The government recently approved a measure that marks a change in the country’s wage policy as of 1 July 2024. Under the measure, the minimum wage will be 47% of the average salary by 2029.
This adjustment is in line with the EU directive requiring member states to implement regulations to ensure adequate minimum wages. The provision suggests that these should be at least 60% of the gross median wage or 50% of the gross average wage. Since January, there has been an increase in the minimum wage by 1,600 crowns, reaching 18,900 crowns. This increase represents 41.1% of the median gross wage for the current year, marking a step towards the 47% target. According to Labour Minister, Marian Jurečka, the minimum wage is expected to increase annually by the same percentage rate, reaching 42.2% of the average wage the following year.
Initially, the minimum wage was supposed to increase to 45% of the average wage by 2028, with a reduction from the current eight levels of guaranteed wages to four, applicable only to the public sector and companies. However, the perplexities expressed by the Ministry of Finance led to the proposal to abolish guaranteed wages completely, prompting a debate that actively involved the Chamber of Commerce. The latter called on the government to reconsider the proposal, suggesting a reduction of the guaranteed amounts or their application limited to the public and state sectors, if necessary. The compromise solution adopted aims to establish guaranteed wages for public sector and administration employees from scratch and to guarantee guaranteed wages for employees only. In this way, an attempt was made to mediate between the trade union demand for a minimum wage of half the average wage and the position of employers in favour of abolishing it or reducing the wage ratio.
Under the current rules, any increases are decided by a government decree following negotiations between the social partners. Under the new amendment, the methodology for adjusting the minimum wage will be based on the expected average wage for the following year, announced by the Ministry of Finance by the end of August. The government will introduce a coefficient that will take into account various compulsory aspects such as purchasing power, the cost of living, the general level of wages and their distribution, the growth rate of wages, as well as long-term productivity trends and its development, and will apply it for a period of two years. Thereafter, by 30 September, the Ministry of Labour will set the minimum wage for the following year by multiplying the expected average wage by the established coefficient. Instead of the current eight guaranteed wage levels, four levels will apply, based on the qualification requirements set by government regulation. In more detail: within job group 1, the guaranteed wage will correspond to the minimum wage; for job group 2, the guaranteed wage will be increased to 1.2 times the value of the minimum wage; for job group 3, the guaranteed wage will increase to 1.4 times the minimum wage; and for job group 4, the guaranteed wage will reach 1.6 times the minimum wage.
In practice:
– by 31 august 2024, the Ministry of Finance will publish a forecast of the average gross wages for the year 2025;
– after consulting the social partners and assessing suitability according to the mandatory criteria, the government will establish by regulation two coefficients for 2025 and 2026, which will then be used to forecast the average gross wage for the year in question;
– based on this, the Ministry of Labour will announce the minimum wage for 2025 by 30 september 2024 and do the same in 2025.
The reform, which reflects the government’s policy statement and complements the EU directive on minimum wages, is a significant step towards strengthening the economic security of workers and harmonising wage policies at European level. With this approach, an attempt is made to balance the needs of the labour market with the need to ensure decent living conditions for all workers.
Source: https://www.ceskenoviny.cz/ https://www.mpsv.cz/
AI-generated image
Graphic source: https://storyset.com/
