Pay Transparency – What and How It Will Change in the Job Market

When the Public Opinion Research Center (CBOS) asked Poles in mid-2023 what they had most frequently discussed with family, friends, neighbors, or coworkers in recent weeks, the dominant answer was high inflation, cited by 74% of respondents. The second most common topic was the difficulty in accessing doctors and medical services. Following these were issues related to national security, such as the influx of immigrants and the war in Ukraine. Fifth on the list of frequently discussed topics was another financial concern. Over half of us (54%) have recently complained about low wages, low pensions, or simply insufficient funds to live on.

Based on the CBOS survey, it can be concluded that we are eager to discuss money in everyday conversations, though we mostly talk about general financial matters rather than our personal finances. We treat personal finances as a taboo subject. According to a report by Hays and Baker McKenzie, salaries are rarely discussed in Poland, especially not with coworkers. When asked, "Who knows how much you earn?" only 15% of respondents said "a colleague at work." Even fewer share this information with friends (10%). Only about a third (34%) discuss their salary with their siblings, and roughly half (56%) with their parents. Almost 20% of survey participants admitted they do not even inform their partner about their earnings, and 7% declared they do not share this information with anyone. 

Will these statistics change dramatically once the European directive on pay transparency comes into effect in Poland (by 2026 at the latest)? It seems doubtful, as the regulations developed in Brussels are not about publicly disclosing individual salaries. So is there really nothing to fear? What changes will the new regulations bring to the job market? Who will benefit the most, and who might lose out? How can companies prepare for implementing the European guidelines? And why do we even need them?

Transparency Means Equality

To understand the main intention behind Directive 2023/970, it’s essential to closely read the full title of the document adopted by the European Parliament last year: "Directive on strengthening the application of the principle of equal pay for men and women for the same work or work of equal value through pay transparency and enforcement mechanisms." The word "transparency" is key, but so is another important term – "equal." Equality understood as equal pay for men and women for the same work. The issue of pay differences between genders has been a subject of lively debate in every industry, including those with the highest earnings, such as sports and entertainment.

Recent examples highlight the disparity. The winner of the women’s Tour de France, Katarzyna Niewiadoma, received a prize of over 50,000 euros, while the men’s race winner, Tadej Pogačar, earned nearly ten times that amount. Though it’s important to note that men race more stages and kilometers, suggesting that both were doing the same work but with different demands. On the movie set of Mr. and Mrs. Smith, Angelina Jolie and Brad Pitt worked on equal terms, yet Jolie received half of Pitt’s pay. However, significant changes have occurred in Hollywood since then. Last year, thanks to the success of Barbie, Margot Robbie jumped to second place in the ranking of the highest-paid stars. Ten years ago, no women were in the top ten of such lists. Similar progress is visible in sports. Iga Świątek and Carlos Alcaraz, this year’s Roland Garros tennis champions, received equal prizes of 2.5 million euros each. This was the first time in the over century-long history of the Paris tournament that the prize money was equalized between the men’s and women’s competitions.

In today’s job market, reducing pay differences between men and women is progressing slowly but steadily, as evidenced by the shrinking gender pay gap, the difference in average gross hourly earnings between men and women. According to Eurostat, the average gap in Europe is just under 13%, with Poland far below this average, at just under 5%. Only Slovenia, Italy, Romania, and Luxembourg have lower gaps. On the opposite end are Lithuania and Latvia, where the gap is about 20%. Significant pay disparities (17-18%) also exist in Austria, Germany, and Hungary. These figures are considered too high by European parliamentarians. Directive 2023/970 aims to standardize pay issues across EU countries and, most importantly, equalize differences in the private sector. In Poland, the low pay gap is primarily due to the public sector, where pay differences are just over 2%, while in the private sector, the same indicator reaches double digits.

Transparent Wages – Fair Wages?

Will the new regulations act like a steamroller and flatten all pay inequalities? Yes, as long as these inequalities are solely based on gender. The directive’s creators do not dispute situations where pay differences are related to factors such as work experience, additional skills, or increased job engagement. The European directive is designed to eliminate pay discrimination based on gender.

The document mandates transparency of pay rates for specific positions (but not individual salaries) and open reporting and informing employees about pay levels. If reports reveal that the pay gap exceeds 5%, the company will have to face specific consequences and take corrective actions, and the employee will have the right to seek compensation, including recovering wages and associated bonuses and benefits.

The directive will primarily apply to large companies with over 250 employees, which will be required to publish pay information for specific positions annually. Smaller organizations will report every three years, while companies with fewer than 100 employees will be exempt from this obligation. According to the directive, every employee will also have the right to obtain information about average pay for their position, allowing them to check if pay equality is maintained and if any pay gap exceeds the legally allowed threshold. Moreover, companies will be required to remind employees of this right through their communication channels.

Who Will Benefit from the Changes?

It seems that women will benefit the most, but so will some men, as the pay gap can also work against them, and gender discrimination can go both ways. All employees could potentially benefit. The requirement for companies to disclose pay rates or ranges for specific positions means transparency in the criteria used by employers to establish pay structures across the organization. Employees will be able to see why they are paid what they are and what they need to do to earn more. Not all companies have clear and understandable pay policies. 

In a LiveCareer survey, 60% of respondents admitted they had never seen their company’s pay scale. According to the Monitor Pracy – 55th edition report, more than half of Polish employees do not understand their company’s pay system, finding it unclear and complicated. The same number of employees would like to see pay ranges for specific positions, including their own. Even greater support for change is evident in the Hays and Baker McKenzie survey, where nearly 80% of respondents said they see the benefits of actions towards greater pay transparency and widespread pay transparency policies within the company.

