In today’s dynamic business world, many companies are moving toward globalization. Companies are increasingly operating on an international level, which brings with it various challenges, including human resources management. In response to these changes, and to ensure adequate standards of worker protection, the European Union introduced Directive 2023/970 from May 10, 2023, on strengthening the application of the principle of equal pay for women and men for equal work or work of equal value through pay transparency and enforcement mechanisms (referred to as the “Payroll Directive”), which aims to regulate pay and compensation of workers at the European level.
In this article, we will look at the main aspects of this directive and discuss what implications it has for companies doing business in the European Union.
What is the Payroll Directive?
The Payroll Directive was adopted by the European Parliament and the Council of the European Union in response to the need to regulate the wages and salaries of employees across the European Union. Its purpose is to ensure fair and equal pay conditions for employees in member countries and to minimize wage differences between different regions of the European Union.
What do the directive’s regulations cover?
Digging deeper into the reading of the directive’s provisions, one can get the impression that from the date of its introduction into the Polish legal order – which should take place until June 7, 2026 – labour law will undergo another significant revolution due to the assumptions of the Payroll Directive.
One of the main goals of the Payroll Directive is to ensure pay transparency. Under its provisions, employers will be required to make available to employees detailed information about wages at the workplace, including all wage components such as bonuses, allowances, or other benefits. This is intended to prevent discrimination and ensure that employees are properly compensated for their work. In addition, under the provisions of the Payroll Directive, companies must inform employees of expected increases in the future.
One of the directive’s key goals is to ensure gender equality in payroll matters. Employers must regularly analyze their pay systems and eliminate any gender pay injustices, and regularly report on their pay practices and undergo audits to ensure compliance with the aforementioned directive.
Among other provisions of the directive, it is worth noting the provision that employers will not be able to ask applicants for employment questions about their wages either at their current workplace or at previous jobs.
The Payroll Directive is another legal act of the European Union that requires changes in the labour law of member states (after the recently adopted work-life balance directive), however, its potential effects and outcomes should be initially assessed as positive. Despite the rather significant changes, which may be perceived differently by employers, it should be recognized that they may contribute to an increase in workplace culture and respect for both sides of the employment relationship, which would improve the atmosphere in the workplace.
Mateusz Turowski, Trainee attorney-at-law (PL)