Indexation of minimum wage and abolition of vacation scheduling – further changes to Labour Code ahead
One major amendment to the Labour Code has barely entered into force, and the government is already discussing two more amendments. According to the proposal of the Ministry of Labour and Social Affairs, the mechanism for increasing the minimum and guaranteed wages is to change, the obligation to draw up a vacation schedule is to be abolished, and changes are to be made to collective bargaining where several trade unions are active at one employer. The ministry also envisages the introduction of a liability for wages in the construction sector.
The key change proposed is the introduction of a minimum wage indexation mechanism. The minimum wage should now be calculated as the product of a coefficient set by the government and a prediction of the average gross monthly wage in the national economy. The ministry thus promises to increase the predictability of increases in the minimum wage and to eliminate annual negotiations. The minimum wage could be roughly between 45-50% of the average gross monthly wage in the national economy; i.e., for 2024 this would be approximately CZK 20 to 22 thousand. However, we will not see this change until 2025 at the earliest.
The ministry is also considering abolishing the guaranteed wage concept: in their opinion, the minimum wage should be adequate protection against low pay. However, the bill also allows for the preservation of the guaranteed wage; in which case, however, its maximum value would be reduced from two times the minimum wage to 1.6 times the minimum wage.
The amendment should also abolish the obligation to draw up vacation schedules, as the ministry considers this a mere formality that unnecessarily increases the administrative burden on employers, also as starting from the new year, this obligation would also apply to employees working under agreements outside employment, for whom planning vacations a year in advance is even more difficult. Employers will thus only be obliged to give employees at least a 14-day written notice of the intended period of their vacations.
The process of concluding collective agreements where more than one trade union organisation is active at an employer is also to change. Currently, if the trade unions do not agree on the content of the collective agreement, the employer may not conclude a collective agreement with any of these organisations. Thus, any trade union organisation, regardless of its size or the number of employees it represents, can block collective bargaining. The amendment therefore introduces a special procedure whereby the employer may conclude a collective agreement with one or more trade unions that have the largest number of members employed by the employer. This procedure may then be blocked by a written statement of the simple majority of all employees, in which they can also indicate their preferred trade union organisation. The employer would then be entitled to conclude a collective agreement only with the trade union that has been indicated this way by the same (above-half) number of employees. This measure should substantially streamline collective bargaining at the company level.
The last change is the introduction of the liability of entrepreneurs in the construction sector for the wages of their subcontractors’ employees. The construction entrepreneur will be liable to the extent of the subcontractors' share in the contractual performance for this entrepreneur, up to the amount of the minimum wage. A labour agency shall also be considered a subcontractor if it has temporarily assigned its employees to the entrepreneur. Construction workers will thus be able to claim their wages from both their employer and the construction entrepreneur.