Sixty percent of Czech employers plan to raise wages next year

Approximately 60 percent of employers in the Czech Republic are planning to increase wages in the coming year, with most anticipating a raise of 5 to 10 percent, as indicated by a survey conducted by the Chamber of Commerce (HK) of the Czech Republic. This increase will mostly happen in larger companies with over 250 employees (90 percent) and medium-sized enterprises with 51 to 250 employees (79 percent), particularly in the processing industry.

"This is related to the expectation that household consumption will pick up in 2024. Some businesses will increase pay by more than 10 percent, especially those that provide services to businesses. But data from companies suggests that the wage-inflation spiral this year and in 2024 as a result of possible high double-digit wage growth will not happen" said HK president Zdeněk Zajíček.

Zajíček also pointed out that the current average (real) wage is expected to rise nominally by eight percent year on year, approaching CZK 43,600. Real wages likely started to rise slightly in the last quarter of this year due to falling inflation. It's projected that wages will continue to rise in real terms next year as inflation for the entire year 2024 could fall to 3.3 percent, according to the HK's calculations.

Despite economic recovery, the HK anticipates that the unemployment rate will not return to historical lows in the coming year.

"At the moment, we are analyzing the effects of the changes planned by the government, which will increase costs for companies. Examples are higher corporate taxes from January or the increase in energy prices due to the rise in the regulated component of the price.

Companies that will not be able to absorb these costs will have to pass them on to product prices, but it will mean that the competitiveness of Czech companies in Europe has deteriorated," pointed out Zajíček. He, therefore, does not rule out that due to higher costs, firms will reassess their plans to increase wages in the coming months.

Businesses identify rising labor costs and a lack of qualified employees on the labor market as the biggest obstacle to their development in 2024. At the same time, according to them, the level of labor costs increases, especially the high levy burden on employers. The HK has regularly identified the cost of labor and its lack as companies' biggest problems in its investigations since 2017. The exception was in 2020 when the biggest obstacle to firms' development was identified as anti-pandemic measures.

According to the HK, a growing problem is that – due to the lack of qualified workers, and the excessive legislative and administrative burden of the labor market – it is harder for companies to be productive. This leads companies to refuse new stock orders and leave them to competition abroad. The slow process of processing work visa applications also does little to aid the situation.

Over 400 companies and representatives of all major industries nationwide took part in the survey.