Addressing Objections to Pay Transparency within businesses

This article examines the objections to pay transparency and highlights how concerns raised at legislative level may be reflected by concerns about pay transparency within employing organisations. 

Legislation proposed – and voted down – in Poland

On February 6, 2024, the Polish Parliament (Sejm) voted against the proposed Act to transpose the Pay Transparency Directive at its first reading. As a result, the bill has been sent to the Extraordinary Committee for Amendments to Codifications (Komisja Nadzwyczajna do spraw zmian w kodyfikacjach) for further revisions and analysis.

What did Poland propose?

The draft Act on Pay Transparency in Poland seeks to align with the EU Pay Transparency Directive, but does not incorporate all of the requirements.  The Act does include:

• salary ranges to be disclosed in job advertisements;
• companies with more than 250 employees must conduct pay audits to identify unjustified gender pay gaps and report the findings to relevant authorities;
• Employees will have the right to request and receive information about their salary levels compared to the average pay for similar roles within the company;
• Anti-Retaliation (or victimisation) Measures.

However, the proposals fall short of the requirements of the Directive, with no provision for:

• for mandatory pay gap reporting (for companies with 100+ employees);
• joint pay assessments where there is an unexplained pay gap of more than 5%;
• enforcement mechanisms.

Aside from concerns about whether the proposed legislation fully implements the Directive, and the need for further consultation about implementation, concerns were raised about the impact of pay transparency on business and the employment relationship, including:

• the commercial risk of publishing salaries, which may be considered to be a trade secret of the business;
• the potential impact on competition in the employment market;
• a negative impact on salary negotiations for individual candidates;
• the additional administrative burden on employers;
• the potential for transparency to cause tension in the workplace.

Impact on employers — dealing with internal concerns

The concerns raised in Poland echo various objections from business leaders, managers and employees about the impact of pay transparency.  To effectively address these challenges, businesses must adopt strategies that tackle these objections, sustain operational efficiency, and ensure compliance with legislative requirements.

Effective communication is crucial for gaining stakeholder support. For some senior leaders, compliance and regulatory requirements will be more compelling than addressing inequality within the organisation, particularly where there is a reluctance to accept that any gender pay disparities exist. For others, understanding when a pay gap may be justifiable can help alleviate concerns — pay transparency does not mean pay inflexibility.

It is important to convey to stakeholders that pay transparency under the Directive examines average pay and overall pay gaps in percentage terms, rather than revealing individual pay or business cases. Moreover, the Directive does not require a comparison of terms across different Group companies. Raising awareness and providing training will be essential in addressing these concerns.

We also recommend preparing draft pay gap reports ahead of the legislation's implementation, preferably under the protection of legal privilege, to identify and address any issues that may arise from transparency. A lower pay gap could minimise potential concerns.

Balancing transparency and flexibility

Ultimately, pay transparency, when strategically implemented, can enhance an organisation's reputation and attractiveness in the employment market. Additionally, with transparency becoming a requirement across Europe, some leaders may find it riskier to be left behind than to embrace pay transparency.  It is possible to balance pay transparency with business flexibility — understanding the details of what is required and creating flexibility within those requirements are key.

If you would like to discuss the requirements in different Member States, how to meet and achieve your business aims within those requirements and/or how to address concerns raised in your organisation, or any other aspect of pay transparency, please contact your usual Fieldfisher contact or transparencypays@fieldfisher.com.

With thanks to Eryk Czajkowski, B2R Law, Poland.