From this January, the minimum wage will rise by CZK 1,150 to CZK 13,350 (around EUR 520). As well as improving the financial situation of those on minimum wage, the increase will also have an impact on tax duties and other financial obligations. Photo credit: Freepik
Brno, Jan 7 (BD) – “The increase in the minimum wage is not limited to 150,000 people [the number of workers on minimum wage, according to the Ministry of Labor and Social Affairs], but will affect all workers, as it puts pressure on wage growth,” said Minister of Labour Jana Maláčová (ČSSD, Social Democrats) on Twitter in November 2018, when the government approved the increase. The change affects a wide range of payments and tax deductions, such as advances on health insurance, the income tax limit on pensions, and pre-school tax benefits for parents.
Higher wages always bring higher tax duties and higher health insurance payments and social contributions for both employees and employers.
The minimum wage forms the basis for health insurance payments for non-taxable persons, such as part-time workers who earn below the minimum wage, students older than 26 years, or unemployed people not registered as job-seekers at the Labour Office. Health insurance payments are set at 13.5% of wages, therefore the minimum is now CZK 1,803 per month. In addition, the minimum wage is also the basis for calculating the maximum possible payments that can be made to people registered at the Labor Office as job-seekers, which are set at half the minimum wage.
Income in the form of retirement pensions is tax exempt up to the amount of 36 times the minimum wage. Tax is only payable on income above this limit.
The yearly maximum of tax deductions available to parents paying for
Every increase in the minimum wage benefits the public budget. Due to the 2019 increase in the minimum wage, the state is expected to receive CZK 1.26 billion more in taxes and other contributions than in 2018, according to Czech news website Aktualne.cz (“Vyděláte, nebo proděláte na zvýšení minimální mzdy? Ovlivní toho víc, než si myslíte”, Jan. 2).
With a minimum wage of CZK 12,200 in 2018 and CZK 11,000 the previous year, the Czech Republic has been among the EU countries with the lowest minimum monthly wage. Labour Minister Maláčová has been pushing for an automatic year-on-year increase in minimum wages. Read more in our previous article “Czech Minimum Wage to
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