Czechia approves near-10-percent rise in minimum wage: Who will benefit most?

The Czech government this week greenlit a substantial 9.2 percent increase in the minimum wage, signaling positive economic prospects for workers. In this explainer, we break down the key details surrounding this decision and its implications.

The minimum wage is the lowest permissible pay for basic, routine work, set by the government and applicable to all full-time employees. This amount excludes additional payments for overtime, holidays, or weekend work. 

The approved increase will raise the minimum wage from the current CZK 17,300 to CZK 18,900 – a rise of 9.2 percent. On an hourly basis, the minimum wage will rise from CZK 103.8 to CZK 112.5.

While the minimum wage is a benchmark, employees do not receive this amount in full. The gross salary, or the total earnings before deductions, is subject to reductions for social and health insurance contributions. Various factors, such as the number of dependents, can further impact the net pay.

The average worker earning the minimum wage in 2024 should, therefore, expect to see about CZK 16,440 net every month.

Apart from impacting individual incomes, the minimum wage affects health insurance contributions, income tax, and social and health insurance for both employees and employers. 

Changes in the minimum wage also influence the eligibility for tax bonuses and deductions.

Approximately 1.5 million employees, particularly those in professions with lower guaranteed wages like cooks, cleaners, and social services workers, are expected to benefit from the higher minimum wage.

Labor Minister Marian Jurečka wants to help people on the lowest incomes with rising inflation (which has averaged about 12 percent this year) and cost of living.

He told the press earlier this week that “within five years the minimum wage will gradually increase to the target value of 45 percent of the average wage.” 

In line with a recent EU directive, the Czech Republic must set its minimum wage at either 50 percent of the national average gross wage or 60 percent of the median gross wage. Member states have a two-year window to incorporate these rules into national legislation.

Czechia’s current average monthly gross wage is CZK 42,600. Given that the new minimum wage will be CZK 18,900, this is 44 percent of the average.

Czechia’s guaranteed wage is the lowest permissible pay for various professions, categorized into eight groups based on complexity, effort, and responsibility. It applies to employees without a negotiated collective agreement.

Of the eight groups, the guaranteed wage in three of them will increase. According to the new law, the guaranteed wage of the second group (mainly manual work) will rise from CZK 17,900 to CZK 19,500, that of the third group (barbers and cashiers, for example) from CZK 19,700 to CZK 21,300, and the eighth level (high-level, white-collar work) from CZK 34,600 to CZK 37,800.

Self-employed people (those working on a trade license) will need to pay over CZK 1,100 extra every month in 2024, despite any minimum wage increase.

The health insurance minimum will increase by CZK 246 to CZK 2,968, while social insurance will see a steeper hike, rising by CZK 908 to CZK 3,852.