Simply put, the minimum wage is a certain basic amount that every worker should be able to reach. But its meaning is much broader. The concept cuts across different areas of law and can apply to almost anyone. How is it determined and what is the difference between the minimum wage and the guaranteed wage?
Even the simplest and most monotonous work must be paid at least the minimum level set by the government to which any full-time worker is entitled. In 2024, the minimum wage of the Czech Republic was increased by government decree to CZK 18,900, which corresponds to a minimum hourly wage of CZK 112.50 for a fixed working week of 40 hours. This is the basic amount, which does not include various additional payments for overtime, public holidays or weekend work. However, it is not the amount that the employee will actually see on his/her pay slip. It is the gross salary, less social security and health insurance contributions. The “net” amount depends on how many children the employee has and his/her living situation.
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The minimum wage is set as the equivalent of a 40-hour week. So if you work part-time and your gross salary is CZK 14,500, then you should not argue with the minimum wage when asking your boss for a raise. However, if you are on the same wage at full-time, then your employer must give you the minimum wage top-up.
On the other hand, of course, you should receive at least half of the minimum wage at half-time.
Tip: We have covered the legal obligations regarding remuneration and benefits in a separate article.
The minimum wage setting has several different functions. In relation to employees, this is firstly a motivational function, where the wage should be set in such a way as to provide a greater incentive to work and not rely solely on social benefits.
We can also talk about a social protection function. The minimum wage should ensure that the employee can provide for the basic necessities of life (albeit very modestly) and be protected from falling to the social bottom.
Tip: The Nobel Prize in Economics was recently awarded to David Card. His research looked at the relationship between the minimum wage and work. Among other things, he concluded that raising the minimum wage does not necessarily lead to fewer jobs.
The amount of the minimum wage in the Czech Republic is intertwined throughout our legal system and is also related to other amounts, benefits or tax write-offs. For example, in order to qualify for the child tax bonus, your income must be at least six times the minimum wage, which for example for 2021 was CZK 103,800.
The Czech minimum wage also affects the potential earnings of persons registered with the Labour Office but who do not receive unemployment benefits because they are not entitled to them or they have already ceased to be entitled to them. They can earn extra money in so-called non-colluding employment, but their monthly earnings must not exceed half of the minimum wage, which was CZK 8 650 in 2021.
With the increase in the minimum wage, the limit up to which pensions are legally exempt from taxation also increases. In order to be exempt, the pension must not exceed 36 times the minimum wage in a year. This applies to the vast majority of pensions in the Czech Republic.
Tip: How to determine the correct wage, what are the legal obligations regarding remuneration and what you are entitled to as an employee are topics we have discussed in a separate article.
The guaranteed wage should be distinguished from the minimum wage. A guaranteed wage is a wage or salary to which an employee is entitled under the Labour Code, wage assessment, contract or salary assessment.
Here, too, the situation is regulated in some way by the State. The government sets by regulation a minimum level of guaranteed wages for those employees whose wages are not fixed by a collective agreement and for employees who receive a salary (employees of the state, municipalities or contributory organisations).
The guaranteed wage is the lowest wage set for work at a particular step of the minimum wage scale. The individual steps take into account the complexity, responsibility and strenuousness of the work performed.
There are eight levels, with the guaranteed wage at the lowest level being the CZK 18 900 already mentioned, rising in each level up to CZK 37 800 at the eighth level.
The individual steps differ according to the difficulty of the work performed. For researchers or securities traders, at least CZK 37 800 per month or CZK 225 per hour should be guaranteed this year.
| Skupina | Zaručená mzda 2024 – výše |
|---|---|
| 1. skupina | 18 900 Kč |
| 2. skupina | 19 500 Kč |
| 3. skupina | 21 500 Kč |
| 4. skupina | 23 600 Kč |
| 5. skupina | 25 900 Kč |
| 6. skupina | 28 400 Kč |
| 7. skupina | 31 200 Kč |
| 8. skupina | 37 800 Kč |
If the basic amount of wages or salary does not reach the relevant minimum level of guaranteed wages, the employer is also obliged to provide the employee with an additional payment.
The characteristics of the individual groups and the typology of employment falling under them are also laid down in a government regulation. Employees receiving a salary are further divided into 16 grades.
When statistics refer to the level or trend of wages over a certain period, they often use the terms ‘average wage‘ and ‘median‘. Sometimes the two terms are used interchangeably, but they are not the same.
Wage policy in the Czech Republic is not limited to the minimum wage. The average wage in the Czech Republic is published regularly by the Czech Statistical Office to show wage developments. In the second quarter of 2024, this amount was CZK 38 275. In Prague, where wages are traditionally higher, the average wage reached CZK 46,163.
The average gross monthly wage is calculated from the wages, which also include various additional or supplementary salary payments, remuneration for weekend work, etc. However, they do not include, for example, wage or salary compensation during the period of incapacity for work.
To know the average wage in a certain area (enterprise, region), it is sufficient to know only the wage costs for a given period and the number of employees. For example, if the monthly costs in a small company with 7 employees are CZK 350 000, then the average wage here will be CZK 50 000.
You can also find out what the average salaries are for different professions.
In addition to the average wage, the median wage is often mentioned as a more realistic picture of the income of ordinary employees. For example, the median wage in Prague in 2024 was CZK 39,233. The median is generally less distorted by the extremely high incomes of some employees, which can affect the average statistic. In contrast, the median is a statistical concept that represents a mean value. In the case of wages, however, we need more data to determine it than to determine the average wage.
What pay settings are worthwhile for you and what types of pay are there? Find out in the next article.
If we imagine that in the above mentioned company the salary of the director is CZK 100,000 and the salary of his closest advisor is CZK 80,000, then it is obvious that the salary of these two persons alone accounts for more than half of all salary costs. The salaries of the other colleagues must therefore be significantly lower than the average salary quoted above. For this purpose, it is preferable to work with the median, where all values (wages) in a given company are ranked and the median is found. If the wages in this example were CZK 100 000, CZK 80 000, CZK 60 000, CZK 35 000, CZK 30 000, CZK 25 000 and CZK 20 000, then the median would be the wage of CZK 35 000.
While the average wage may be distorted by the extremely high salaries of some managers, which raise the average wage of all employees, the median is more indicative of real wage ratios.
The minimum wage in the Czech Republic in 2024 was CZK 18,900 per month at full-time employment, equivalent to a minimum hourly wage of CZK 112.50. This amount is set by the government and serves as the basic level of remuneration for all full-time employees. It does not include additional payments for overtime, public holidays or weekend work. For part-time employees, the minimum wage is adjusted to half this amount. The minimum wage not only motivates employees to work, but also provides social protection to ensure that individuals do not fall into poverty. It is also linked to other amounts and benefits, such as entitlement to a tax bonus or additional earnings for the unemployed. In addition to the minimum wage, there is a guaranteed wage, which depends on the intensity of the work and is set in several levels. In 2024, the average wage in the Czech Republic was CZK 38 275, with the average wage in Prague reaching CZK 46 163. It is important to distinguish between the average wage, which can be affected by extreme earnings, and the median, which better reflects the real income of ordinary employees.
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