In Slovakia tariffs and bonuses must be linked to average, not minimum wage

Salary tariffs and bonuses should be bound to the average, rather than to the minimum wage, Tibor Gregor, executive manager of Club 500 that is an association of businesses in Slovakia that have at least 500 employees, told a news conference on Monday, adding this would enable entrepreneurs to predict their future costs better as they would not be dependent on current government decisions when planning. According to Gregor, although a negligible proportion of employees earn the minimum wage at the largest Slovak firms, increased expenditures on bonuses and salary tariffs bound to the minimum wage would cost a firm with a 1,000 employees EUR2.5m annually as the minimum wage is linked to 42 laws, which has an impact on companies’ performance. Club 500 also disagrees with the minimum wage equaling 60% of the average wage, as proposed by trade unions and some politicians. According to Gregor, Slovakia at 47% already ranks third in the EU (following Romania and Slovenia). According to employers, staff earning the minimum wage should not have to pay income tax. Therefore, employers claim that with a minimum wage of EUR552 and zero tax as they proposed, the net monthly income of these employees would be EUR493, which is almost EUR20 more than with the ministry’s proposal.

The labor ministry proposed a minimum wage of EUR580 for next year, which means an 11.5% hike from the EUR520 set for 2019 as opposed to employers proposal for mere 6.2% hike to EUR 552 and the unions’ for more than 22% to EUR635. The ministry’s proposal is to be discussed by the tripartite council on Aug 19. If there is no agreement on the minimum wage at the tripartite talks, the labor ministry will submit a draft government regulation by Sep 30, thereby setting the level. It will then submit the draft to a government session. We do not expect the social partners to agree with the employers likely to continue criticizing the strong increase as being to their detriment amid easing economic growth. The employers are also likely to continue to insist on the introduction of deductible tax base equaling the entire minimum wage in the minimum wage law.

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