On 28 June 2024, an amendment to the Labour Code was approved by the Chamber of Deputies in its third reading (Chamber of Deputies print 663/0), and on 25 July 2024, this amendment was approved by the Senate. It now awaits only the signature of the President of the Republic.
Amendment to the Labour Code and the minimum wage indexation mechanism
If the proposed amendment to the Labour Code passes the entire legislative process, could take effect from 1 August 2024. Changes The amendments to the Labour Code transpose Directive 2022/2041 of the European Parliament and of the Council of the European Union of 19 October 2022 on adequate minimum wages in the European Union and, inter alia relate to the adjustment of the indexation of the minimum wage.
On the basis of this Directive the Member States of the European Union must put in place proceduresto ensure that minimum wages are set and regularly updated, which would ensure the living standards of working people and reduce their poverty.
Minimum wage indexation mechanism
Minimum wage indexation mechanism should be based on a prediction of the average wage (set by the Ministry of Finance) and the coefficient for calculating the minimum wage.
The coefficient for calculating the minimum wage should be set by government decree for two years in advance. The coefficient should be different for each calendar year. In the event of a substantial change in national economic conditions, the coefficient may be changed before the expiry of the two-year period for which it is to be fixed.
The explanatory memorandum states that the indexation mechanism should ensure that there is no nominal decrease in the minimum wage.
Calculating the minimum wage
Minimum wage = Prediction of average gross wage x coefficient for minimum wage calculation
The resulting amount will be rounded up to the nearest hundredth of a cent.
Minimum wage calculated on the basis of the indexation mechanism for the following calendar year should be published by 30 September each year by a communication from the Ministry of Labour and Social Affairs in the Collection of Laws.
Through the indexation mechanism, the minimum wage should reach 47 % of the average wage in the following years. Currently, the minimum wage is less than 43 % of the average wage.
Minimum wage indexation parameters
According to the explanatory memorandum, the government should take these facts into account when updating the parameters of the indexation mechanism:
- the purchasing power of the minimum wage in relation to the cost of living
- the general level of wages and their distribution
- wage growth rate
- Long-term national productivity and its evolution.
Minimum wage model for 2025
- The Ministry shall determine until 31 August 2024 Prediccand average gross monthly nominal wages in the national economy
- Government in the Regulation sets the coefficients for calculating the minimum wage for 2025 and 2026
- Until 30 September 2024 shall be announced by the Ministry of Labour and Social Affairs in the Collection of Laws monthly and hourly minimal salary for 2025
Minimum wage - monthly and hourly
In the amendment to the Labour Code we have two concepts - monthly minimum wage and hourly minimum wage (§ 111 of the Labour Code).
How are these two values defined and what is their calculation?
Above monthly minimum wage is determined as the product of the prediction of the average gross monthly nominal wage in the national economy for the following calendar year and the coefficient for calculating the minimum wage.
The monthly minimum wage will be rounded up to the nearest hundred crowns.
Hourly minimum wage for a fixed weekly working time of 40 hours will be calculated as the monthly minimum wage divided by the average number of working hours per calendar month in the calendar year for which the calculation is made. In this calculation, working hours shall not include public holidays if they fall on a working day in the case of an even distribution of working time over a five-day working week.
The rounding of the hourly minimum wage will be upwards to the nearest dime.
