Market Wage and Market Compensation for an Executive Officer

99 out of 100 Slovak entrepreneurs do not pay themselves a market-rate salary or market-rate executive compensation from their own companies.

As a partner in a Slovak consulting firm with annual revenue of 5 million EUR—excluding (i) public contracts and (ii) work from international networks—I am fortunate that the majority of our revenue comes from consulting services provided to Slovak entrepreneurs. So I would humbly say that I should have a good understanding of the realities of the Slovak business environment.

From my experience: 99 out of 100 business owners do not pay themselves a market-rate salary from their own companies.

And that 1 in 100:
🔹 either forgot to cancel it after “saving up” for maternity leave or a mortgage; or
🔹 has it due to specific circumstances, such as other “stakeholders.”

The remaining 99 out of 100 typically handle this by waiting for dividends, through copyright contracts, car depreciation, petty cash, loans, “invoicing” their own companies…

Not only does this topic perfectly expose just how incompetent the standard management of more complex public projects ultimately is (this isn’t evident only in “hospitals and highways”), two interesting subtopics also emerge here:

🔹 how the government (does not) require market-rate wages or executive compensation; and at the same time
🔹 when the state (does not) want to reclassify preliminary dividends (such as loans from one’s own company) as income subject to a 35% tax rate.

We discussed these topics in a podcast with Tomáš Demo (I’ll post the full episode in the comments). However, I’ll go into more detail on this at our conference, “Why and How to Stay in Slovakia” (photo).

With regard to the 2027 state budget, I am particularly looking forward to giving a presentation—in connection with this topic as well as the “Švarc system”—on the purpose of the law, which is to prevent social exclusion through pension insurance (i.e., through the payment of social security contributions).

Because the fact that people are not paying into the pension system is slowly but surely aligning with the lawmakers’ intent. Their intention was, in fact, to prevent retirees from falling into social exclusion. And by paying “social security contributions” at the expense of a higher net “wage” from other forms of compensation, they may end up in that situation sooner.