Equal pay and the gender pay gap

What the EU Pay Transparency Directive Brings

The key objective of the directive is to eliminate the gender pay gap, which in the Czech Republic reaches up to 18 percent. The new rules introduce an obligation to disclose the salary range in job advertisements, a ban on asking applicants about their previous salary, and the right for employees to request information on average wages by gender in their category. If an analysis reveals an unjustified difference of 5% or more between men and women, the employer must rectify the situation within six months or conduct a joint pay assessment with employee representatives.

Reporting and Inspections: What Really Awaits You

From 2027, companies with 250 or more employees will be required to report annually on the pay gap between women and men. Smaller companies with 150 to 249 employees will report every three years, and firms with 100 to 149 employees will start reporting from 2031. These reports must include the average and median pay gaps, the proportion of women and men receiving bonuses, and the distribution of employees by gender in each pay quartile.

The reports will be submitted to the relevant national authority and must be made publicly accessible, for example, on the company's website. Companies that fail to comply with this obligation may face fines of up to CZK 400,000 for breaching the ban on pay secrecy as early as June 2025. At the European level, sanctions of 2 to 4% of annual turnover are proposed for repeated violations.

Joint Pay Assessment as a Corrective Measure

If an analysis reveals an unjustified difference of 5% or more, the company must, in cooperation with employee representatives, conduct a thorough joint pay assessment. This process requires a detailed analysis of job categories, an evaluation of the remuneration system, identification of the causes of the differences, and a proposal of specific measures to eliminate the inequalities.

The employer must rectify the situation within six months; otherwise, they face further sanctions and possible public scrutiny from the labour inspectorate or equal treatment bodies. The results of the joint assessment must be shared with employees, their representatives, and supervisory authorities. This process cannot be successfully completed without the active cooperation of employee representatives.

Risks, Sanctions, and Reputational Impacts

Media Coverage and the Risk of Reputational Damage

Cases of unequal pay can be very quickly politicized and publicized. News servers and media outlets devote their attention to almost 42% of pay discrimination cases. Companies with greater employee diversity often face more media scrutiny because their cases are considered more newsworthy. Negative news coverage of unequal pay has a direct negative impact on stock value and investor perception of the company.

Examples from practice show that large organizations like the BBC or Goldman Sachs have faced extensive media coverage of their unequal pay cases, which damaged their brand and led to costly legal disputes. In the case of Goldman Sachs, the settlement reached $215 million. The BBC had to publicly face accusations of systematic discrimination against women and underwent several extensive equal pay audits.

The ARROWS law firm has many years of experience in handling crisis communication and reputation protection in connection with labour law disputes. Our lawyers will prepare a communication strategy for dealing with the media, supervisory authorities, and the public to minimize reputational damage to your company. For an immediate solution to your situation, write to us at consultation@arws.cz.

Transparency in Recruitment Processes and Other Obligations

From June 2026, employers will be required to state the initial salary or salary range in job advertisements. This information must be provided before salary negotiations begin. Furthermore, employers will be prohibited from asking applicants about their previous salary, which is intended to prevent the carry-over of inequalities from past employment relationships.

This requirement means that HR departments and recruitment processes will need to be redesigned. Companies will need to have clearly defined pay structures based on gender-neutral criteria, such as education, skills, and level of responsibility. The ARROWS law firm will help you prepare pay policies and review recruitment processes to comply with the new requirements. Contact us at consultation@arws.cz.

Employees' Right to Information on Remuneration

Employees will have the right to request information about their individual pay level and the average pay levels for their category, broken down by gender. The employer must provide this information within a reasonable period, in some countries up to 14 days. Failure to comply with this obligation may result in the burden of proof in a potential discrimination dispute shifting to the employer.

These rules require companies to have carefully documented remuneration systems and clear justifications for any differences. The ARROWS law firm will prepare your internal regulations, training for managers, and documentation to ensure you are ready to respond to employee requests and defend your remuneration system. For a legal consultation, contact consultation@arws.cz.

