Pay transparency in practice. What changes await employers and employees?

What will result from the implementation of Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023? What mechanisms in relation to pay transparency of men and women will the new law introduce? What obligations will employers have to face? Those are the key questions in connection with the upcoming significant changes on pay.

EU Directive – a milestone in strengthening equal pay

It has been a year since the European Parliament and the Council of the European Union adopted Directive 2023/970 on strengthening the application of the principle of equal pay for equal work or work of equal value for men and women through pay transparency and enforcement mechanisms.

It may seem as nothing new, as the Polish labour law already contains rules on equal pay for equal work or for work of equal value (Article 18^3c (1) of the Labour Code), and the prohibition of discrimination in employment (Article 18^3a (1) of the Labour Code), the requirement of equal treatment of men and women and the prohibition of discrimination on the grounds of sex (Article 11³ of the Labour Code).

What is more, the provisions of the Directive contain definitions already known to the Polish Labour Code, such as: direct and indirect discrimination (Article 18^3a(3) and (4) of the Labour Code) or harassment and sexual harassment (Article 18^3a(5)(2) and (6) of the Labour Code). 

Therefore, it could be concluded that there is no need to implement the Directive into Polish legal system. However, such a need exists, because the key element of the Directive’s rather long title is the word “strengthening”,referring to the practical application of the principle of equal pay. And this is what the implementation of the Directive is supposed to be about; about the introduction of mechanisms that will guarantee transparency and real, not just declared, equal pay for men and women.

New mechanisms will guarantee equal pay for women and men

Those mechanisms are primarily job evaluation and classification systems, which should ensure that pay discrimination on the basis of sex is excluded.

Salary information

Job applicants should obtain information from the potential employer about the initial salary (or salary range), which is based on objective and non-discriminatory criteria. This information should be provided in such a way and at such a time as to enable the applicant to make an informed decision about employment. The employer must not ask the applicant about their salary at previous employer.

Transparent pay criteria

Employees have the right to be informed about pay criteria, which must be objective and gender-neutral. This right also includes access to information (provided in writing) on individual pay levels and average pay levels by gender in different categories of workers. This information is to be provided within a reasonable period of time, but no later than two months after receipt of the employee’s request.

No more salary non-disclosure obligation

At the same time, employers may not prevent employees from disclosing their individual salaries if this serves to strengthen the application of the principle of equal pay. This means, among other things, a ban on introducing salary non-disclosure clauses in employment contracts (which is quite a common practice). However, the information obtained in this way may not be used by employees who have acquired this knowledge for purposes other than those related to enforcement of their right to equal pay.

Employers will be subject to pay reporting

According to the Directive, employers will be obliged to provide the monitoring body (designated for this purpose by the Member State) with pay reporting, which, depending on the number of employees, should be submitted:

• annually (for employers with at least 250 employees), or
• every three years (for employers with 100 to 249 employees).

Employers with fewer than 100 employees should also be able – on a voluntary basis – to submit such reports.

If the above report reveals a disparity in the levels of pay of men and women in any category of employees of at least 5% and the employer is not able to reasonably justify it applying objective and neutral criteria or compensate for such disparity within six months from the date of submission of the report, the employer and employee representatives will have to carry out a joint assessment of the pay levels. Subsequently, appropriate measures agreed by the Member State should be taken to remedy the disparities. 

Employees will enforce their rights in court

Employees who consider themselves wronged by their pay level should have an access to court proceedings to enforce their rights. This otherwise fair principle, may be the most difficult to implement in Poland, given the workload of labour courts and duration of trials.

An employee who has suffered damage as a result of a failure to apply the principle of equal treatment should be entitled to a full compensation (covering, in particular, full recovery of back pay and related bonuses) or reparation for non-material damages. Member States should not fix a prior upper limit for such compensation or reparation.

Importantly, in court proceedings initiated by the employee, the principle of reversed burden of proof should apply, it means that the employee will only be required to establish facts from which it may be presumed that the principle of equal treatment has been violated, and it will be for the employer to prove that there has been no discrimination in relation to pay and that fair differentiation criteria were applied. 

An employee who has applied for compensation or reparation may also request that the employer be ordered to cease the infringement and take measures to ensure the principle of equal pay is adhered to. The Directive requires that the employer’s execution of this order be subject to an appropriate financial penalty.  

EU Pay Transparency Directive – time to implement the regulations

Notwithstanding the above, Member States are required to lay down appropriate criminal provisions containing “effective, proportionate and dissuasive” fines for breaches of equal pay rules, including specific penalties for repeated infringements.

The Directive should be transposed into the Polish legal system by 7 June 2026.

The Directive is usually and quite superficially associated with the introduction of pay transparency in Poland (which many people would probably welcome with joy), but, as the analysis of the Directive’s provisions shows, this is not exactly its purpose. In fact, the point is that the criterion for determining the pay should be substantive and economic considerations, and not criteria that are prohibited, including in particular those relating to gender.

Possible disclosure of individual salaries must serve this purpose and cannot be used only to satisfy the curiosity of employees.

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