New EU Directive – salary transparency or more?

The EU Directive on pay transparency is a game-changer in the labour market. The new EU regulations not only introduce a number of obligations for employers, but also provoke many emotions and questions. What are the most important changes and how to implement them? What does pay transparency really mean?

Objectives of the Directive (ratio legis)

Remuneration is a very sensitive topic, and it is not surprising that the announcement of the implementation of Directive 2023/970, adopted a year ago by the European Parliament and the Council of the European Union, is arousing great interest. The announcement of its implementation has provoked numerous comments, which often confirm a misunderstanding of its basic objectives or even indicate a misinterpretation of the provisions of the Directive.

It is most often referred to as the Pay Transparency Directive, but this is not its essence. It can be easily seen when you read the full name (objective) of the Directive – to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms.

The descriptions of the Directive emphasise above all the obligation to provide employees and job candidates with the amount of pay or pay range. However, this will be only one of several obligations imposed on employers and it will be the easiest to fulfil. Much more complicated, but at the same time more important, will be the obligation to align the level of remuneration for men and women. The implementation of the Directive is therefore to involve the introduction of mechanisms into the national legal system that will ensure the transparency of remuneration systems and guarantee real equality of pay for men and women.

The need for the Directive is evidenced by the fact that, according to research, women in the European Union earn on average 12.7% less than men working in the same positions.

Information on pay as a personal interest of the employee and an element of personal data

It is clear that the Directive does not intend to disclose remuneration for the sake of disclosure and to satisfy the curiosity of employees. Anyway, most employees can easily satisfy this curiosity even now, because, as research shows, almost half of employees know how much people in similar positions earn. Confidentiality clauses concerning the amount of remuneration introduced into employment contracts by employers are not a major obstacle here. Enforcement of such clauses is very difficult in practice, and besides, their application may already be considered unacceptable today if, for example, they were to prevent employees from proving the fact that they are discriminated against in the area of pay.

This is confirmed by court rulings, which consider correct to disclose confidential salary data to other employees if the motive for such disclosure is to counteract the violation of the principle of equal treatment or the prohibition of pay discrimination (such a view was expressed by the Supreme Court in its decision of 15 July 2011 (case no. I PK 12/11); and in decision of 26 May 2011 (ref. II PK 304/10).

On the other hand, the view has been established in the court rulings that information on remuneration is an element of the sphere of a person’s private life and, as their personal interest, is subject to protection provided for in the provisions of the Civil Code (Articles 24 and 25). This view can be found in the Supreme Court’s resolution of 16 July 1993 (I PZP 28/93, OSNC 1994/1), in which it was stated that the employer’s disclosure of the amount of the employee’s remuneration without the employee’s consent may violate the employee’s personal rights.

On the other hand, according to the GDPR, salary data belongs to the employee’s personal data and cannot be shared without their explicit consent. Only in certain situations does the employer have a legal obligation to demonstrate the amount of remuneration and does not have to obtain the employee’s consent, e.g. when providing this information to the Social Insurance Institution or tax authorities.

So now we have a certain conflict of interest – between the right to privacy and the right to equal treatment in terms of remuneration. As will be noted below, the Directive in question introduces important additional guidelines in this respect to organize these issues.

What elements determine remuneration?

In general, it can be stated that the amount of an employee’s salary depends, on the one hand, on the employer’s capabilities and the remuneration policy applied by it, and on the other hand, on the negotiation skills of the employee or job candidate and the current situation on the labour market. In other words, the amount of remuneration largely determines whether we have an employer’s market or an employee’s market.

In the light of the labour law, the remuneration policy is shaped (or should be shaped) by the following elements:

• the obligation to provide the employee with fair remuneration for work that corresponds to the type of work performed and the qualifications required for its performance, as well as takes into account the quantity and quality of work performed (Articles 13 and 78 of the Labour Code);
• the right to equal remuneration for equal work or for work of equal value (Article 18^3c(1) of the Labour Code);
• the principle of equal treatment of employees (Article 11² of the Labour Code);
• minimum wage for work determined by the regulation of the Council of Ministers.

Remuneration is determined by considering the amounts and rules for granting rates of remuneration to employees for work of a specific type or position, as well as other components of remuneration, if they are provided for the performance of specific work. These arrangements may be included in collective bargaining agreements or in remuneration regulations.

What does the Directive change?

The implementation of the Directive is to involve the introduction of mechanisms into national legal systems that will guarantee  the transparency of remuneration systems and real equal pay for men and women. These mechanisms are primarily job evaluation and classification systems, which should exclude pay discrimination on the basis of sex.

