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Preparing for Pay Transparency: Directive 2023/970 and Its Implications for Employers

LAWPreparing for Pay Transparency: Directive 2023/970 and Its Implications for Employers

Directive 2023/970 will come into effect on June 7, 2026. Organizations should start preparing for its implementation now, especially those employing over 150 workers. These companies will face the most significant obligations regarding wage reporting.

The Pay Transparency Directive is often associated with the requirement to disclose salary levels or ranges to job candidates. However, this is just one of the obligations, and one of the easier ones to fulfill. A much more serious task will be reporting salary data and the pay gap to the designated authority (in Poland, implementing regulations have not yet been enacted). If the pay gap exceeds 5%, remedial actions must be taken.

Organizations with at least 150 employees should begin collecting the necessary data for reporting before the directive takes effect. Why? Companies with such a large workforce will need to submit their first report in 2027, covering the entire year of 2026. Subsequent reports must be submitted annually or every three years, depending on the organization’s size (annually for those with at least 250 employees, and every three years for those with 150-249 employees). In 2031 and every three years thereafter, the first report will be required from companies employing at least 100 people.

What data must be included in the pay report? The directive clearly specifies:

  • The percentage of female and male employees in each wage quartile;
  • The pay gap and median pay gap by gender;
  • The gender pay gap among employees broken down by job categories, hourly or monthly rates, and variable compensation components (bonuses, allowances, etc.);
  • The percentage of female and male employees receiving variable compensation components.

It is essential to remember that if the pay gap reported exceeds 5%—and this gap is not justified by objective, gender-neutral criteria—and the employer has not addressed this unjustified discrepancy within six months of submitting the report, an official remedial path will be triggered. This involves conducting a joint pay assessment with employee representatives. Additionally, affected employees will be able to claim compensation. The amount and conditions of this compensation will be specified by national regulations. However, the directive states (Article 16, point 2) that it must be “effective and dissuasive compensation or reparation for the loss and damage suffered, in a manner determined by Member States.”

This leaves about a year and a half to prepare for pay transparency and take appropriate actions now. Contrary to appearances, this is not much time. The first step might be conducting a pay audit in the company to see what data will appear in our “trial” report. A pay review should answer whether a pay gap exists in our organization and its extent. In the next stage, we can examine pay policies, job descriptions, and assigned duties to ensure that salaries in our organization are justified and based on regulations and clear requirements and tasks for each position.

Knowing the challenges we face, we can implement appropriate measures. If the pay gap in the organization exceeds 5%, we can prepare a plan to gradually equalize pay and allocate funds for this in the future budget. If our pay policies, job descriptions, and duties are not clear enough, we have time to make changes. In large organizations, analyzing records, designating responsible individuals for preparing amendments, and working on them will take considerable time, so it is worth planning the action schedule in advance.

The most discussed aspect of pay transparency has been the obligation to inform candidates of the initial salary or its range (brackets). The directive stipulates that this pay should be based on “objective, gender-neutral criteria relevant to the position.” This is also why we need to analyze job positions and pay policies. According to the directive, job advertisements and job titles must be gender-neutral, and the recruitment process must be conducted in a non-discriminatory manner. Asking candidates about their current or previous salaries will also be prohibited. However, it is worth noting that more and more companies are already disclosing starting salary ranges in job advertisements. This is not mandatory and will not be after the directive comes into effect—the candidate must be informed of the salary before the first interview, but not necessarily through the advertisement. Practical experience shows that candidates are more likely to apply to advertisements with salary brackets, and the recruitment process is faster and more efficient.

Anna Barbachowska, HR director at ADP Polska

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