage of between 50% and 60% of the average gross wage.
Since January 2024, the minimum wage has risen to €18,900 per year.
Proposed Changes to the Labour Code in the Czech Republic
The draft amendments to the Labour Code have been revised. According to the original plan, by 2028, the minimum wage in the Czech Republic was to be set at 45% of the average wage. Simultaneously, the number of guaranteed wage levels was to be reduced from eight to four for both the private and public sectors.
The Ministry of Finance opposed this proposal, suggesting the abolition of the guaranteed wage altogether. The Chamber of Commerce also agreed with this proposal, urging the government to review the plan, reduce the guaranteed amounts, or, conversely, maintain them only for the state and public sector.
Under the revised amendments, the calculation of the minimum wage will be based on the projected average wage for the following year, which the Ministry of Finance will announce by the end of August. The government will set a coefficient taking into account purchasing power, the cost of living, the level and rate of growth of wages, as well as the development of labour productivity. This coefficient will be valid for two years.
The Ministry of Labor will be tasked by the end of September to set the minimum wage for the next year, which will be calculated as the product of the expected average earnings and the coefficient. Instead of eight guaranteed salaries, four will be paid, but only in the area of labor remuneration. They should vary from the minimum wage to 1.6 times the minimum wage.
Minimum Wage in the Czech Republic to Increase in 2025
According to current calculations, the minimum wage in the Czech Republic will rise by CZK 1,700 next year, bringing it to CZK 20,600. The Ministry of Labour and Social Affairs has proposed coefficients for its calculation.
The government regulation concerning the coefficient for calculating the minimum wage in 2025 and 2026 establishes one of the key parameters of the minimum wage indexation mechanism. Based on this proposal, the minimum wage is expected to be approximately 42.2% of the average wage in 2025 and 43.4% in 2026. Consequently, the minimum wage could reach CZK 20,600 in 2025 and CZK 22,100 in 2026, which is significantly higher than the current minimum wage of CZK 18,900.
The Ministry of Labour and Social Affairs will submit this proposal for interministerial review.
“With this step, the government continues to pursue a policy of gradual and stable increases in the minimum wage, aiming to achieve a minimum-to-average wage ratio of 47% by 2029. Increasing the minimum wage aligns with the principle I have long advocated: work must be compensated fairly,” said Minister of Labour and Social Affairs Marian Jurečka (KDU-ČSL).
New Minimum Wage Indexation Mechanism in the Czech Republic
The government resolution was issued pursuant to the Labour Code, which establishes a new mechanism for adjusting the minimum wage. The government is now obligated to update the minimum wage annually, effective from August 1st. This resolution does not set the minimum wage itself but determines the coefficients for its subsequent calculation.
Under the indexation mechanism, the minimum wage is calculated as the product of the forecast for the average monthly nominal accrued wage in the national economy and the coefficient for calculating the minimum wage. The Ministry of Finance publishes the corresponding forecast for the next calendar year before the end of August each year. The resulting minimum wage is rounded up to the nearest hundredth of a percent.
“This resolution will automatically increase the gap between the minimum and average wages over the next two years, making the development of the minimum wage predictable for both employers and employees,” added Minister Jurečka. The Ministry of Labour and Social Affairs aims to achieve a minimum-to-average wage ratio of 47% by 2029. Consequently, this ratio will gradually and steadily rise by 1.2 percentage points each year in the coming years. These ratios correspond to the coefficients for calculating the minimum wage proposed in the Government Resolution: 0.422 for 2025 and 0.434 for 2026.
Based on data from the Ministry of Finance’s Macroeconomic Forecast of April this year, the estimated minimum monthly wage could reach CZK 20,600 in 2025 and CZK 22,100 in 2026. However, the final minimum wage for the next year will be announced by the Ministry of Labour and Social Affairs in the Collection of Laws and International Treaties by September 30th, 2024, and for 2026 by September 30th, 2025.
The Ministry of Labour and Social Affairs will also announce the lowest levels of guaranteed wages for the non-profit sector by 30 September 2024. These levels will apply to four job groups and will be determined based on the minimum wage and statutory coefficients.
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