How to Evaluate Work of Equal Value and Avoid Disputes

Under the Czech Labour Code, Czech law already recognizes the principle of equal pay for equal work or work of equal value. Work of equal value is defined by its complexity, responsibility, effort, and working conditions, as well as performance and results achieved. However, the EU directive emphasizes gender-neutral job evaluation systems that consider skills, effort, responsibility, and working conditions.

A problem arises when typically "female" jobs are systematically undervalued because certain skills like communication or empathy are considered natural traits rather than professional competencies. The ARROWS law firm can help you create an evaluation system that prevents these hidden forms of discrimination and complies with international standards. Contact us at consultation@arws.cz.

Analytical Job Evaluation as a Defence

To successfully defend against equal pay claims, it is essential to have an analytical job evaluation system in place that assesses individual positions according to clearly defined factors. This system must be transparent, applied consistently, and free of gender bias.

The evaluation should include factors such as knowledge, responsibility, communication skills, physical and emotional demands, initiative, and decision-making autonomy. The lawyers at ARROWS will audit your existing evaluation system and propose adjustments to ensure compliance with the new requirements and minimize the risk of disputes. For a legal consultation, write to us at consultation@arws.cz.

Why It Is Important to Prepare in a Timely and Thorough Manner

Although the new rules may seem straightforward at first glance, in practice they hide a number of procedural details, exceptions, and connections to other regulations. For example, determining what exactly constitutes "work of equal value" or what factors can objectively justify differences in pay requires expert knowledge of the case law of the European Court of Justice and national practice.

Companies that rely on standard HR procedures without a legal basis risk being unable to defend their decisions during an inspection or dispute. The burden of proof lies with the employer if an employee demonstrates that they are not paid the same as a comparable employee of the opposite sex. This means the employer must provide evidence that the pay difference is justified by objective, gender-neutral factors.

The ARROWS law firm deals with this agenda daily and can significantly reduce the time needed to ensure compliance and minimize the risk of errors. Our practice includes working with more than 150 joint-stock companies and 250 limited liability companies, which gives us a deep understanding of the real-life situations that can arise. For an immediate solution to your situation, write to us at consultation@arws.cz.

The Importance of Professional, Insured Assistance

ARROWS is insured for damages up to CZK 500,000,000, which provides clients with security and assurance that in the event of any error on our part, full compensation for damages is guaranteed. We also regularly partner with in-house counsel to handle special matters, such as implementing new legislative requirements or conducting complex audits.

If you do not want to risk mistakes, high fines, or reputational damage, the safest option is to entrust the entire matter to the professionals at ARROWS. We provide comprehensive services that include preparing documentation, risk analysis, employee training, representation during inspections, and dispute resolution. Simply contact us at consultation@arws.cz.

Audits and Corrective Measures: How to Conduct Them Correctly

A gender pay gap audit is a systematic and data-driven assessment of employee remuneration aimed at identifying inequalities between women and men. The audit involves collecting data on wages, positions, length of service, education, and other relevant factors, followed by a statistical analysis that quantifies the pay gap.

An important part of the audit is an in-depth analysis of the causes of the identified differences. The lawyers at ARROWS use a modified analysis that takes into account objective factors affecting remuneration (seniority, performance, job complexity) to identify what portion of the gap is explainable by legitimate factors and what portion may signal discrimination.

How to Conduct a Joint Pay Audit in Cooperation with Employee Representatives

If the audit reveals an unjustified gap exceeding 5%, the employer must conduct a joint pay assessment in cooperation with employee representatives. This process includes:

• A detailed analysis of employee categories (broken down by position, department, seniority level)

• An assessment of the job evaluation and classification system for gender neutrality

• Identification of the causes of pay gaps and evaluation of whether they are justified or discriminatory

• A proposal of corrective measures and a timeline for their implementation

Employee representatives must be elected specifically for this purpose in accordance with national legislation. If there are no representatives in the company yet, they must be elected for the purpose of the joint assessment. ARROWS will help you manage the entire process organizationally and legally, including communication with employee representatives and preparation of an action plan. Contact us at consultation@arws.cz.

