WAGE vs. SALARY: Key differences and rules

Dec 18, 2024 7 min reading

This article about Wages and Salaries applies only to the Czech Republic.

How Much Will I Get? This is usually the first question we ask when starting a new job. However, we often confuse the terms wage and salary. When you hear “wage” or “salary,” you might think, “Isn’t it the same thing?” Not quite! There are differences between these two terms. In this article, I’ll explain the rules governing wages and salaries, what you’re entitled to, and what specifics you should know before starting a new job.

Wage vs. Salary: What’s the Difference?

Wage is what you earn if you work in the private sector—for example, in a company, a startup, or for a sole proprietor. It’s flexible because it’s negotiated directly between you and your employer. Want more? Just negotiate! (🤔 In simple terms, that is.)

Salary is legally defined and fixed. It applies to employees in the public sector, such as teachers, firefighters, clerks, etc. Here, there’s no room for “let’s adjust it”—everything follows set tables. 📊

Salary Tables: How Do They Work?

Salary tables in the public sector precisely determine the salary amount based on job difficulty, qualifications, and experience. Here’s the basic principle:

Salary Class: This indicates how demanding your job is and the level of education required. For instance, a primary school teacher falls into salary class 11.
Salary Step: This depends on your years of experience. The longer you’ve worked, the higher your step—and the higher your base salary.

But wait, there’s more! In addition to your base salary, you can receive allowances, such as for team leadership, extra work, or working in challenging conditions (night shifts or high-risk environments).

Where to Find the Latest Salary Tables?

Salary tables are updated annually to reflect inflation and other changes. Want to know what you’re entitled to? Check the Ministry of Labor and Social Affairs of the Czech Republic.

Gross vs. Net Wage: Why Is It Always Gross?

When discussing wages, people often ask, “How much will I get net?” But it’s not that simple. During interviews, gross wage is the focus—asking about net pay is not appropriate. Why? Net pay can vary between colleagues with the same gross wage due to allowances, deductions (e.g., pension insurance or garnishments), and personal circumstances (e.g., different tax credits).

How Does Net Wage Differ?

Let’s imagine two colleagues with a gross wage of 30,000 CZK. Their net wages could differ:

Colleague A: Single, no additional tax credits. Their net wage is about 23,500 CZK.
Colleague B: Two children and claims tax credits for them. Their net wage increases by 3,126 CZK thanks to the credits, totaling 26,626 CZK.

Wage and Salary Components: What’s in Your Paycheck?

Your paycheck (this applies to both wages and salaries) isn’t just a single figure on your payslip. It’s a complex mosaic of various components that significantly affect the final amount you receive. Let’s break them down!

Basic Component: The Core Amount

This is the guaranteed part of your wage or salary. For private sector employees, it’s usually stated in the employment contract (or wage statement), while for public sector employees, it’s determined by salary tables based on class and step.

Allowances: Extra Pay for Tough Conditions

Allowances reflect special working conditions. These apply in both sectors. Examples include overtime pay, night shift premiums, or hazardous work allowances.

Bonuses and Incentives: Performance Boosters

Bonuses and incentives aren’t automatic—they depend on your performance and results, both yours and your company’s. They are more common in the private sector as motivation to achieve goals.

Specifics of the Public Sector: Tables and Allowances

In the public sector, functional allowances and personal evaluations are added to the base salary. These components aren’t universal and depend on the specific position and performance.

Functional Allowance: A department head in an office, for instance, receives an allowance amounting to thousands of CZK monthly.

Personal Evaluation: If a nurse performs duties beyond her usual responsibilities, she may receive an additional 2,000 CZK per month.

Contractual Wage vs. Wage Statement: What’s the Difference?

Now we will move to the purely private sector, where we receive a salary for the work we do. But what if we do not follow clearly defined tables like in the public sector, where will we have our gross salary stated? There are essentially two possible formats. Either you have the amount stated directly in the employment contract, or in the wage statement. What is the difference between them?

Contractual salary: A bilateral legal act

A contractual salary is part of an employment contract, which is a binding document between you and your employer. With this document, both parties, the employee and the employer, agree on the terms, including the amount of the salary. It cannot be changed unilaterally without your consent. Once agreed, the salary remains valid until both parties agree to change it. The change can be made by means of an amendment to the employment contract, signed by both parties.

Pay slip: Unilateral legal act

A pay slip is a document that is not part of an employment contract. It is issued unilaterally by the employer and sets out the details of your salary (e.g. the breakdown of salary components, bonuses). Please note: The employer can amend the pay slip without your consent, but must notify you in writing of the change at least one day in advance.

This allows the employer to react more flexibly to changes in the situation (e.g. adding bonuses or reducing bonuses when orders fall). However, it is the decency of every employer to communicate such changes to the employee well in advance, especially if they have to reduce their salary.

Minimum Wage vs. Guaranteed Pay: What’s the Difference This Year?

You’ve likely heard of the minimum and guaranteed wages. They both concern the lowest amount you can be paid, but each has its specifics. Starting in 2025, the rules are changing: guaranteed wages in the private sector will be abolished, leaving only guaranteed pay for public sector employees.

Minimum Wage: A Basic Right

The minimum wage is the lowest amount an employer must pay you for your work – regardless of your profession or position. It applies to all employees in the Czech Republic and is set by the government. In 2025, the minimum wage will be 20,800 CZK.

Guaranteed wage (valid until the end of 2024)

The guaranteed wage was the minimum amount of earnings in the private sector, which took into account the intensity of the work, i.e., for example, a cook could not have a salary lower than 21,800 in a given year, even though the minimum wage was set at 18,900 CZK.

From 2025, this system will be abolished and replaced by a guaranteed salary only in the public sector.

Guaranteed Pay (Effective 2025)

Guaranteed pay in the public sector will be divided into four groups based on qualifications and job requirements:

Group 1: Minimum wage (20,800 CZK)—e.g., unskilled support jobs.
Group 2: 1.2x the minimum wage (24,960 CZK)—e.g., administrative workers.
Group 3: 1.3x the minimum wage (27,040 CZK)—e.g., specialized professionals with higher education.

In-Kind Wage: Money Isn’t Everything!

Have you heard of in-kind wages? Don’t worry, this isn’t about diving into double meanings—the term is entirely real.

The benefits you receive at your workplace should be considered part of your compensation, such as meal vouchers, a company car, or even free office coffee. ☕

Benefits and Deductions: Where Does My Money Go? 🤔

This is not a popular part of the payslip, but it is important to understand and check it. First, a part of your salary will be deducted from the so-called mandatory contributions, i.e. taxes, health and social insurance. Then you may find yourself in a situation where deductions from your salary will be directly ordered by law, such as alimony or execution deductions. Finally, there are voluntary deductions, when you enter into a written agreement with your employer about these deductions, for example. These may be deductions for pension insurance, life insurance, union dues, etc.

Equal Pay: The Right to Fair Compensation

Equal pay for equal work is emphasized today, regardless of gender, age, or even your favorite sock color. 🚫 However, disparities still exist, which is why tools like pay audits and public statistics are being introduced.

For example, in the Czech Republic, women still earn almost 18% less than men for the same work.

Whether you earn a wage or a salary, it’s crucial to understand what’s behind it. Understanding your payslip is not only practical—it’s your right. And who knows? It might even help you negotiate better conditions. 💪