The European directive could also benefit future employees. The over 70-page document includes a provision requiring employers to inform about the initial level or range of pay for a given position. This means that companies will have to disclose pay ranges – either in the job posting or before the interview. Employers will also be prohibited from asking job candidates about their previous pay for similar positions. Moreover, job postings should include gender-neutral job titles. As a result, phrases like "hiring a woman" or "looking for a man" will no longer be used in job offers.

All these changes should streamline and simplify recruitment processes. Knowing the proposed pay range can save us time if we find the salary does not meet our expectations. It also helps us better position ourselves in the job market and negotiate financial terms with a company without fear of quoting too high a rate. In the LiveCareer survey, 89% of respondents said that pay ranges should be included in job postings, and a similar percentage (87%) believe that this requirement will positively impact the job market.

Over half of the employers surveyed by Hays and Baker McKenzie share this view. Sixty-five percent of leaders and managers believe that the European directive will simplify and speed up the recruitment process. These are not the only benefits that employers see in the new regulations. According to them, implementing the changes will provide an opportunity to better manage employees' financial expectations, reduce unjustified inequalities in the job market, and develop better pay practices. Overall, 67% of companies participating in the Hays and Baker McKenzie survey see the value in introducing pay transparency and salary ranges. 

Is There Anything to Fear?

Every change brings new opportunities and benefits, but also some concerns or risks. According to the report Pay – the biggest taboo in the Polish job market, 54% of employees believe that pay transparency could lead to conflicts with coworkers due to unjustified pay differences. Over 40% expressed concern that pay transparency could harm workplace atmosphere or even hinder efforts for a raise or promotion. Knowing that we earn less than the average salary in our team could also affect us negatively. For some, this awareness will spark greater motivation to work harder, but for others, the reaction may be the opposite – they may lose enthusiasm for their work, stop putting in effort, or start looking for other job opportunities.

This is precisely what employers fear. The obligation to include pay ranges in job postings will allow employees to quickly compare their earnings with those offered by competitors. Competitors could then use this information to create more attractive offers and attract the best specialists. While employees may benefit, their current employers may not. Employers' concerns largely mirror those of employees. In the face of new regulations, leaders and managers fear a deterioration in workplace atmosphere and internal conflicts. Another source of concern is the entire process of preparing the organization for the new requirements and changes. According to Hays and Baker McKenzie, only one in three Polish companies is ready to implement the provisions of Directive 2023/970.

Two Years – A Lot and a Little 

EU member states should implement these regulations by the second quarter of 2026. There is still time, but many challenges lie ahead for businesses, especially large ones, where Directive 2023/970 could turn the entire organizational structure upside down. How can companies properly prepare for the inevitable changes? The best way is to start with an audit to determine if the pay gap is a significant problem in the organization. Of course, this requires setting up a special team, preparing appropriate procedures, and a system to monitor average pay at different levels of the company. Naturally, all these actions involve costs, which will increase if it turns out that the pay differences between men and women exceed the allowable limits. These differences will have to be addressed before the European regulations take effect.

Another significant and highly responsible task will be preparing the company to publish pay information. This will require detailed job descriptions that clearly explain why some employees earn more and others less, even within the same department. Identifying internal career paths will also be crucial, showing employees what skills and competencies they need to develop to reach the salary level of their colleagues. Additionally, managers and HR departments will need to be trained on the new guidelines for job interviews and job postings and ensure appropriate communication strategies within the organization.

The Crucial Role of HR

In theory, companies with well-organized HR procedures and those skilled in change management should find it easier to handle these tasks. Besides leaders and managers, HR departments will play a key role in preparing organizations for changes in pay transparency. HR will primarily be responsible for thoroughly analyzing pay structures in the organization and identifying potential pay gaps between genders. This will require a detailed review of pay policies, job positions, and pay levels, as well as the methodologies used to set pay rates. 

HR will also be responsible for implementing systems to monitor and report pay differences, which may involve both process automation and training for teams performing these tasks. Equally important will be educational and communication efforts. HR must prepare employees and management for the changes, explaining the new regulations, the directive's goals, and its requirements. Building awareness among employees about the importance of pay equality and transparency will also be crucial. In many cases, HR will be responsible for preparing appropriate job descriptions and career paths.

HR will also play a key role in developing strategies to help companies adapt to the new requirements without losing employee motivation and trust. These strategies could include actions aimed at equalizing pay and developing policies that promote pay equality. HR will need to prepare the company for audits and inspections related to implementing the directive, ensuring compliance with the new regulations and transparency in pay processes. This will require close collaboration with legal departments to ensure all actions comply with the law.

Additionally, HR will need to monitor current employee sentiments. If the previously mentioned concerns about internal team conflicts materialize, HR will be responsible for defusing tensions and maintaining employee focus and motivation. However, the scale and frequency of problems will largely depend on the effectiveness of actions at the organizational level.

It won’t just be HR managers who will face a busy period. According to the Hays and Baker McKenzie report, in 77% of Polish companies, pay transparency does not exist at any organizational level. This statistic illustrates the magnitude of the changes and obligations that Polish businesses will need to address in the next two years. Along with them, we too will need to adapt. Perhaps we will finally learn to be more open in conversations about money, including with colleagues sitting at the next desk.