Minimum wage increase comes into effect

The monthly minimum wage in the Czech Republic will increase to CZK 8,500 (about €330 as at 23 August 2013) from 1 August 2013. The minimum wage has been CZK 8,000 (about €310) since the last increase, six years ago in January 2007. The right-wing coalition parties whose government collapsed in June have resolutely opposed the increase. The unions have welcomed it, saying that it will improve the spending power of the 3% of employees in the Czech Republic who are paid the minimum wage.

Legislative background

The minimum wage is the lowest permissible level of monthly pay for a full-time employee. Full-time work is assumed to be 40 hours a week, and part-time employees’ minimum permissible hourly rates are calculated on this basis.

The basic rules are regulated by Act No. 262/2006 Coll., Labour Code (495 KB PDF) as amended and the amount is determined by the government.

The minimum wage applies to all employees, except for employees with disabilities whose entitlement to an invalidity pension means that their minimum wage is slightly lower. It also applies to anyone who has a contractual relationship that covers work performed outside the employment relationship, such as agreements about work performance or working activity. There are no exceptions for definite or indefinite periods of employment or concurrent employment. The minimum wage is the only wage that is variable for employees in organisations of the business sector, where collective bargaining on wages is applied.

Minimum wage last increased in 2007

Individual collective agreements may set a minimum wage higher than the legal minimum. In organisations where there is no collective agreement, or where the collective agreement does not include wages, the guaranteed wage system comes into play.

The guaranteed wage is regulated by Government Decree No. 547/2006, and 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 – simple manual labour – corresponds to the minimum wage.

In the public sector (public services and administration), a system of pay scales is used in addition to the minimum wage and the lowest grades of guaranteed wage.

The concept of a minimum wage entered Czech labour law in 1991, and it rose from CZK 2000 in 1991 to CZK 8000 (€310.60 as at 23 August 2013) in 2007. While left-wing governments led by the Czech Social Democratic Party (CSSD) raised the minimum wage almost every year they were in power, growth stopped after Mirek Topolanek of the right-wing Civic Democratic Party (ODS) became Prime Minister.

His ODS colleague and future Prime Minister, Petr Nečas, became Minister of Labour and Social Affairs in January 2007 and he rounded the minimum wage up by CZK 5 (€0.19) to CZK 8,000 (€310.60) per month. Since then, it has remained unchanged.

Czech Statistical Office (CSO) data show that about 3% of employees in the Czech Republic are paid the minimum wage.

Caretaker government makes wages a priority

The right-wing coalition government, led by Petr Nečas, collapsed in June 2013. A caretaker government led by Jiří Rusnok was appointed by President Milos Zeman, and one of its first actions was to raise the minimum wage to CZK 8,500 (€330.03) per month or CZK 50.6 per hour (€1.96).

The Rusnok government said that wage indexation would be a priority, and President Zeman also voiced his support for wage increases. The political parties of the former right-wing coalition resolutely opposed any increases.

Trade union representatives demanded a higher minimum wage and proposed an increase of CZK 600 (€23.30) per month. Employers agreed to raise the minimum wage, but only by a maximum of CZK 400 (€15.53).

According to Jaroslav Zavadil, President of the Czech-Moravian Confederation of Trade Unions (CMKOS), raising the minimum wage will increase the purchasing power of those on lower incomes.

However, ODS Member of Parliament Michal Doktor argues that the rise in minimum wage will have no real impact on the economy. He commented that a rise could only be justified if the economy had grown very quickly and real wages had not grown at the same speed.

The caretaker government’s Minister of Labour and Social Affairs, František Koníček, said he saw his major challenge as being to protect the minimum wage, stating that ‘It is well known that [a minimum wage] was always functional and worked throughout Europe.

Soňa Veverková, RILSA

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