Government rejects proposal for minimum wage increase

In December 2011, the Czech government rejected an increase in the minimum wage proposed by the Minister of Labour and Social Affairs and approved by the tripartite Council of Economic and Social Agreement. The Government defended its position against trade union opposition, saying the proposed increase could have a negative impact on the economy. The minimum wage has not risen since January 2007, and even employers’ organisations have accepted the need for an increase in 2012.

Background

The concept of a minimum wage entered Czech labour law in 1991, and is regulated by the Labour Code (Act No. 262/2006) and the Government Decree on the Minimum Wage (Act No. 567/2006). The minimum wage was increased every year from 1998 to 2007 by left-wing governments. However, subsequent right-wing governments have been reluctant to do this. The minimum wage has been frozen since 2007 at CZK 8,000 (€320) per month for a 40-hour week, the equivalent of CZK 46.1 (€1.84) an hour.

The Czech legal system also recognises a guaranteed wage (regulated by Government Decree No. 547/2006) which is applied in the non-business sphere and in businesses where a collective agreement has not been concluded. Wage guarantees are graded to take account of the complexity and responsibilities of various types of work, and the amount paid for the lowest grade corresponds to the minimum wage.

The proportion of employees receiving the minimum wage is low and getting lower. Figures published in 2012 (in Czech, 641Kb PDF) by Czech consultants Trexima suggest that in 2010, 0.6% of employees were receiving a monthly wage of between CZK 8,000–8,099 (€320–324), and 0.3% were being paid between CZK 8,100–8,500 (€324–340).

Tripartite agreement on minimum wage increase

In summer 2011, the Minister of Labour and Social Affairs, Jaromír Drábek, reached an agreement with the social partners to increase the minimum wage at a meeting of the Council of Economic and Social Agreement (RHSD), the national tripartite negotiating forum for the government and the social partners representing employers and employees.

The Czech-Moravian Confederation of Trade Unions, (ČMKOS), the largest trade union confederation, proposed an increase of 15%, to CZK 9,200 (€367). This proposal was based on their calculation of inflation growth since the last minimum wage increase in 2007. The Association of Independent Unions (ASO), the second-largest union umbrella organisation, was more moderate and proposed a 6% increase.

Not all employers’ representatives opposed an increase in the minimum wage but those that did support it argued for a substantially lower amount. The Confederation of Industry (SP ČR), the largest employer association, accepted that the minimum wage should increase but disapproved of any step increase. The Confederation of Employer and Entrepreneur Associations (KZPS ČR) argued against any increase. Employers’ professional associations also expressed their opinion; the Czech Chamber of Commerce (HK ČR) proposed a increase of 2–3%, while the Czech Association of Small and Mid-Sized Enterprises and Crafts (AMSP ČR) rejected any increase.

Negotiations ended in a compromise. Minister Drábek suggested submitting two alternatives to the Government – a minimum wage increase of CZK 400 (€16) to CZK 8,400 (€335) a week, or by CZK 500 (€20) to CZK 8,500 (€340) a week.

Government decision and backlash

In December 2011 the Czech Government rejected the proposed increase. Minister Drábek said the proposed increase would correspond to the potential of the Czech economy but nevertheless, the Government argued that in the current economic situation the Czech Republic could not afford a minimum wage increase. It would increase costs to companies and might lead to dismissals and increased unemployment.

This decision was strongly criticised by the opposition, as well as trade unions. The ČMKOS expressed disappointment that the government promise given to the social partners at their tripartite meeting had been broken. It argued that anyone on the very low minimum wage automatically falls below the poverty line and depends on social benefits. The confederation also said it regarded an increased minimum wage as a way of curbing the practice of companies that were using it as a way of avoiding paying full social security contributions, by officially paying their employees the minimum wage while topping up salaries by other undeclared means. The ČMKOS will ask for the issue to be reopened at the next tripartite meeting.

Hana Geissler, Research Institute for Labour and Social Affairs (RILSA)