8 Dezember 2023 Monika Krzyszkowska-Dabrowska Employment and Incentives

HR In the Know 1/2023

On May 10 2023, the Directive (EU) 2023/970 of the European Parliament and of the Council 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 "Directive", "Equal Pay and Pay Transparency Directive") was adopted and is scheduled to be implemented by Member States by June 7 2026.

Its objectives are to eliminate the gender pay gap, increase its transparency and simultaneously increase employees' awareness of their rights related to access to information regarding the principles behind a given employer’s remuneration structure as well as shift the attitude of employers on the issue of pay transparency, ensuring that victims of discrimination can seek redress and exercise their right to equal pay.

For employers in particular, this necessitates the need to establish or revise remuneration structures, significantly lifts the veil of confidentiality, imposes numerous additional obligations, and increases the possibility for employees to pursue discrimination claims and widens the risk of other sanctions being imposed as well as heightens the risk of possible negative reputational consequences.

Thus, a real revolution is brewing when it comes to equal and transparent pay, and in particular with regard to the criteria adopted by employers to differentiate between pay levels. A number of guidelines in this regard are already included directly in the Directive itself, but translating them into practice by employers may prove to be a tedious exercise. Thus, it's a good idea to start your analyses, preparations and customised/individualised approach today.

Salary thresholds must be provided to candidates as a minimum

It will be necessary to set salary thresholds (starting salary) or salary ranges for the position to be offered and made available to job candidates. They should, as a rule, correspond to the salary structures referred to below.

Salary structures

Employers will be required to create and review pay scales or tables to ensure equal and transparent pay for people doing the same work or work of equal value – they should allow for a comparison of the value of different jobs/roles within a company. The principle of equal pay should be observed in respect of hourly wages, monthly wages or any other benefit, whether in cash or in kind, received directly or indirectly by employees. Supplementary or variable components include, for example, bonuses, overtime compensation, travel discounts, housing and food allowances, compensation for participation in training, payments in the event of dismissal, statutory sickness benefits, statutory compensation and occupational pensions. The salary structures must be construed in such a way so as to allow for an assessment if the employees are in a comparable situation regarding the value of their work on the basis of objective, gender neutral criteria agreed to with the employee representatives (if operating). 

This will involve a lot of work in the form of analyses, creating appropriate networks, structures, procedures and valuations of positions, including their implementation and evaluation. Will job salary scales built-in in the remuneration regulations be commonly applied?

Differentiation of the wage situation of employees: what are to be the criteria?

A pay structure will need to be put in place to ensure that there are no gender differences in the remuneration of workers performing equal work or work of equal value that are not justified by objective, gender-neutral criteria. The recitals of the Directive indicate the criteria that will help to assess whether a job is work of equal value, these being: (i) skills, (ii) effort, (iii) responsibility and (iv) working conditions. However, workers may be remunerated differently for the same work or work of equal value, as long as objective criteria apply, including, i.e. achievements and competence. The employer should weigh each of these four factors depending on the importance of these criteria for the specific workplace or position. It is possible and may be necessary to also include additional criteria if they are relevant and justified. Jobs should be measured and compared where the scope of duties is different but of the same value.

The criteria should also be public and communicated to employees

Importantly, employers will also have to make available to their employees the criteria used to determine salary levels and salary progression. 

Comparability of all elements of remuneration

When comparing employees' salaries, whether hourly or lump-sum, it will be necessary to take into account all supplementary or variable components as well as cash or in-kind benefits. 

Salary progression on specific terms

Salary progression refers to the process of an employee moving to a higher salary level. Criteria related to salary progression may include, but are not limited to, individual achievement, skill development, and length of service. In addition, employers will have to introduce rules for granting pay rises that are justified by objective and neutral considerations, regardless of gender.

The bigger picture

It is worth bearing in mind that equal pay is not always limited to one given employer. Employees may find themselves in a comparable situation if they do not work for the same employer, provided that the terms of pay are attributable to a single source establishing those working conditions. This may be the case where the relevant remuneration terms are governed by statutory provisions or remuneration agreements and apply to multiple employers, or where such terms are set centrally for more than one organisation or enterprise within a holding company or conglomerate. 

How to avoid any surprises?

The upcoming changes are not only a huge shift in the philosophy of managing the principles of employee remuneration, but are also a significant organizational undertaking. Now is the most appropriate time to:

  • begin works on reviewing the company's practices and issue spot the firm’s situation in view of the requirements of the Directive;
  • take stock of the applied rules, customs and/or recruitment policies awarding remuneration and its elements as well as other benefits and identifying problematic or risky areas;
  • begin work on remuneration structure/analysis of the applied remuneration structure from the perspective of the new requirements;
  • valuate  job positions;
  • set criteria for awarding remuneration and its elements as well as other benefits;
  • determine the list of necessary policies, procedures and start work on their drafts;
  • hold initial trainings for persons assigned to respective processes, and in particular for management-level employees and HR Managers;
  • run an illustrative assessment of gender pay gaps in order to assess risks and the firm’s situation;
  • assess the situation of women in terms of jobs/remuneration and employees benefiting from parental rights.

We will be happy to support you throughout this process.

Monika Krzyszkowska-Dąbrowska
Paweł Fołda