What is the optimal salary setting?

Quick overview: In the private sector, employees receive a wage; in the public sector, they generally receive a salary; and for contract workers, they receive compensation as specified in their contract. In 2026, the minimum wage is 22,400 CZK per month or 134.40 CZK per hour based on a 40-hour workweek. It is safest for employees to have a fixed wage and bonus rules agreed upon in writing. An employer has more flexibility to adjust a wage determined by a wage assessment, but cannot unilaterally reduce a wage agreed upon in a contract.

Wages, Salaries, and Minimum Remuneration Thresholds in 2026

The Labor Code distinguishes between three basic terms: wages, salary, and compensation under a contract of employment. “Wage” is typically used in the private sector. “Salary” applies to employees of employers listed in the Labor Code, particularly in public services and administration. “Remuneration under an agreement” refers to work performed under a contract for work (DPP) or a contract for specific work (DPČ).

In everyday speech, people often use the term “salary” even when referring to private-sector employers. Legally, however, the distinction is important. “Wages” are more flexible, and their specific amount can be negotiated, established by internal regulations, or determined by a wage assessment. “Salary,” on the other hand, is more closely tied to pay grades, pay steps, and public sector rules.

In 2026, the minimum wage is 22,400 CZK per month or 134.40 CZK per hour, based on a standard 40-hour workweek. If the salary or compensation under the agreement falls below the minimum wage, the employer must provide a supplement. For the purposes of calculating the minimum wage, certain components are not included in the wage, such as overtime pay or premiums for work on public holidays, at night, in a hazardous work environment, or on weekends.

In the private sector, the previous system of guaranteed wage groups is no longer applicable. The primary statutory minimum is the minimum wage. In the public sector, however, a guaranteed salary applies. For 2026, the lowest levels of the guaranteed salary are divided into four groups ranging from 22,400 CZK to 35,840 CZK per month for a 40-hour workweek.

What Forms of Compensation Can an Employer Choose?

Pay does not have to be just a fixed monthly amount. The Labor Code allows for various methods of compensation, provided they are clearly defined in advance and in accordance with legal limits. Wages should correspond, in particular, to the complexity, responsibility, and physical demands of the work, the difficulty of working conditions, work performance, and the results achieved.

The most common forms of pay are:

• time-based pay —for example, monthly or hourly pay,
• piece-rate pay —remuneration based on the completion of a task, a quota, or performance,
• commission-based pay —for example, a share of turnover, sales, or profit,
• mixed pay —a combination of fixed and variable components.

For employees, the most transparent form of pay is one that has a sufficiently high fixed component and a clearly defined variable component. For employers, it may be advantageous to link part of the salary to performance, work quality, or business results. However, they must establish rules in advance to ensure that the system is not arbitrary or discriminatory.

Real-world example: A sales representative has an agreed-upon base monthly salary of 35,000 CZK plus a commission on closed deals. Such an arrangement can work if it is clear which deals the commission is calculated based on, when the entitlement arises, whether cancellations are taken into account, and when the commission is paid.

On the other hand, a clause such as “the employee may receive a bonus at the employer’s discretion” is risky if it is not clear what the bonus is paid for. Such wording provides the employee with little certainty and can lead to disputes with the employer if bonuses are paid unevenly or without transparent rules.

Fixed Salary, Bonuses, Premiums, and Statutory Allowances

It is advisable to break down wages into components, but it is important to use precise terminology. Not everything an employee receives on their pay stub constitutes wages in the strict sense. In addition to wages, these may include wage compensation, allowances, bonuses, travel allowances, or other payments.

A fixed salary is the amount an employee can count on upon fulfilling the agreed-upon work and working hours. It may be agreed upon in a contract, established by internal regulations, or determined by a salary assessment. The more clearly the fixed component is described, the less room there is for disputes.

Statutory premium pay is due when statutory conditions are met. Typically, this includes overtime, work on public holidays, night work, work on Saturdays and Sundays, or work in a hazardous work environment. These premiums should not be confused with voluntary bonuses. If an employee works a shift for which the law grants a premium, the employer must provide it, unless the law permits another form of compensation, such as compensatory time off.

Bonuses and incentives can be structured in various ways. Some are truly discretionary and depend on the employer’s decision. Others, however, become mandatory if the conditions for receiving them are clearly defined in advance and the employee meets them. Therefore, it is not just the label “non-entitlement bonus” that matters, but the actual content of the rules. Case law holds that, in a dispute over wages or a portion thereof, the decisive factor is whether the conditions for the entitlement to wages have been met.