In Poland, we already have provisions in the Labour Code prohibiting discrimination in general (Article 113) and prohibiting discrimination in determining employment conditions, including on the grounds of gender (Article 183a(1)-(4) of the Labour Code). Now, after the implementation of the Directive, these regulations will have to be supplemented.

Right to information about remuneration

As indicated above, the implementation of the Directive is most often associated with the transparency of remuneration. It is time to clarify what is at stake and to what extent the Directive addresses this issue. Transparency should be combined with the right to information.

In line with the objectives of the Directive, workers should be given the right to be informed about pay criteria, and these criteria must be objective and gender-neutral. This right also includes access to information on the pay level and average pay levels by gender in individual categories of employees. This information should be provided within a reasonable period of time, but no later than within two months from the date on which the employee made the request.

At the same time, employers will not be able to prohibit employees from disclosing their pay for the purpose of the enforcement of the principle of equal pay. This means, among other things, a ban on introducing confidentiality clauses relating to the pay into employment contracts. As a result, all existing clauses in the currently applicable employment contracts will become invalid as contrary to the law (Article 58 §1 of the Civil Code).   

Job applicants’ right to information consists in the right to receive information from a potential employer about the initial pay (or its range), which should be based on objective and non-discriminatory criteria. At the same time, such information should be provided to a candidate in a manner and at time such as to ensure an informed decision as to employment with a given employer. According to the Directive, the employer may not ask questions about the applicant’s pay history.

New obligations of employers – what is the pay gap?

According to the Directive, employers are to be obliged to provide the monitoring body (designated by the state) with reports on pay conditions. According to the Directive, the report should include: 

• quartile pay band (obtained through a statistical method that allows the actual average pay to be determined);
• the gender pay gap and the median gender pay gap;
• the gender pay gap by categories of workers broken down by ordinary basic wage or salary and variable components (bonuses, allowances, etc.);
• the proportion of female and male workers receiving variable components.

Impact of the pay gap

If the report reveals a gap in the pay levels of men and women in any category of workers of at least 5% and the employer is not able to reasonably justify it with objective and neutral criteria or compensate for this disparity within six months from the date of submission of the report, then the employer and the workers’ representatives will have to carry out a joint assessment of the pay levels. Appropriate remedies agreed by the Member State will then have to be taken to address the disparities revealed.

Workers who consider themselves wronged by a failure to apply the right pay level are to be provided with access to court proceedings in order to enforce their rights. On the other hand, any worker who has sustained damage as a result of an infringement of the equal treatment principle will have the right to full compensation (including the recovery of unpaid remuneration and related bonuses) or reparation for non-material losses. Compensation or reparation cannot be limited in advance as to their amount.

Importantly, in court proceedings initiated by the employee, the burden of proof will be shifted to employer, i.e. the employee will only be required to substantiate the infringement of the equal treatment principle, and it will be up to the employer to demonstrate that there was no discrimination as to the pay and that fair criteria for differentiation were applied. 

In addition, Member States are required to introduce appropriate criminal provisions containing “effective, proportionate and dissuasive” penalties for breaches of equal pay rules, including in particular penalties that take into account employers’ repeated infringements.

How to prepare for the new regulations?

The Directive should be transposed into the Polish legal system by 7 June 2026 and it may seem that the Directive is still a long way from being implemented. However, employers should already start preparing for the entry into force of its regulations and verify their pay rules in terms of their compliance with the objectives of the Directive. This applies in particular to determining whether there is a disparity in the levels of pay between men and women, and possibly to what extent.

The first and necessary action seems to be a salary review to determine whether there are significant disparities in salaries. The next step should be to analyse the pay rules in relation to positions and scopes of duties – whether these principles are adequately reflected in internal labour law regulations and whether the amount of remuneration is substantively justified in each case and whether there is no unjustified differentiation between men and women. In some cases, it will be necessary to carry out or verify the valuation of positions, which will enable obtaining the correct pay table based on the results of the valuation and current market rates.

In the first instance, such a review should be carried out by companies with at least 150 employees, as they will be the first to be subject to the pay reporting requirements. Companies with this level of employment will have to submit their first report in 2027 for the reporting period covering 2026. It is therefore recommended that these employers start collecting data for reporting purposes without waiting for the implementing legislation.

Subsequent reports will be submitted annually or every three years, depending on the number of employees; annually for 250 or more employees, and every three years for 150-249 employees. Employers with 100 or more employees will submit the first report in 2031 and then every three years.

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