EU Pay Transparency Directive: Impact on Czech Employers

Directive (EU) 2023/970 of the European Parliament and of the Council on pay transparency represents a fundamental change in employee remuneration. The Czech Republic must transpose this directive into national law by June 7, 2026.

The Ministry of Labour and Social Affairs has prepared a draft amendment to the Labor Code implementing the directive's requirements. Key points: - Core provisions are set to take effect from January 1, 2027 - Pay gap reporting obligations and related enforcement powers commence from January 1, 2028 - First reports covering 2027 data will be due by April 30, 2028

- Disclose salary ranges in job advertisements or communicate them to candidates before the first interview - Not ask candidates about their previous salary - Base remuneration decisions exclusively on objective criteria related to the position This rule applies to all employers regardless of size.

- Their individual pay level - Average pay levels of employees performing the same work, broken down by gender - The employer must respond no later than two months from the request Important: Confidentiality clauses about salary in employment contracts will be declared invalid under Czech law.

Every employer must establish and document a remuneration system via internal regulation or collective agreement. The system must: - Classify all job positions into groups graded by work value - Use gender-neutral evaluation criteria - Criteria under the Czech draft: complexity, responsibility, difficulty, and working conditions

- Employers with 250+ employees – annual reporting (first in June 2027 for 2026 data) - Employers with 150–249 employees – reporting every 3 years - From 2031, the threshold lowers to 100 employees If reporting reveals a pay gap between men and women exceeding 5% that is not objectively justifiable, the employer must conduct a joint pay assessment.

One of the most significant changes is shifting the burden of proof to the employer. If an employee presents facts suggesting discrimination, the employer must prove that no discrimination occurred. Czech courts have already ruled that regional differences in living costs cannot justify pay differentials for equal work at the same employer.

- Fines from the Labor Inspection for violations of equal treatment obligations - Civil lawsuits by employees for back-payment of wage differences and compensation for non-material damage - Potential impact on public procurement – the directive requires tender participants to comply with equal pay rules - Reputational risks from disclosure of discriminatory pay practices

1. Conduct an internal pay audit – map pay differences in comparable positions 2. Formalize the remuneration system – create internal pay regulations with clear job classification 3. Update recruitment processes – prepare salary ranges for all positions, remove questions about previous salary 4. Remove confidentiality clauses – eliminate clauses prohibiting salary sharing from employment contracts 5. Train managers – teach them to justify pay based on objective criteria 6. Prepare data infrastructure – ensure the ability to generate gender pay gap reports