[Czech Republic] Changes to the minimum wage, reduction limits and the taxpayer relief
A new year usually brings with it changes to certain amounts that affect payroll and other areas important to employees. We provide an overview of the most important changes in this article.
The minimum wage will change from CZK 15,200 to CZK 16,200 from 1 January 2022. The minimum wage represents the lowest permissible gross monthly wage that a full-time employee must receive. Thus, no employee can be paid less than CZK 16,200. However, it should be recalled that employers are also obliged to comply with the so-called guaranteed wage, which is a de facto minimum wage set for narrowly defined groups of occupations. For example, a doctor who belongs to occupational group 7 cannot have a gross wage lower than CZK 29,400.
As the minimum assessment base in health insurance is linked to the minimum wage, higher minimum insurance must be paid for employees from 2022. Specifically, it is CZK 2,187 (CZK 2,052 in 2021). A person with no taxable income must pay the same amount to the health insurance company.
The reduction limits, which affect the amount of sickness benefits and indirectly the amount of wage compensation of sickness, are increasing rapidly. It is the highest annual increase in the reduction limits in at least 7 years. This is partly due to the fact that in 2021, by contrast, the reduction limits increased by only 1.8% (in previous years it was about 6.6%). Now the reduction limits are increasing by 9.8%.
- Reduction limit: CZK 1,298 (CZK 1,182 in 2021)
- Reduction limit: CZK 1,946 (CZK 1,773 in 2021)
- Reduction limit: CZK 3,892 (CZK 3,545 in 2021)
The last change mentioned is an increase in the taxpayer relief from CZK 2,320 to CZK 2,570. Everyone who pays at least CZK 250 in advance tax each month will thus improve their net salary by CZK 250 from 2022. At the same time, for the first time, wages for January 2022 (mostly paid in February) will see an increase in the tax benefit for the second, third and each additional child. We have already informed about this change in our article of 11 August 2021, where the specific new amounts are also described, including the possibility to apply these increased amounts retrospectively for 2021 in the tax return or annual tax reconciliation.
Payroll Development Specialist