Reducing Salary in the Czech Republic: Legal Limits, Minimum Wage and Risks

28.4.2026 | ARROWS law firm

A unilateral reduction of salary without the employee’s consent is not permitted. The legal framework in the Czech Republic is more precise and more complex than many employers assume. If you want to reduce salary, you must know the rules relating to an agreement, the current level of the minimum wage, which is regularly adjusted by a Government Regulation, the principle of equal pay, the legal effectiveness of the change, and the practical risks.

The photograph shows an expert consulting on a unilateral reduction of salary.

Article contents

Basic rule: it won’t work without an agreement
Minimum wage and the principle of equal pay
Practical risks and common mistakes
Special situation: wage compensation during incapacity for work

Quick summary

A wage agreed in an employment contract can only be reduced with the employee’s written consent, in the form of an amendment to the employment contract.
The reduced wage must not fall below the currently applicable minimum wage or breach the principle of equal pay for equal work.
Without a new written agreement, or without previously agreed and valid terms in the employment contract or collective agreement relating to variable components of pay, a wage reduction is not automatic.
An incorrectly implemented reduction may lead to court proceedings, an obligation to pay the wage difference including interest, fines from supervisory authorities, and even a justified termination of employment by the employee.

Basic rule: it won’t work without an agreement

The Labour Code (Act No. 262/2006 Coll.), as amended, clearly provides that wages are one of the essential elements of an employment contract (Section 34(1)(a)). In principle, any change is governed by the same rules as a change to any other existing contractual arrangement.

If you want to reduce an employee’s wage, it is always necessary to obtain their written consent to the new amount. This consent is most commonly implemented by an amendment to the employment contract. When preparing the amendment and setting up the internal process, you can rely on our specialisation in employment law under Czech legislation. Without an agreement with the employee, the agreed wage cannot be reduced unilaterally.

Common situations where employers mistakenly believe they can reduce wages without formalities:

A significant drop in the company’s revenues (economic reasons alone do not entitle an employer to unilaterally reduce an agreed wage).
A change of position or a partial transformation of the role (you still need an agreement to amend the employment contract, including pay).
Termination of a particular project or a narrowing of activities (this is also not sufficient to unilaterally reduce wages).
The employee is on long-term sick leave (the rules for wage compensation are specific—see below—but they do not concern reducing the agreed wage for work performed).

If you want to be on the safe side and understand what lawful options exist and how to proceed in these situations, the attorneys from ARROWS, a Prague-based law firm, will be happy to explain.

When wages or their components change based on previously agreed terms or a legal regulation

In practice, there are situations where an employee’s income changes without the need to negotiate a brand-new ad hoc amendment to the employment contract. These are cases where such a change is anticipated in the employment contract (for variable components of pay), a collective agreement, or directly in legislation.

Changes in the amount of variable components of pay under the employment contract

If the employment contract (or an internal policy referenced by the contract) clearly and understandably sets out the conditions for payment and the amount of variable components of pay—such as premiums, rewards, or bonuses—their amount may change without new employee consent, provided the specified conditions are met. The key is that the conditions for earning and paying these pay components are objective, measurable, and known to the employee in advance. This also relates to practice in flexible working arrangements—see our summary on recording working time when working from home.

Only variable components of pay can be changed in this way. Fixed (basic) pay is agreed and cannot be reduced without an agreement. A contractual provision that would allow the employer to unilaterally reduce fixed pay as a sanction or for another reason without an agreement would, with a high degree of probability, be invalid due to conflict with the Labour Code.

Changes based on a collective agreement

If you are also dealing with how to properly reflect rules for premiums or bonuses in your documentation, legal support in the area of contracts and negotiations may also help.

If a collective agreement has been concluded in your company and it contains rules concerning variable components of pay (e.g., conditions for paying premiums, bonuses upon achieving certain targets, or conversely their reduction if the specified criteria are not met), you can rely on it. A collective agreement carries strong legal weight; however, it must comply with the Labour Code and meet the formal requirements for conclusion and publication. It cannot, however, create an entitlement to unilaterally reduce the agreed basic wage.

