New EU Pay Transparency Directive

What already applies today – and where employers are losing disputes

The most common misconception of 2026 is: "As long as the directive isn't in effect, we're not at risk." The opposite is true. The fundamental pillars of transparent remuneration have been enshrined in Czech law long before the directive, and courts are actively enforcing them.

Equal pay for equal work or work of equal value. According to Section 110 of Act No. 262/2006 Coll., the Labour Code, all employees of the same employer are entitled to the same wage, salary, or remuneration from an agreement for the same work. The comparison criteria are the complexity, responsibility, and strenuousness of the work, working conditions, performance, and results – nothing else. The obligation of equal treatment in remuneration is also imposed on employers by Section 16 of the Labour Code.

Regional wage differences do not hold up in court. In its judgment of 20 July 2020, file no. 21 Cdo 3955/2018, in a dispute involving a Czech Post driver, the Supreme Court concluded that socio-economic conditions and the cost of living at the place of work are not comparative criteria under Section 110 of the Labour Code. A Prague-based employee cannot, therefore, receive a higher wage for the same work just because living in Prague is more expensive. This conclusion is followed by a series of other decisions (e.g., file no. 21 Cdo 2000/2024 or 21 Cdo 1702/2024), and related lawsuits are being heard in courts even in 2026.

The ban on wage confidentiality is already in effect. Since the 'flexi-amendment' to the Labour Code, effective in 2025, Section 346a applies: an employer may not restrict an employee from using information about the amount and structure of their wage, salary, or remuneration from an agreement. Wage confidentiality clauses in employment contracts are therefore already ineffective, and their enforcement is an offence – under Section 24(1)(e) of Act No. 251/2005 Coll., on Labour Inspection, with a fine of up to CZK 400,000. Failure to ensure equal treatment or discrimination in remuneration carries a fine of up to CZK 1,000,000.

The burden of proof lies with the employer. If an employee presents facts before a court suggesting gender-based pay discrimination, it is up to the employer, under Section 133a of the Code of Civil Procedure, to prove that the principle of equal treatment was not violated. According to Section 10 of the Anti-Discrimination Act, a discriminated employee can demand that the discrimination cease, its consequences be eliminated, adequate satisfaction be provided, and in serious cases, compensation for non-pecuniary damage in money – in addition to back pay with default interest.

In practice, this means one thing: an employer who cannot currently document why two people in comparable positions receive different pay is already losing the dispute under current Czech legislation. The directive does not create this situation; it only makes it more visible.

Directive (EU) 2023/970: what exactly it requires

Directive (EU) 2023/970 of the European Parliament and of the Council strengthens the application of the principle of equal pay for men and women for equal work or work of equal value through pay transparency. It is based on the premise that the main obstacle to enforcing equal pay is non-transparent pay systems – and the Czech Republic has long been among the EU countries with the highest gender pay gap (around 15–18%).

Key obligations under the directive:

• Recruitment: information on the initial salary or its range before the interview (in the job ad or otherwise in advance) and a ban on asking about an applicant's salary history. This applies to all employers regardless of size.

• Internal transparency: gender-neutral criteria for remuneration and career progression made available to employees; the right of an employee to information about their own pay and the average pay levels by gender for the category of workers performing the same work or work of equal value, with a response within two months.

• Reporting on pay gaps: employers with 250+ employees annually, with 150–249 employees every three years (first report due by June 2027 under the directive), with 100–149 employees every three years from 2031.

• Joint pay assessment: if reporting shows an unjustified gender pay gap of more than 5% and the employer does not remedy it within six months, they must conduct an in-depth analysis of the causes and adopt corrective measures in cooperation with employee representatives.

• Enforcement: strengthened reversed burden of proof, the right to full compensation (back pay including bonuses and non-monetary benefits, interest, compensation for damages), and effective sanctions.

The concept of remuneration is broad – in addition to basic salary, it includes bonuses, premiums, allowances, benefits, and other work-related compensation. The employee count also includes workers on agreements (DPP/DPČ), if their relationship meets the criteria of dependent work.

Czech transposition: a minimalist amendment and realistic deadlines

The Czech Republic missed the transposition deadline of 7 June 2026. The Ministry of Labour and Social Affairs presented a draft transposing amendment to the Labour Code on 16 March 2026, opting for a so-called minimalist transposition – meeting European requirements without imposing obligations beyond their scope. The amendment builds on the existing provisions of Sections 16 and 110 of the Labour Code and elaborates on them; it is intended to impose a new obligation on employers to create and maintain a transparent remuneration system based on objective, gender-neutral criteria. The draft is in the legislative process (as of July 2026, after the inter-ministerial consultation process) and provides for a staggered entry into force.