Preparing for Inspections by the Labour Inspectorate and Supervisory Authorities

The Czech Labour Inspectorate has broad powers to check compliance with the Labour Code, including the principle of equal pay. Following the implementation of the Pay Transparency Directive, inspections will focus on compliance with reporting obligations, the transparency of pay structures, and the correctness of conducted audits.

The inspectorate can request access to pay data, internal regulations, employment contracts, and other documents. If a violation is found, the inspectorate can impose fines and order corrective measures. Repeated violations can lead to higher sanctions and public media coverage.

The ARROWS law firm has extensive experience representing clients during inspections by the labour inspectorate. We will prepare you for an inspection, ensure all necessary documents are available, and, if necessary, represent you in communications with the inspectorate. For an immediate solution to your situation, write to us at consultation@arws.cz.

Documentation and Record-Keeping as a Defence

The key to a successful defence during an inspection is thorough documentation of all pay decisions, promotion criteria, and pay progression. The employer must be able to prove that its remuneration practices use gender-neutral criteria and are based on market benchmarks.

Records should be kept for at least four years so they can be presented during audits or in the event of legal disputes. This includes documentation of individual pay negotiations, performance reviews, bonus allocations, and promotion decisions.

ARROWS will help you set up a record-keeping system that complies with the requirements of the directive and Czech legislation. We will prepare document templates, internal regulations, and provide training for the HR department. Contact us at consultation@arws.cz.

International Aspects and the ARROWS International Network

If your company operates abroad or has foreign owners or employees, you may face additional challenges in ensuring equal pay across jurisdictions. Different EU countries are implementing the transparency directive differently, with varying deadlines, fines, and requirements.

The ARROWS law firm has built the ARROWS International network for over ten years and, as a result, handles cases with an international element on a daily basis. Our network includes trusted partner firms in more than 70 countries, allowing us to coordinate complex pan-European audits, harmonize pay policies across different countries, and ensure compliance throughout the group.

For clients, this means having a single point of contact in Prague who coordinates legal matters worldwide. This approach significantly reduces costs and increases efficiency. For an immediate solution to your international situation, write to us at consultation@arws.cz.

Connecting with Investment and Business Opportunities

ARROWS can connect clients with each other if they have interesting investment or business opportunities. We are happy to listen to interesting entrepreneurial or business ideas, and if a client is looking for financing or a business partner, we will help them with contacts in our network. This added value is part of our long-term partnership with more than 2,000 clients, including over 150 joint-stock companies and 250 limited liability companies.

Conclusion: Let the Experienced Lawyers at ARROWS Help You

The new rules on equal pay and pay transparency bring fundamental changes that will affect virtually all medium and large companies. Whether it's the obligation to report pay gaps, disclose salary ranges in job advertisements, conduct joint pay audits, or face possible inspections from the labour inspectorate, each of these steps requires expert preparation and legal support.

The ARROWS law firm has many years of experience providing legal services to clients in the areas of labour law and compliance. We are partners to more than 150 joint-stock companies, 250 limited liability companies, and 50 municipalities and regions. We pride ourselves on speed and high quality. Thanks to the ARROWS International network, we handle cases with an international element in more than 70 countries on a daily basis.

ARROWS is insured for damages up to CZK 500,000,000, which means maximum security for our clients. We regularly partner with in-house counsel to handle special matters because we combine deep expertise with a modern approach and technological infrastructure.

If you do not want to risk mistakes, high fines, or reputational damage, entrust the entire issue of equal pay and the gender pay gap to the professionals at ARROWS. Our lawyers will help you safely navigate all the requirements of the new legislation and ensure that your company is prepared for inspections, audits, and potential disputes. For an immediate solution to your situation, write to us at consultation@arws.cz.

Don't want to solve this problem alone? More than 2,000 clients trust the ARROWS law firm, and we have been awarded Law Firm of the Year 2024. See our references HERE, and it will be our honour to help you solve your problem. The inquiry is free of charge.