Example: An employer stipulates in an internal regulation that an employee is entitled to a quarterly bonus of 20,000 CZK if they meet a specific sales target and have no unexcused absences. The employee meets both conditions. In such a situation, the bonus is no longer merely a matter of the employer’s “goodwill,” but rather an enforceable part of the wages.

It is in the employee’s best interest to insist that the bonus rules be set forth in writing and be specific. For employers, on the other hand, it is prudent to specify whether the bonus is an entitlement, what conditions must be met, who assesses compliance, for what period the bonus is paid, and whether it is reduced in the event of absence, resignation, or termination of employment.

Wages in a contract, wage determination, or internal regulation

From the perspective of future certainty, it is crucial where the wage is specified. The Labor Code allows for the wage to be agreed upon in a contract, established by internal regulations, or determined by a wage determination. This must occur before the employee begins performing the work for which the wage is to be paid.

A wage agreed upon in an employment contract offers the greatest certainty for the employee. The employer cannot unilaterally reduce it. Any change requires the agreement of both parties, typically in the form of a written amendment to the employment contract.

Wages determined by a wage determination are more flexible for the employer. The employer may unilaterally change them under the conditions prescribed by law, but must notify the employee of the change in writing no later than the day the change takes effect. The wage determination must include details on the method of compensation, the payment date, and the place of payment, unless these details are already specified in the contract or internal regulations.

Wages set by internal regulations are typically used by larger employers. The advantage is consistency and clarity. A disadvantage for employees may be reduced individual certainty if part of the wage is based on rules that the employer may change in the future.

Example: An employment contract specifies a fixed monthly salary of 45,000 CZK. The employer cannot simply send the employee a new salary determination for 38,000 CZK and claim that this constitutes a salary reduction. If the salary is agreed upon in the contract, a mutual agreement is required. The situation would be different if the employment contract does not specify the salary and the salary is determined solely by a pay slip.

When signing an employment contract, it is therefore worth asking:

• Is the salary specified directly in the contract, or only in the pay slip?
• Is the gross or net amount listed?
• How exactly is the bonus calculated?
• Are allowances included in the base salary, or are they paid separately?
• When and under what conditions can the employer change the salary?

When Can an Employer Change or Reduce a Salary?

The possibility of changing the salary depends mainly on how the salary was agreed upon, set, or determined.

If the salary is agreed upon in a contract, the employer cannot unilaterally reduce it. The employer needs the employee’s consent. The employee is not required to agree to an amendment simply because the company’s financial results have deteriorated or the employer wants to cut costs.

If the salary is determined by a salary determination, the employer may unilaterally change it going forward. However, the employer cannot retroactively reduce the wage for work the employee has already performed. The wage must be determined before the employee begins the work for which it is due, and any change to the wage determination must be notified no later than the effective date of the change.

If part of the salary is variable, the rules governing it must be examined. An employer may cancel or reduce a bonus that is not actually an entitlement. However, if an employee has met specific conditions for an entitlement-based bonus, the employer cannot simply decide later that they have changed their mind about paying it.

Furthermore, wages must never fall below the statutory minimum. In the private sector, the minimum wage serves as the baseline. If the actual wage or compensation under the agreement falls below the minimum wage, the employer must provide a top-up payment.

Real-world example: An employee has a contractually agreed wage of 40,000 CZK and, according to the pay statement, a performance-based bonus of up to 10,000 CZK based on results. The employer cannot reduce the contractual wage of 40,000 Kč without an agreement. However, the employer may adjust the performance-based bonus in the future, provided that it is actually established outside the contract and the employer complies with the rules for changing the wage determination.

When changing a salary, the employer should proceed in writing, in a predictable manner, and without discrimination. When a salary is reduced, the employee should always verify whether the salary was agreed upon in the contract, whether the change is retroactive, and whether the statutory minimum wage has been violated.

Summary

The optimal salary structure depends on whether we view the matter from the employee’s or the employer’s perspective. Employees typically value certainty: a fixed salary in the contract, clear bonus rules, and a transparent pay stub. Employers, on the other hand, often need flexibility: the ability to link part of the compensation to performance, results, or the company’s financial situation.

In 2026, it is particularly important to monitor the minimum wage of 22,400 CZK per month or 134.40 CZK per hour based on a 40-hour workweek. In the public sector, a guaranteed salary is also applied across four groups.

The most important question is: Is the wage agreed upon in a contract, established by an internal regulation, or determined by a wage assessment? This is precisely what determines how easily it can be changed in the future. For bonuses and premiums, it is the specific terms and conditions that matter, not just their name.