The recent annual study by Forvis Mazars reveals a diverse picture of wage growth in Central and Eastern Europe, with the Czech Republic recording a 6 % increase in average wages in the private sector to EUR 1,779 (CZK 43,716).
Wage growth for the Czech Republic was the slowest among the countries of the Visegrad Group (V4 – Czech Republic, Slovakia, Poland, Hungary). According to data from the Czech Statistical Office, in the first quarter of this year the average nominal wage in the Czech Republic increased by 7% year-on-year to CZK 43,941. After more than two years, the average wage also increased in real terms, taking inflation into account, by 4.8% year-on-year.
In contrast, the Forvis Mazars study shows that Polish wages outperformed Czech wages, recording the highest average wage growth among the V4 countries in euro terms, with an increase of 25% to EUR 1,795 (CZK 44,109). Wages also grew faster in Slovakia and Hungary than in the Czech Republic, but remained at a lower level in absolute terms. In Hungary, the average wage reached EUR 1,597 (CZK 39,242) after an increase of 11%, while in Slovakia it reached EUR 1,383 (CZK 33,984) after an increase of 7%.
Austria represents the highest average wage among the Central and Eastern European countries, with EUR 4,753, followed by Germany with an average wage of EUR 4105 (CZK 100,875), while the lowest average wage is found in Kosovo, where it reaches EUR 400 (CZK 9,829), and in Ukraine, where it is EUR 525 (CZK 12,901).
Income Taxes
The study also analyses the level of income tax in the countries studied, noting that it has not changed significantly over the past year. Consequently, there were no major changes affecting the distribution of the tax burden among taxpayers. Pavel Klein, managing partner of the tax department of Forvis Mazars in the Czech Republic, stated that the only significant change was observed in Croatia. Here, the income tax system was made more progressive, with an increase in rates for higher incomes and a change in the levels and brackets of income subject to each rate. A minority of the countries surveyed continue to apply a flat personal income tax, with rates ranging from 10 to 20 per cent. Other countries apply progressive taxation, with the highest rate of 55% in Austria and 50% in Slovenia. The Czech Republic applies two rates of personal income tax: a basic rate of 15% and an increased rate of 23%, which applies to earnings above three times the average salary.
Employers’ Contributions
Finally, the study also notes the mandatory levies on employers. On average, their share of gross wages in the countries studied is 16%, but there are large differences between countries. Employers’ contributions are lowest in Lithuania, where they amount to 1.77% of gross wages. In the Czech Republic, contributions are 24.8% for annual incomes up to EUR 86,140 (CZK 2.1 million). In Slovakia, contributions increased from 35.2% to 36.2%.
In summary, the different trends in wage growth between the Visegrad Group countries, together with variations in statutory contributions and tax policies, reflect different economic strategies. These discrepancies highlight the importance of a detailed analysis to understand the challenges and opportunities in each country of the region.
Sources: https://www.ceskenoviny.cz/zpravy/prumerna-mzda-v-cr-v-eurech-dosahla-1779-eur-rostla-nejmene-ve-v4/2529513 https://www.czso.cz/csu/czso/cri/prumerne-mzdy-1-ctvrtleti-2024
Image generated by AI
Graphic source: https://storyset.com/