Changes based on legislation

The Labour Code itself regulates certain situations in which the amount paid to an employee changes, or where wages or part of them are not paid. These situations mainly concern wage compensation or deductions from wages, not a reduction of the agreed wage for work performed:

Obstacles to work on the employer’s side give rise to an entitlement to wage compensation. In the event of obstacles to work on the employer’s side (e.g., downtime or other obstacles), the employee is entitled to wage compensation, typically in the amount of 80% (downtime) or 100% (other obstacles) of average earnings, unless the parties agree otherwise or special regulations provide a different procedure.

During obstacles to work on the employee’s side, wage compensation or sickness insurance benefits are primarily paid. Specifically, for the first 14 days of temporary incapacity for work (sickness), the employee is entitled to wage compensation in the amount of 60% of the reduced average earnings (Section 192(1) and (2) of the Labour Code). For agreements (DPP), it may also be crucial to set thresholds and contributions correctly—we discuss this in more detail in the article Agreements to perform work in 2026: How to set thresholds correctly, avoid unexpected tax contributions and sanctions after Labour Code changes.

Deductions from wages: The Labour Code regulates the possibilities for deductions from wages, only in cases defined by law (e.g., enforcement proceedings, maintenance, compensation for damage caused to the employer, wage overpayments) and within statutory limits (the so-called non-seizable amount and the level of thirds). However, these deductions do not constitute a reduction of the agreed wage, but rather a deduction after calculation.

It is precisely in these legal details that mistakes tend to occur. When the attorneys at ARROWS, a Prague-based law firm, handle cases where an employer has incorrectly applied legal regulations, it is often due to a lack of knowledge of these “silent” rules and a confusion of concepts.

Minimum wage and the principle of equal pay

One of the most common mistakes: by reducing wages, the employer falls below the minimum wage. The minimum wage in the Czech Republic is regularly adjusted by a Government Decree. As of 2026, a further increase is expected, and its current amount will be set by the relevant Government Decree. It is always necessary to follow the effective wording of that decree.

The minimum wage applies to all employees regardless of their activity or job position. If you therefore reduce an employee’s wage so that their income for standard working hours falls below the level of the applicable minimum wage, this constitutes a breach of the employee’s legal entitlement. Such a reduction is invalid.

Mgr. Jakub Oliva, LL.M., MSc.

associate, partner

oliva@arws.cz

JUDr. Barbora Kořenářová

associate

korenarova@arws.cz

The second level of protection is the principle of equal pay for equal work (Section 110 of the Labour Code). This principle provides that all employees of an employer are entitled to the same wage for the same work or work of equal value.

If you have several people in the company in the same or comparable position and you reduce the wage of one of them without an objective reason while the others remain at the normal level, you risk a discrimination claim. Practical example: Employee A and Employee B do the same work. Employee A had their wage reduced by 10% due to “a decrease in the company’s revenues”, but Employee B keeps the original wage. Employee A may turn to the court claiming that this is discriminatory conduct.

If the court finds that the reason for differentiation is not objective and legitimate (e.g., different qualifications, experience, performance), the employer will have to pay the adjustment (the wage difference) and may also be required to pay compensation for non-pecuniary harm.

The attorneys at ARROWS can anticipate such situations and set up the process so that all decisions on wage changes are defensible both in practice and legally.

Practical risks and common mistakes

If you reduce wages without an agreement, the employee may turn to the court claiming that you have breached their employment contract. The court must then decide whether the change had a legal basis. If not, the court will usually order you to repay the wage difference (in full for the period during which the reduction was effective).

It may also add default interest on the outstanding amount.
In some cases, compensation for non-pecuniary harm is also decided.

The average length of a wage dispute in court ranges from 1–2 years, but it may take longer. This means the matter may still be ongoing even after the employee leaves.

Immediate termination of employment by the employee

An employee has the right to terminate employment with immediate effect (Section 56(1)(b) of the Labour Code) if the employer “has not paid the wage or salary or wage or salary compensation, or any part thereof, within 15 days after the due date”. A unilateral, unauthorised reduction of the agreed wage by the employer may be classified as non-payment of part of it.

The employee may then claim severance pay (in an amount of at least three times the average earnings if the employment lasted more than 2 years).

Compensation for lost earnings.
Potentially also compensation for non-pecuniary harm.

If the employee leaves stating that you are at fault and later claims severance pay and other entitlements, you may face further legal proceedings.