Two notes on the timeline: First, the deadlines may still shift during the legislative process – the basic framework of obligations stems directly from the directive, but the specific Czech parameters may yet change. Second, after the transposition deadline has passed, sufficiently precise provisions of the directive may have direct effect against the state and public-sector employers (so-called vertical direct effect); the public sector should therefore not wait for the amendment to take effect before starting preparations.

Transparency in recruitment: the end of 'salary by agreement'

Once the amendment takes effect, employers will have to inform applicants of the initial salary or salary range – either directly in the job advertisement or otherwise before the first interview. Job ads stating 'salary by agreement' without a range will be a thing of the past. The range must be realistic; an extremely wide range will be considered circumvention of the law.

At the same time, it is prohibited to ask about an applicant's salary history. If the applicant discloses it voluntarily, the employer may not use it as a basis for setting the salary if it would lead to inequality – the objective criteria of the position must be decisive. Also, be cautious with recruitment tools using artificial intelligence: the employer is responsible for any discriminatory output from the algorithm, as we discuss in our article Artificial Intelligence in HR.

For companies that have so far kept salaries secret as a competitive advantage, this is a strategic change in recruitment communication – and also an opportunity: transparent job ads have been proven to increase the conversion rate of high-quality candidates.

Employees' right to information on remuneration

From 2028 (according to the draft amendment), every employee will be able to request in writing information on their individual pay level and on the average pay levels, broken down by gender, for the category of workers doing the same work or work of equal value. The employer must respond in writing or electronically within two months.

Important: this is not about publishing specific individual salaries. A colleague's individual salary remains protected personal data – only averages for categories are disclosed. However, companies without a formal system for classifying positions into work groups will be unable to respond to a request at all, which is a violation in itself. A pay audit is therefore the foundation of preparation.

Reporting on pay gaps and joint assessment

The reporting obligation will gradually apply to employers with 100 or more employees (see timeline). The report includes the overall gender pay gap and the gap in variable components, the median gap, and the proportion of female and male workers in each pay quartile. Companies are effectively building the data foundation today – pay data is submitted to the state as part of the unified monthly employer report (JMHZ), so any discrepancy between the report and reality will be easily detectable.

If the report shows an unjustified gap of over 5% that the employer does not remedy within six months, a joint pay assessment with employee representatives follows: analysis of the causes, corrective measures, and making the results available to employees and supervisory authorities. This is not a formality but a negotiation with sensitive data on the table – legal guidance for this process is key. We discuss the reputational dimension in our article The Gender Pay Gap as a Legal and PR Risk.

How to prepare: a plan for the end of 2026

1. Pay audit (Q3 2026). Categorise positions according to work value (criteria of Sec. 110(3)–(5) of the Labour Code: skills, complexity, responsibility, effort, conditions, performance) and compare actual remuneration paid, including bonuses and benefits. Goal: to find out where differences exist in comparable positions and whether you can objectively explain them.

2. Remuneration system and pay policy (Q4 2026). Define groups of work of equal value, salary ranges for positions, and gender-neutral criteria for movement within the range. A manager's subjective impression will not stand up in court; documented evaluations will. This includes reviewing employment contracts and assessments – including removing obsolete confidentiality clauses and correctly structuring bonuses (on a non-entitlement basis).

3. Recruitment processes (Q4 2026 – Q1 2027). Job ad templates with salary ranges, adjustment of interview scripts (no questions about salary history), ATS setup, and review of AI tools.

4. Manager training and communication (ongoing). Managers must be able to explain why someone has a certain salary and what they need to do to grow. Transparency without prepared managers will create more conflicts than it solves.

Audit data is subject to personal data protection, and the outputs can be used against you – conduct the audit under the guidance of a law firm so that working versions are covered by attorney-client privilege.

Small and medium-sized enterprises: this applies to you too

Reporting does not apply to companies with fewer than 100 employees, but everything else does: salary ranges in recruitment, the ban on asking about salary history, transparent criteria, the ban on wage confidentiality, and the risk of lawsuits under Section 110 of the Labour Code. Smaller companies without an HR department and with 'intuitive' remuneration are paradoxically the most vulnerable – they lack the documentation to defend themselves in court. The solution does not have to be bureaucratic: a simple pay policy with bands and criteria spanning a few pages can cover most risks.

Conclusion

Transparent remuneration is not a future that you can wait out. The toughest tools – equal pay for equal work, the reversed burden of proof, the ban on confidentiality, and million-crown fines – are already in effect today, and the 2027 amendment will only add procedural obligations. A company that completes an audit and sets up a system in 2026 will gain a head start in recruitment and peace of mind during the first inspection or the first employee request for data.

The ARROWS law firm has a team of employment law specialists who will guide you through the entire process – from the audit and drafting a pay policy to representation in disputes. With liability insurance of up to CZK 400 million, we provide our clients with maximum security.