The issue of compensation has always stirred up a lot of emotion and has been one of the most sensitive yet crucial aspects of the employer-employee relationship. For decades, an approach based on confidentiality and individual negotiation prevailed, but today’s world of work, driven by growing expectations of fairness, equality and transparency, as well as new legal frameworks, is forcing a fundamental change in this perspective. Pay transparency, or the practice of openly communicating information about compensation systems and pay levels, is no longer just a postulate or distant vision, but is becoming a new standard and strategic imperative for organizations seeking to build trust, engagement and competitive advantage in the talent market. The introduction of Directive (EU) 2023/970 of the European Parliament and of the Council on remuneration transparency further accelerates this transformation by imposing specific obligations on employers in the European Union, including Poland, in this regard.
The purpose of this article is to discuss in depth the concept of payroll openness – from its definition and various levels, to a detailed analysis of the requirements of the new EU directive, to the practical aspects of implementing a transparency strategy within an organization. We will delve into what benefits and challenges come with greater openness on payroll issues, and how managers and HR departments can effectively navigate this new reality. EITT, as an expert in human resource management and organizational transformation, wants to provide you with comprehensive knowledge that will allow you not only to prepare for the upcoming legal changes, but more importantly to harness the potential of payroll openness to build a fairer, more motivating and more effective organization.
Pay equity as a new paradigm in compensation management: definition, evolution and strategic imperatives for organizations
Pay transparency refers to the degree to which an organization openly communicates information about its philosophy, policies, structures and compensation levels both internally – to employees – and externally – to potential candidates. It is not a zero-sum concept; there is a spectrum of transparency, from a minimum level, where employees only know their own salaries, to full disclosure, where the salaries of all employees are publicly available inside the company (which is less common and more controversial). The modern approach to salary openness focuses primarily on transparency of salary decision-making processes, clarity of criteria, and the provision of information on salary ranges for specific roles or job levels.
The evolution toward greater pay transparency is driven by several key factors. First, the growing public awareness and expectations of employees, especially younger generations (Millenials and Generation Z), who value openness, fairness and authenticity in the workplace. Second, the drive to eliminate wage discrimination, especially the gender pay gap, where transparency is seen as one of the key tools for identifying and closing unjustified gaps. