Transparency of salaries. What does the EU directive change?

Directive (EU) 2023/970 of the EU and of the Council will significantly change the situation of many employers, not only because it introduces a number of new obligations, but also because it may create many problems with adapting the current remuneration rules to the new requirements and perhaps also with maintaining a stable workforce.

Equal pay – the real objective of the Directive

It is worth clarifying at the outset that the Directive is not about pay transparency (or at least this is not its purpose), but about equalizing the level of pay between men and women. The essence of the Directive is best expressed in its full title: 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. Therefore, in its abbreviated form, a more accurate name seems to be: the Equal Pay Directive.

The justification for adopting the Directive is the fact that, according to statistics for 2021, women in the European Union earned on average 12.7% less than men working in the same positions, which is known as a pay gap. Those disparities are even more pronounced when comparing the pension benefits being received by men and women.

Analyses of the content of the Directive emphasise above all the obligation to provide employees and job candidates the amount of salary or salary range. However, this will be only one of several obligations imposed on employers and it is the easiest obligation to fulfil. A much more complicated, but at the same time more important task will be to equalize the level of remuneration for women and men. The implementation of the Directive should introduce to the national legal system of such mechanisms that will ensure the transparency of remuneration systems and guarantee real equal pay for men and women.

It should be noted that there are already provisions in the Labour Code that apply to this issue. Those include the principle of equal treatment of employees (Article 11² of the Labour Code), the prohibition of discrimination in determining the terms and conditions of employment, including on the grounds of gender (Article 18^3a(1)-(4) of the Labour Code) and the right to equal remuneration for equal work or for work of equal value (Article 18^3c(1) of the Labour Code). The problem is that so far those provisions have not been treated as a real and enforceable obligation of an employer. Suffice it to say that the number of court cases (in district and regional courts) for unequal treatment in general, initiated by women that ended with a positive decision for them, amounts to several dozen per year.

What does the Directive change?

The implementation of the Directive is to involve the introduction of mechanisms into the Polish legal system that should guarantee the transparency of remuneration systems and real equality of pay for men and women. Those mechanisms are mainly appraisal systems and job grades that exclude pay discrimination on the basis of sex.

Right to information about remuneration

In line with the objectives of the Directive, workers should be given the right to be informed about remuneration criteria, which include information on the level of pay and average pay range broken down by gender in each category of worker. This information must be provided within a reasonable time, no later than two months after receipt of the employee’s request.

The right to information of job applicants will consist in the right to receive information from the potential employer about the initial salary (or pay range), which should be based on objective and non-discriminatory criteria. This information should be provided to the candidate in such a way and at such a time as to enable him or her to make an informed decision about employment with a given employer. This does not mean – as some believe – the obligation to provide information about salary in the recruitment advertisement. Such an obligation does not arise from the Directive and, unless it is introduced by the Polish law, it will be possible to provide information on salary before the meeting with the candidate. On the other hand, the Directive says directly that the employer may not ask the candidate about the salary at previous employer.

Employers will not be able to prohibit employees from disclosing their individual salaries if such disclosure is intended to implement the principle of equal pay. This means, among other things, a ban on introducing confidentiality clauses relating to the salary amount into employment contracts. Consequently, all such clauses now existing in the currently applicable employment contracts will become invalid as contrary to law (Article 58 §1 of the Civil Code).   

New obligations of employers – what is a pay gap?

According to the Directive, employers are to be obliged to provide the monitoring body (designated by the state) with reports on remuneration rules. According to the Directive, such a 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.

A pay gap occurs if the difference in pay levels between male and female employees is at least 5%.

New employee rights

Employees who feel aggrieved in terms of pay levels are to be provided with access to court to enforce their rights. An employee who has suffered damage due to a breach of the principle of equal treatment will be entitled to full compensation, including the recovery of unpaid remuneration and related bonuses, as well as reparation for non-material losses. Compensation and reparation cannot be limited in advance as to their amount. It is worth noting that employees’ claims may include losses for up to 3 years back, i.e. for the period in which those claims have not been not time-barred.

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 (e.g. by indicating differences in pay for the same positions), and it will be up to the employer to demonstrate that it applied fair criteria when differentiating remuneration and that there was no discrimination in this respect.

Criminal sanctions

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. Although the effectiveness of penalties and their deterrent effect may raise doubts, the mere addition of such provisions to the Polish law will increase the importance and gravity of the obligations under the Directive. 

How to prepare for the new regulations? Should I wait for the implementation of the Directive?

The answer to the second question must be unequivocally negative. The Directive should be transposed into the Polish legal system by 7 June 2026, but it would be a mistake to wait for a Polish act. Although the act will detail the provisions of the Directive, the essence of the obligations under the Directive will certainly not change. Therefore, employers should already start preparing for the entry into force of the new regulations and should verify the remuneration rules in terms of their compliance with the objectives of the Directive. This applies in particular to the examination of whether a given employer has a disproportion in the levels of remuneration of women and men, i.e. a pay gap, and possibly to what extent.

Therefore, it seems necessary to review the principles and structure of remuneration in order to determine whether the amount of remuneration (including its components) is substantively justified in each case and whether there is no unjustified differentiation between men and women in this respect. In some cases, it will be necessary to carry out or verify the valuation of positions, which will enable the determination of the correct salary scale based on the results of the valuation and current market rates.

This task will certainly be the most complicated and time-consuming, so it should be undertaken relatively immediately. Since its implementation will inevitably also involve additional costs, every employer must find and budget appropriate funds for this purpose.

It also seems necessary to review the internal regulations on remuneration: remuneration regulations, bonus regulations, rules for granting employment-related benefits. The result of this review should be to determine the extent to which these regulations need to be modified or supplemented and whether this will not imply the need to change the terms of employment contracts. 

Dates of the first pay reports

The activities referred to above should be first carried out by entities employing at least 150 employees, because they will be subject to pay reporting requirements in the first place. These entities will submit their first report in 2027 for 2026, which means that data for reporting purposes will need to be collected from the beginning of 2026. This also means that before 1 January 2026, it will be necessary to carry out all measures to sort out pay issues in such a way that it is possible to achieve the objectives of the Directive and eliminate or significantly reduce the risk of violation of the rules on equal pay for men and women and the risk of negative legal consequences, including reputational damage caused by such a violation.   

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