Minimum wage to be raised

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Both the monthly and hourly minimum wage will be increased in the Czech Republic in January 2016 due to a new government regulation, i.e. the minimum hourly rate from CZK 55 to CZK 58.70 and the monthly minimum rate from CZK 9,200 to CZK 9,900.This will be another increase since the beginning of 2015, but despite this change, the Czech Republic is still one of the EU countries with the lowest statutory minimum wage rate, by which it allows entrepreneurs to use skilled workforce while minimizing fixed costs.

A further increase in the minimum wage is being discussed, so the minimum wage could go up to 40 per cent of the average wage (currently CZK 25.306 per month). Although such an increase would stimulate higher employment, it could also lead to further use of illegal employment (such as the "Švarc" system) and to the risk of inspections by the competent authorities. However, those entrepreneurs that would approach the increase in wage costs by reducing the number of employees should take into account the strict protection laid down by the Labour Code to avoid risks of litigation for invalid termination of employment and compensation. When using these options, i.e. cooperation with sole traders and termination of employment contracts, companies should also ensure that the costs saved are not significantly lower than those incurred as a result of underestimating the risks.