Minimum wage increase as of 1 January 2021

Jana Střelická
From 1 January 2021 the minimum wage will increase by CZK 600 to CZK 15,200. It will thus reach 42.4% of the average wage.

The minimum wage increase impacts also the growth of the lowest levels of guaranteed wage. The guaranteed wage sets the lowest price of work for a fixed weekly working time of 40 hours, graded according to its complexity, responsibility and effort. The guaranteed wage ranges from the minimum wage in the first group (e.g., kitchen assistants, mail delivery) to twice the minimum wage in the highest eighth group (e.g., financial and business bosses of organizations, financial and capital market brokers) where it can thus be in the amount up to CZK 30,400 as of 1 January 2021.

Given that many of the limits in the Income Tax Act are tied to the minimum wage, its increase also has tax implications. Specifically, the following amounts will be applicable to personal income taxation in 2021:

  • The entitlement to the monthly child tax bonus arises when the income from the employer in the given month is at least half of the minimum wage, i.e. at least CZK 7,600 (in 2020 it is CZK 7,300).
  • The entitlement to the child tax bonus arises when the annual income from employment and business activity is at least six times the minimum wage, i.e. at least CZK 91,200 per year (in 2020 it is CZK 87,600).
  • Credit for child placement (kindergarten fee) will be up to CZK 15,200 per child per year (in 2020 it is CZK 14,600).
  • The limit for the exemption of regularly paid old age pensions is 36 times the minimum wage, i.e. CZK 547,200 per year (in 2020 it is CZK 525,600).

Last but not least, the increase of the minimum wage also has an impact on the payment of health insurance premiums for persons without taxable income, which will amount to CZK 2,052 per month (in 2020 it was CZK 1,971).

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Jana Střelická
Certified Tax Advisor