Impacts on tax and social insurance

Reducing wages also changes the basis for calculating income tax and social security and health insurance contributions. If you implement the reduction retroactively or without proper legal arrangements, it may later be found that you calculated the employee’s tax or contributions incorrectly. This then leads to corrected payroll records, refunds or additional payments, and penalties may also arise from the tax authorities or the Czech Social Security Administration.

How to proceed correctly if you want to reduce wages

Step 1: determine whether you have a legal basis

Review the employee’s employment contract and related internal regulations (e.g., payroll rules). Find out whether there are provisions concerning variable components of remuneration whose amount may change based on predefined and objective criteria. To reduce the basic (fixed) salary, an agreement with the employee is always required.

Step 2: prepare written documentation

It is never a bad idea to have the justification for the proposed wage reduction in writing (or in an email). This does not mean the employee must agree simply because you present economic reasons—but it carries weight in any later dispute. The employer should be able to prove that the reduction was part of addressing a legitimate problem and was made on the basis of an agreement.

Step 3: communicate with the employee

Ideally in person, or at least by phone. Present the proposal for the change. Hear their arguments. In many cases, the matter can be resolved without conflict—for example, by agreeing on a temporary reduction or a gradual decrease, or by agreeing on another way of addressing the situation.

Step 4: agree a written amendment

Once the employee agrees to a reduction of the fixed salary or an adjustment of variable components of remuneration outside the scope of the original rules, record it in writing. An amendment to the employment contract must include:

You must state the previous salary amount (or the original rules for variable components).

The new salary amount (or new rules for variable components).
It must also include the effective date of the change.
Signatures of both parties.

Keep the amendment carefully in the employee’s personnel file.

Step 5: handle the technical side

Recalculate payroll records, the income tax base, and social security and health insurance contributions. Make sure the new wage is not below the current minimum wage and that it does not breach the principle of equal pay.

If you want to be sure that all these steps are carried out safely and without legal risk, the attorneys at ARROWS will be happy to assist you with preparing amendments, reviewing employment contracts, and providing legal opinions on individual situations.

Special situation: wage compensation during temporary incapacity for work

An employee who is temporarily unfit for work (on sick leave) is entitled to sickness benefits from the Czech Social Security Administration from the 15th day of incapacity for work. For the first 14 calendar days of incapacity for work, they are entitled to wage compensation from the employer. The Labour Code states that the employer must provide wage compensation of at least 60% of the reduced average earnings (Section 192(1) and (2) of the Labour Code).

It is not possible to “automatically” reduce an employee’s agreed salary during a period of temporary incapacity for work without an agreement. This concerns only remuneration for work performed. Wage compensation is different and is governed by specific rules. The minimum entitlement to wage compensation of 60% always applies. Anything above this statutory minimum is governed by the employment contract or a collective agreement, provided they contain specific and valid arrangements.

Another specific case: An employee is taking annual leave and you want to reduce their agreed salary during that period. Beware—this is exactly where mistakes are most common. Annual leave is governed by specific rules; the employee is entitled to wage compensation in the amount of their average earnings. A reduction of salary for the period during which annual leave was taken would be possible only on the basis of an agreement that became effective before the leave was taken. Here too, a formal written agreement is recommended.

Risks and sanctions	How ARROWS helps (office@arws.cz)
Unilateral reduction of agreed salary without an agreement – the employee turns to the court, seeks repayment of the difference and default interest, which can take months to years.	We will ensure a legally safe process: we will prepare an amendment, conduct a consultation with the employee, and document all steps so that the change is legally watertight under Czech law.
Reduction below the minimum wage – breach of the employee’s legal entitlement, risk of fines from the Labour Inspectorate (up to CZK 2,000,000) and subsequent inspections by public authorities.	We will set the reduction so that the resulting salary always remains at the level of the current minimum wage and complies with legal limits under Czech legislation.
Breach of the principle of equal pay – discriminatory treatment of an employee who performs the same work as colleagues; risk of a discrimination claim and compensation for non-pecuniary harm.	We will review the wage structure in your company, identify potential risks, and propose measures to prevent discrimination so that all decisions are objectively justifiable.
Incorrectly calculated tax and social security contributions – recalculations, payment of outstanding amounts, penalties and fines from the tax authority and the social security administration.	We coordinate with your payroll accountant or external advisor and ensure that all tax and insurance contributions are correctly recalculated and properly documented.
Immediate termination of employment by the employee with entitlement to severance pay – loss of the employee and a legal dispute over the amount of severance pay and compensation.	We will help you understand the legal implications of each step and set up communication with the employee to minimise the risk of conflict and court proceedings.

