Minimum wage in the Czech Republic rises again

On January 2019 the minimum wage in the Czech Republic will rise by 1150 Korunas to 13,350 Korunas. This rise is projected to influence many financial obligations such as income tax deductions, the income tax rate and tax benefits for working parents.

The rise in the minimum wage is expected to jeopardize the statues of the Czech Republic as an inexpensive country, that is as one of the countries in the European Union where salaries and labor costs are particularly low. However, since the raise is not limited to those who receive minimum wage (some 150,000 people) it is expected to impact the entirety of the market.

As a rule, a higher wage results in higher tax and health insurance payments, both on part of the employers and on the part of the employees. The health insurance in the Czech Republic today constitutes 13.5% of the wages and the minimum payment is 1803 Czech Korunas a month. The minimum wage constitutes the basis for calculating the health insurance of tax exempt individuals such as part time employees, students and the unemployed.

In addition, the minimum wage constitutes the basis for calculating the maximum possible subsidy for unemployment subsidies – the ceiling is equal to half the minimum wage. In addition, the minimum wage affects the pension which is considered to be tax exempt up to a certain ceiling – up to 36 times the minimum wage. The minimum wage also serves to calculate some of the tax exemptions for working parents and hence is also expected to influence this field.

The significance is that the rise in the minimum wage contributes, among other influences, to the national budget. The revenues of the Government of the Czech Republic is projected to be 1.26 Czech trillion Czech Korunas more than in 2018, primarily thanks to various taxes and fees. That is why there is no wonder that there are already those in the Czech Republic calling for an even greater increase in the minimum wage.

More on wages and salaries in the Czech Republic.