A view on the Czech HR business market
Some considerations from Oliver Schmitt, Managing Partner of Glasford International Czech Republic:
Surprisingly, during the financial crisis the unemployment rate in the Czech Republic did not rise as fast as originally feared. This is mainly because businesses had previously experienced a dramatic shortage of skilled workers. Mindful of this experience, they strived to retain their – painfully built – workforce pool. And in the future, young skilled workers will still continue to be in high demand on the Czech labour market.
It all started with the automotive industry. The sector was among the first last year, which started to hire staff again. Renewable energy is another sector which was seeking workers even during the crisis. In particular, solar energy was booming and was in need of real estate and electrical installation specialists. However, major investments in this area were accomplished by small teams, and so the impact on the labour market was rather limited.
Current salary development
At present, the average monthly income in the Czech Republic amounts to almost EUR 1,000. Nevertheless, significant differences exist between the regions. Particularly for Prague and its surroundings, the national average figures are of limited relevance. Here a university graduate earns around EUR 1,000 per month in the first working year. Accountants with foreign language skills make EUR 1,000 to 2,000 in Prague, while experienced key account managers receive a monthly salary of EUR 2,000 to 5,000.
Managers’ salaries have reached German levels in a number of areas, especially when taking into account the size of the Czech market and the economic size of the companies. A financial manager of a business with a turnover of EUR 30 million earns EUR 80,000 to 120,000 per year, while the managing director of a comparable company makes EUR 100,000 to 150,000. Company cars – including those for private use – are more common than in Germany.
Trade unions play a rather minor role in the Czech Republic, although they have experienced a bit of a revival as a result of the strict austerity measures of the Czech government. In June, they paralysed regional and national public transport throughout the country. Workers’ protection against dismissal in the Czech Republic is comparable to that in Germany. A business may fire an employee only after several letters of warning or as a result of organisational changes. In practice, five months salary is usually agreed as compensation for immediate termination by mutual agreement.
Two months salary is paid for the notice period of two months while another three months salary is paid as direct severance payment. Currently, the Czech parliament is working on a labour law amendment. Major changes include the extension of fixed-term employment contracts from a maximum of two years to three years and the optional extension of the probation period for managers from three months to up to six months.
The unlimited freedom of movement for workers, which came into force in Germany and Austria on 1 May, has had virtually no impact on the Czech labour market. In general, the mobility of the Czech workforce is low. The high percentage of working women makes the relocation of families even more difficult. And, for Czechs willing to leave the country, Germany does not rank first on their wish list. The main reasons are the German language, which is considered difficult to learn, and the country’s relatively high tax rate.
In spite of the continuing trend towards academic education, a lack of skilled workforce and managers is expected to prevail in the Czech Republic in the future. The situation is aggravated by the country’s demographic development, as the Czech Republic has one of the lowest birth rates in Europe. Therefore, young skilled workers with foreign language skills are in great demand. Given the trend towards academic education, the shortage of skilled workers in manufacturing will be even more dramatic than in the past. Unlike Germany, the country has no dual education system and vocational schools are often in poor shape. Therefore, businesses should be ready to implement training and continuing learning measures in the future.