Final summary

In practice, reducing an employee’s salary may seem like a simple gesture—an email with the new amount or a verbal promise. The reality is far more complicated. The Labour Code, the principle of equal pay, protection of the minimum wage, tax and insurance rules, and in particular the strong legal protection of employees place all situations within a stricter framework than many managers think.

Mistakes in this process are costly: they lead to legal disputes that last months or years, an obligation to pay wage differences including interest, fines from state supervisory authorities, and they can damage your reputation among other employees and potential candidates. One mistake can be resolved—with difficulty—by the attorneys at ARROWS, a Prague-based law firm, but it is easier to prevent it.

If you are considering reducing the salary of any employee, it is safer and more efficient in the long term to discuss the procedure with the attorneys at ARROWS, a Prague-based law firm. They can help you prepare amendments, provide a legal opinion on your situation, review employment contracts, and manage communication with the employee. No risk, no surprises, no courts. Contact them at office@arws.cz.

FAQ: Most common questions about the rules for reducing salary

1. Can I reduce salary if the company’s financial situation worsens?
Only with the employee’s written consent in the form of an amendment to the employment contract. The company’s economic problems in themselves are not a legal reason for a unilateral reduction of agreed salary under Czech law. You must discuss the situation with the employee and agree on new terms. If you do not want to risk court proceedings, contact the attorneys at ARROWS, a Prague-based law firm—they will help you develop a strategy that is transparent for both parties and legally sustainable.

2. What happens if the employee does not agree to the reduction, but I enforce it unilaterally?
The employee may turn to the court and seek repayment of the salary difference for the entire period during which the improper reduction lasted, including default interest. In addition, you may lose a good employee if, as a result, they lawfully terminate employment with immediate effect and claim severance pay and other entitlements. The risks are not only legal, but also HR-related and reputational.

3. Is it permitted to reduce salary as a sanction for breach of work discipline?
No, agreed salary cannot be reduced unilaterally as a sanction for breach of work discipline. The Labour Code does not recognise an institute of “punishing” an employee by reducing salary. However, if the employment contract or a collective agreement (or an internal regulation) clearly and understandably sets out rules for paying and reducing variable components of salary (e.g., premiums, bonuses) depending on the performance of work tasks and compliance with work discipline, then those components may be adjusted. Nevertheless, even here such adjustments must be proportionate and in line with pre-defined criteria. Deductions from salary are possible only in cases defined by law, most commonly for compensation of damage or enforcement proceedings, and only up to a certain amount (e.g., up to the limit set by the Labour Code for enforcement of decisions).

4. Can I reduce salary when an employee moves from full-time to part-time?
Yes, but this is a change to the employment contract that requires a written agreement of both parties. A reduction in working hours usually also means a proportional reduction in salary. Here too, the process must be formal: a written amendment, a check that the new salary does not fall below the current minimum wage recalculated for part-time work, and compliance with the principle of equal pay. If you proceed without proper documentation, you risk court proceedings.

5. What are the sanctions if it is found that I reduced salary below the minimum wage without an agreement?
The Labour Inspectorate may impose a fine on the employer of up to CZK 2,000,000 for breach of the obligation to ensure wages or salary at least at the level of the minimum wage or guaranteed wage (Sec. 28(1)(c) in conjunction with Sec. 10(a)(1) of the Labour Inspection Act). In addition, the employee is entitled to repayment of the difference, and the court may order compensation for damage or non-pecuniary harm. Last but not least, it may lead to negative media coverage and loss of reputation.

6. We want to reduce an employee’s pay during sick leave – is it allowed?
The agreed wage for work performed cannot be reduced solely due to sick leave. During sick leave, the employee primarily receives wage compensation from the employer for the first 14 days (amounting to 60% of the reduced average earnings) and subsequently sickness benefits from the state. If you want to change the agreed wage level for the period after the employee returns from sick leave, an agreement with the employee is required, just as in any other case. An agreement to reduce pay can of course also be concluded while the employee is on sick leave, but it must relate to the period when the employee will already be working.

Notice: The information contained in this article is of a general informational nature only and is intended to provide basic guidance on the issue under the legal status as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS, a law firm in Prague, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client security we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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