The new EU Pay Transparency Directive (2023/970) represents one of the most significant changes in European Union labor law over the last decade. Although the deadlines for submitting the first gender pay gap reports do not start until 2027, the Labor Act and accompanying regulations are being aligned much earlier. All EU member states, including Croatia, must transpose this Directive into their national legislation by June 7, 2026. For this reason, its provisions already require thorough preparation and strategic planning from employers in the private sector. Below is a detailed breakdown of the exact reporting deadlines based on company size, alongside the key obligations employers must fulfill.

A Detailed Overview of Exact Obligations and Reporting Deadlines

1. Who Must Report and When?

The obligation to report on pay differences (known as Gender Pay Gap reporting) depends on the number of employees. The first reporting period will be based on data collected throughout 2026.

2. What Exactly Must Employers Disclose?

Employers exceeding the thresholds mentioned above will have to publish publicly (or report to the competent authorities) the following exact data:

• Gender Pay Gap: The mean and median pay gap between female and male employees across the entire organization.
• Variable Components: The gap in bonuses, allowances, and other benefits.
• Pay Quartiles: The proportion of female and male employees in four pay bands (from the lowest to the highest-paid group).
• Gaps by Categories: The pay gap among workers performing the same work or work of equal value, broken down by gender.

The Critical 5% Threshold: If the report reveals a pay gap exceeding 5% in any category of workers, and the employer cannot justify it by objective, gender-neutral factors, they must conduct a joint pay assessment in cooperation with workers’ representatives and take corrective measures within 6 months.

3. New Recruitment Obligations: What Real Sector Employers Need to Know

Although the deadlines for submitting the first gender pay gap reports begin in 2027, the Labor Act is being aligned much sooner. This means that starting from June 2026, general transparency rules will apply to all employers (even those with fewer than 100 employees), significantly shifting the recruitment process, employees’ internal rights, and the legal liability of employers:

1. Full Transparency in Recruitment

• Disclosure of Pay Range: The employer is obliged to state the starting salary or its clear range in the job advertisement, or mandatorily before the first interview.
• Ban on Salary History Questions: Employers are no longer allowed to ask candidates (either directly or indirectly) about their salary history at their previous jobs with former employers.
• Gender-Neutral Job Ads: Job descriptions, selection criteria, and job titles must be formulated in a completely neutral manner that does not discriminate based on gender.

2. Ban on Pay Secrecy and New Employee Rights

• Prohibition of Pay Secrecy: Employees have a legal right to discuss salaries with one another. All existing contractual clauses regarding salary secrecy become null and void.
• Right to Information on Pay Levels: All employees gain the right to request and receive written information regarding their individual pay level.
• Right to Gender-Based Averages: A worker can request data on average pay levels, broken down by gender, for categories of workers performing the same work or work of equal value.
• Clear Promotion Criteria: Employers must make easily accessible the objective and gender-neutral criteria used to determine pay progression and professional promotion.

3. Sanctions, Compensation, and the Shift in the Burden of Proof

• Shift in the Burden of Proof: If an employee initiates court proceedings regarding pay discrimination, it is the employer who must prove in court that no discrimination occurred (the burden of proof is no longer on the worker).
• Financial Penalties: Member states are required to prescribe effective, proportionate, and stringent financial penalties for employers who violate these rules.
• Right to Full Compensation: Workers who prove they were underpaid have the right to full retroactive recovery of back pay, corresponding bonuses, as well as benefits in kind.

What Should Employers Do Immediately?

1. Pay Audit: Check whether there are any unexplainable gaps exceeding 5% within identical job positions.
2. Job Classification: Define clear pay structures and objective criteria for bonuses and career progression.
3. Contract Adjustments: Remove “pay secrecy clauses” from employment contracts, as they are now legally void.

Checklist for Employers: Aligning with the EU Pay Transparency Directive

1. Internal Audit & Current State Analysis

• Identify Categories: Group job positions that perform the same work or work of equal value (based on criteria such as skills, effort, responsibility, and working conditions).
• Calculate the Gender Pay Gap: Compute the pay difference between men and women within each category (including bonuses and allowances).
• Check the 5% Threshold: If a gap larger than 5% exists that cannot be justified by objective factors (e.g., tenure, specific skills), prepare a corrective action plan.

2. Transparency in Recruitment (New Processes)

• Job Postings: Implement a mandatory process to include the starting salary or pay range in job ads or prior to the interview.
• Ban on Salary History: Update interview protocols—recruiters are strictly prohibited from asking candidates about their compensation with previous employers.
• Neutral Advertisements: Ensure that job descriptions and selection criteria are completely gender-neutral.

3. Employee Rights and Internal Acts

• Eliminate Secrecy: Revise employment contracts and internal handbooks. Clauses prohibiting employees from disclosing their salaries to others are now null and void.
• Right to Information: Establish a system to respond to employee requests regarding average pay levels for their job category (the response window is typically 2 months).
• Promotion Criteria: Document and make accessible clear, objective criteria used to determine raises or promotions.

4. Reporting and Administration

• Data Collection System: Adjust HR/accounting software so it can seamlessly generate reports on pay quartiles and median differences.
• Reporting Calendar: Set the date for the first report according to your company size (see the table above).
• Social Dialogue: Prepare to cooperate with unions or workers’ representatives when analyzing pay data.

Advice for Employers: The biggest risk is not just the financial penalty, but the shift in the burden of proof. If you do not have documented, objective reasons why one employee has a 10% higher salary than a colleague in the same position, the court will automatically presume discrimination.

Author: Admin