What is the 2023 minimum wage and how does it affect the economy and employees?

The minimum wage is one of the most debated topics in labour law and economics. In Slovakia, this topic is constantly being updated and changed, which has consequences for employees and the overall economy of the country. In this article, we will take a detailed look at the minimum wage in Slovakia, how it is set, its evolution, its advantages and disadvantages, and its impact on employees and the country’s economy.

Minimum wage in Slovakia 2023

The new amount of the monthly minimum wage in 2023 is from 1.1.2023 700 € gross = 568,97 € net (which will be credited to the employee’s account). This minimum wage amount applies to employees who are paid a monthly salary.

The hourly minimum wage in 2023 for a 40-hour working week is €4.023 gross. It is calculated as 1/174 of the monthly minimum wage. The hourly minimum wage shall be applied to employees who are remunerated by the hourly wage.

What is the minimum wage?

The minimum wage is the lowest amount of money an employer must legally pay an employee for work done in a certain period of time (usually a month). It is the legal minimum level set by law to ensure a minimum standard of living for employees. The minimum wage is usually adjusted every year based on inflation, economic developments and labour market needs. In some countries, there are different minimum wage levels for different sectors, regions or groups of employees, but usually the minimum wage applies to all employees over a certain age (for example, 18).

What is a wage?

A wage is a monetary benefit or benefit of monetary value(wages in kind) provided by an employer to an employee in return for work. Wage conditions are the result of an agreement between the employer and the relevant trade union body, as set out in the collective agreement or as agreed with the employee in the employment contract, and equality between men and women must be maintained and respected without any discrimination on the basis of sex. At the same time, the condition that the wage must not be less than the minimum wage laid down by special regulation must be complied with.

In the real economic environment, wages tend to adjust slowly and rigidly to the current state of the labour market. Wage rigidities represent a very complex labour market problem. One possible explanation is that the labour market itself is regulated by economic theory.

Wages are largely set administratively by employers for a period of one year. Companies set their own salary scales, and when pay adjustments are made, wages are usually increased by the same percentage across all grades. However, this may not always be the case. In this context, the influence of trade unions, which aim to raise wages, and state intervention in the form of the introduction of a minimum wage, are also significant.

Wages in a labour market with a high degree of unionisation are even more rigid and inflexible. Wages can be set for longer periods (usually 3 years) and do not have to be adjusted in the event of labour market imbalances.

Minimum wage means the lowest monetary remuneration that an employer is required by law to provide to an employee in return for work. Where the employee’s wage in a calendar month does not reach the amount of the minimum wage entitlement per hour worked, the employer shall provide the employee with a supplementary payment in the amount of the difference between the wage earned and the amount of the minimum wage entitlement laid down for the grade of the job concerned.

How is the minimum wage set in Slovakia?

The determination of the minimum wage usually depends on a country’s particular economic system and legislation. In Slovakia, the minimum wage is set by law and regulated by the Ministry of Labour, Social Affairs and Family.

In general, the minimum wage is set on the basis of various criteria such as the cost of living, inflation, labour productivity and local labour market conditions. The specific level of the minimum wage is usually decided in consultation with employers’ organisations, trade unions and other relevant parties.

In Slovakia, the minimum wage is determined by the Minimum Wage Act. The specific amount of the minimum wage is set annually and usually comes into force in January. The minimum wage is usually set on the basis of the recommendations of a tripartite commission consisting of representatives of the government, employers’ organisations and trade unions. After consulting these parties, the government sets the final minimum wage for the following calendar year.

Introduction of a minimum wage

The origin of the minimum wage dates back to 19. The minimum wage dates back to the 19th century, when the first labour laws appeared and trade unions sought to improve working conditions for workers.

In the United States, the Minimum Wage Act of 1938 established a federal minimum wage for employees nationwide. In Europe, the minimum wage was introduced in the 1920s. In Europe, the minimum wage was first introduced in the 20th century, first in some countries such as Sweden, Germany and the United Kingdom. However, it gradually became common practice throughout Europe and was included in many labor laws.

The main aim of the minimum wage is to ensure that workers receive fair pay for their work and to prevent employers from exploiting workers who might otherwise be paid low wages. At the same time, a minimum wage can help improve the economy by increasing consumption and thus demand for goods and services.

