Getting a raise in the Czech Republic: Is now the time to ask for more money?

The Czech economy is facing tough times ahead. Inflation is spiraling to new heights, leading to steep increases in the cost of living. At the same time, many employers are struggling to find enough workers in a tight labor market.

Given this combination of factors, could now be the time to ask your boss for a pay rise? Negotiating power is certainly firmly in employees hands, as both the lack of suitable replacements and logical arguments relating to increases in the cost of living play in favor of a wage increase.

But can employees realistically expect their bosses to agree to such requests? And could employees even be putting themselves at risk by making demands at a time when higher operating costs are also leading to tough times for companies?

Economists note that in the current labor market, workers almost certainly don’t have to worry about risking their jobs when it comes to asking for a wage increase. Employers can no longer point to a long line of eager employees ready and waiting to take over from unhappy staff; in October, 251,000 jobseekers were registered to 352,000 job vacancies, meaning the demand for workers far outstrips supply.

Leading Czech economist Štěpán Křeček told Echo24 that wages had already grown by 11.3 percent year-on-year the second quarter of 2021, and that companies are now competing not only for qualified workers, but also for less skilled employees.

Whether it is fair on employers to demand a wage increase in the present circumstances is another question, though. Rising costs of utilities and other operating costs are already cutting profits for businesses. While bosses may have no choice but to increase wages at the moment due a lack of alternatives, it’s possible that when the labor market returns to normal levels of supply and demand, they won’t forget being pressured by employees seeking a raise when times were tough.

Wage increases in line with inflation are also feared by economists, who say a rise in wages added to increases in prices for everyday food and drink products and for long-terms loans such as mortgages will only make the Czech Republic’s economic problems worse.

According to Trinity Bank Chief Economist Lukáš Kovinda, the potential for significant increases in wages was one of the main reasons for the Czech National Bank’s recent decision to raise the base interest rate again. “The National Bank is very concerned about this. High inflation transforming into wage inflation is a very dangerous phenomenon. Then, the temporary inflation becomes permanent, having a much greater impact on the peoples’ lives.”

Inflation is predicted to hit seven percent by next year, with such a steep increase in the cost of living not seen since the 1990s. It might seem logical that wages should rise in line with higher everyday costs; but economists warn such a situation only locks in those price increases. Bosses may find it hard to deny employees wage boosts in the current circumstances; but workers should think long and hard about whether making such a request would bring long-term benefits.

Součková says, "Some employers increase wages annually in line with inflation or as agreed with unions; elsewhere, you'll only get a raise if you speak up. It's better to do this more often and perhaps not get a raise, than to keep quiet and wait, because few employers will be proactive about this. They will think those not asking for a raise are satisfied."

She adds, "If the company is doing well if you are performing well, and yet have a lower salary than is common in your field or lower than your colleagues in comparable positions, you are in a strong position to ask for a pay rise."

Součková advises checking your value in the job market before applying for a raise; after a few years, it may be very different from what it was when you started working for the company.

"It's also useful to know the current situation in the labor market and how much you could get elsewhere, as well as the general wage conditions in the company. It's reasonable to ask for more than, for example, the starting salary you would be able to get from a competitor."

She says before asking you should soberly assess your value to the employer. "Don't ask for too little, and don't simply settle for increases in non-financial benefits. Consider the level of inflation during the years in which you have not received a raise: this is the bare minimum you should be looking to achieve, but of course you should ask for more."