Wage growth in the Czech Republic is expected to slow or stagnate in 2020

The wage growth seen over the last few years is slowing, and many companies are more selective in hiring

Raymond Johnston

Written by Raymond Johnston Published on 05.03.2020 07:00:40 (updated on 05.03.2020) Reading time: 4 minutes

Companies in the Czech Republic have become more cautious in their recruitment activities, due to uncertain economic forecasts. Wage growth in the labor market is starting to calm down, according to a survey by personnel consulting firm Hays.

During the past three years, wages increased significantly in many job sectors. But growth rates in 2019 already showed signs of slowing down. For 2020, the Hays survey predicts wage stagnation in many areas. The average monthly wage in 2019 was 34,105 CZK, up 7.1% from 2018’s 31,851 CZK.

“The labor market continues to be oversaturated with vacancies, which greatly exceed the number of unemployed people. This said, wages in many sectors have already reached their hypothetical ceilings and are starting to stagnate,” Ladislav Kučera, managing director for Hays Czech Republic, said in the report.

He added that significant wage growth would slowdown or stagnate in finance, logistics, tourism, business centers, legal services, and administration. More moderate wage growth than in previous years is expected in construction, IT, manufacturing and engineering, or in some areas of trade.

While some further economic slowdown is expected, hiring should not be affected. “We do not anticipate a significant decline in specialist recruitment volume, with companies expected to be more cautious both in terms of personnel and planned investments,” he added.

The trend that prevailed in 2017 and 2018, when companies were briefly recruiting everyone who came into their hands to fill a job, is now a thing of the past. Companies are also more willing to wait for the ideal candidate even longer, even if a position remains vacant for several months, the Hays report states.

There is still a shortage of available job seekers, with 1.7 job vacancies per unemployed person. In regions with high employment, such as Prague or the West Bohemian Region, one candidate can choose from up to five job offers.

In terms of open jobs, the number exceeds the unemployed population, with over 300,000 open jobs currently on the market, and 200,000 unemployed, Hays stated.

According to the Czech Statistical office, in the fourth quarter of 2019, the unemployment rate according to ILO methodology was 2.1%.

Before 2017, a large number of new investors were relocating to the Czech Republic, offering thousands of new jobs especially in shared services. The number of new investors has dropped over the last two years.

“Nevertheless, the Czech Republic is still an attractive destination for new companies, and it is predicted that a greater diversity of job opportunities will arise as a result of new investments in the country. … In general, these incoming investments will add value to the Czech market, be it in the field of information technology, production, construction, or in mechanical engineering with a focus on automation,” Hays stated in its report

It and telecommunications sees some of the highest demand. “The Czech labor market still lacks approximately 30,000 IT specialists. This year brings a new trend, which can be described without exaggeration as rationalization,” Hays said, adding that candidates often expect salaries out of line with their skills.

“Companies resist these undeserving wage increases, as it is economically unsustainable for them to comply to all demands. They try to address these demanding candidates with alternatives such as an interesting project, a positive corporate culture and/or attractive overall benefits, not just through financial remuneration,” Hays added. Typical wages range from 60,000 CZK for a web developer to 140,000 for a product manager.

The construction and property sector has been booming, with the hotel and retail sectors particularly strong. “Recruitment levels in this sector remain high, which in turn has maintained a relatively high wage growth, despite the visible slowdown in the wage growth rate,” Hays states. While brokers, budget specialists and researchers get 40,000 CZK, at the high end a project director can expect 180,000 CZK.

In the accounting and finance sector, the number of available jobs has decreased. There was a significant increase in new financial roles, particularly in the IT, construction, and logistics industries. Typical wages in this sector range from 33,000 CZK for invoicing up to 180,000 CZK for a finance director. Banking saw wages rise mainly in front office roles.

In logistics, recruitment has slowed down and companies are concentrating on current staff. Typical salaries range from 40,000 CZK for a purchasing assistant to 130,000 CZK for a logistics manager.

The lack of candidates has not led to large wage growth in manufacturing and engineering. “Although the record-breaking unemployment rate increases the pressure on wage growth, the rate of wage increase in the industry remains unchanged year on year.,” Hays states. Salaries range from 40,000 CZK for technicians to 160,000 for managers.

Wages are steady in business services. “Stagnation of wages across the sector has been apparent for the second consecutive year. It seems that the market has hit its peak in terms of salaries offered and will no longer increase further. However, companies that have long been under the market level will have to maintain wage increases if they want to remain competitive,” Hays points out. A junior level employee can expect about 35,000 CZK and a manager about 110,000 CZK.

While tourism has been growing in the Czech Republic, low wages have made the sector unattractive for job applicants. Still, a kitchen manager in a three- to five-star hotel can get 70,000 CZK, and an operations general manager can get 200,000 CZK.

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