Why is the minimum wage important?

The minimum wage has several important functions and purposes in modern economic systems. Among the most important are:

• Guaranteeing a minimum income for workers: a minimum wage ensures that workers are guaranteed a minimum income for their work, allowing them to pay for basic living costs, food and healthcare.

• Preventing social exclusion: the minimum wage helps prevent poverty and social exclusion for those who would otherwise be unable to support themselves and their families.
• Improving working conditions: introducing a minimum wage can improve working conditions and increase workers’ incentives to work. Employers should strive to provide better working conditions and wages in order to retain skilled and motivated employees.
• Supporting consumer demand: a minimum wage can stimulate economic activity and boost consumer demand, as minimum wage workers have more money to buy goods and services (compared to if there was no minimum wage and some workers were paid less than the minimum wage).
• Improving living standards: a minimum wage can contribute to improving workers’ living standards and reducing social inequality, as employers are obliged to pay their employees at least the minimum wage.

Ultimately, the minimum wage is an important tool for ensuring decent work and safeguarding workers’ fundamental rights. It can also have a positive impact on the economy and society as a whole.

Development of the minimum wage in Slovakia

The minimum wage in Slovakia has changed and evolved over time. The main milestones are:

• In 1993, a minimum wage of CZK 2 000 was introduced in Slovakia.
• In 2001 , the minimum wage was raised to SKK 3 500.
• In 2004 , the minimum wage was raised to CZK 4 100.
• In 2007 , the minimum wage was raised to CZK 5 200.
• In 2010 , the minimum wage was raised to €307.70.
• In 2014, the minimum wage was raised to €352.
• In 2018, the minimum wage was raised to €480 and the hourly minimum wage to €2,759.
• In 2020, the minimum wage has been raised to €580 and the hourly minimum wage to €3,333.
• In 2021, the minimum wage was raised to €623 and the hourly minimum wage to €3.58.
• In 2022, the minimum wage was raised to €646 and the hourly minimum wage to €3,713.
• In 2023, the minimum wage was raised to €700 and the hourly minimum wage to €4.023.

It is important to note that the minimum wage in Slovakia changes every year. This usually reflects economic conditions in the country, inflation and the rising cost of living. In addition, the level of the minimum wage often becomes the subject of political debate and government decisions. The aim is to ensure a decent wage for workers while protecting the country’s economic stability and competitiveness.

How many people in Slovakia have the minimum wage?

Around 217 000 people in Slovakia receive the minimum wage, which represents around 4% of the workforce. The majority of employees in Slovakia working for close to the minimum wage work in the service, agricultural and food processing industries.

Who is entitled to the minimum wage?

• employees in an employment or similar employment relationship
• natural persons working under one of the agreements for work performed outside the employment relationship (performance agreement, student temporary work agreement and work activity agreement).

Average wage in Slovakia

The average nominal monthly gross wage of an employee in the Slovak economy reached €1,304 in 2022. It increased by 7.7% year-on-year, its growth rate accelerated by 0.8 percentage point compared to the same period last year. Real wages fell by 4.5%. The last time we saw a decline in real wages was in the immediate aftermath of the financial crisis in 2011 and 2012.

What will the minimum wage be in 2024?

If the social partners (trade unions and employers’ associations) had not agreed on the minimum wage for 2024 and the Minimum Wage Act had not been amended, the minimum wage for 2024 would have been determined in accordance with Article 8 of Act No. 663/2007 Coll. on the minimum wage as 57 % of € 1 304, which, after rounding, would be € 744.

Net and gross minimum wage

The employer will deduct social security and health insurance contributions of €93.80 from the employee’s gross monthly minimum wage of €700 from 2023. At the same time, the employer is obliged to pay social and health insurance contributions of € 246.40 on the employee’s wages. The total levy burden for both the employee and the employer is € 340.20 per month, i.e. j. worth almost half of the gross monthly wage (48.60%).

Minimum wage legislation

Pursuant to § 7 of Act no. 663/2007 Coll. on the minimum wage: Representatives of employers and representatives of employees negotiate the determination of the monthly minimum wage for the following calendar year by agreement from 1. April .

The minimum wage is set annually in two amounts in euros:

• per month (monthly minimum wage),
• per hour worked (hourly minimum wage), which is 1/174 of the monthly minimum wage.