Minimum wage
The minimum wage will increase from 1 January 2025 by CZK 1,900 to CZK 20,800.
The increase of the minimum wage has an impact not only on the employer, who is obliged to pay a salary to his employees reaching a minimum of CZK 20,800 per month, but at the same time it also has an effect on tax and other liabilities.
Pension Exemption
- State pensions are not taxed if they do not exceed 36 times the minimum wage, which for the year 2025 amounts to CZK 748,800 annually. In 2024 the limit was nearly CZK 70,000 lower.
Health Insurance
- In addition, the minimum wage impacts also the minimum health insurance payments for employees as well as for persons without taxable income.
- Persons without taxable income generally do not perform gainful activity, employed or self-employed, during the entire calendar month, but at the same time they do not fulfil the conditions for so-called state-insured persons, for whom the minimum insurance is paid by the state. In case of persons without taxable income, the minimum wage is their assessment base.
- The minimum payment for persons without taxable income (OBZP) will increase from CZK 2,552 to CZK 2,808 per month, which is 13.5% of the minimum wage (CZK 20,800).
- At the same time, this minimum payment needs to be observed by employers for instance in case of an employee, who works part-time for lower than a minimum wage, or an employee on unpaid leave. Such an employee should prove to his employer that for example at a different employer the minimum payment of insurance is settled.
Tax deductions
- The increase of minimum wage is also reflected in the area of tax deductions. The adopted change impacts the chance of parents to receive a tax advantage in the form of a so-called child tax credit. The child tax credit represents the part of the child tax deduction that exceeds the final tax and is actually paid by the tax office to the taxpayer. With the increase of the minimum wage, the specified limit for the possibility of obtaining tax credit raises.
- In 2025, a taxpayer, whose income reached at least 6 times the minimum wage, is entitled to the tax credit (monthly CZK 10 400/ annual CZK 124 800). We would like to note here that this income currently includes only taxable income from employment or self-employment, i.e. the taxpayer’s “active” income.
Maximum income of persons registered at the labour office
- Another indirect effect of the increase of minimum wage is on persons registered at the labour office who can earn a maximum of CZK 10,400 extra, i.e. up to a half of the minimum wage.
- However, in this case, they cannot receive unemployment benefits and cannot work on an agreement on the performance of work (“DPP”). They can therefore use an agreement on work activity (“DPČ”) or work part-time on a standard employment contract.
Average wage
The average wage for 2025 was set at CZK 46,557.
The amount of the average wage has impact on various parameters, such as
- minimum payments for health and social insurance for self-employed persons (OSVČ),
- maximum assessment base for social insurance,
- limit for the higher income tax rate for individuals, i.e. progressive taxation,
- limit for the exemption of employees’ non-monetary benefits,
- insurance payments from agreements on the performance of work (“DPP”), and
- minimum basic pension allowance.
Minimum contributions for Self-Employed (OSVČ):
- The average wage impacts the minimum insurance contributions and flat-rate tax advances.
- With the rise in the average wage, the minimum monthly pension insurance contribution for self-employed individuals (OSVČ) will increase from CZK 3,852 in 2024 to CZK 4,759 in 2025.
- For health insurance contributions, the minimum payment for OSVČ will rise from CZK 2,968 to CZK 3,143. OSVČ must adjust their minimum contributions starting with the January payment to reflect the new minimum amounts.
- For OSVČ in the flat-rate tax regime, the monthly flat-rate tax in the first band will increase to CZK 8,716 in 2025, while the other bands will remain unchanged.
Maximum social security assessment base
- The maximum assessment base for social insurance is set at 48 times the average wage. As such, the limit above which no contributions are payable increase as well. The limit is set at CZK 2,234,736 for 2025.
Progressive tax rate for personal income tax (DPFO):
- The average wage is decisive for determining the the upper limit for the progressive 23% tax rate.
- Since 2024, this limit is set at 36 times the average wage.
- For 2024, the 23% tax rate applies to the tax base exceeding CZK 1,582,812.
- For 2025, this limit rises to CZK 1,676,052.
- In monthly terms, for calculating payroll tax advances:
- In 2024, the 23% rate applies to monthly incomes exceeding CZK 131,901.
- In 2025, this limit increases to CZK 139,671.
Changes to agreements to DPP:
- From 1 January 2025 insurance payments for DPP workers will depend on a monthly income equal to 25% of the average wage, i.e. CZK 11,500. This replaces the previous income threshold of CZK 10,000.
- Income of CZK 11,500 will already be subject to the mandatory social and health insurance payments as well as to standard payroll tax, not the final withholding tax. This is assuming that the current amendment to the related acts will be approved by the parliament in the next days.
Minimum old-age pension:
- The average wage of CZK 46,557 primarily influences the calculation of pensions for 2025. For example, the basic pension allowance will amount to CZK 4,660 in 2025, which is CZK 260 higher than in 2024.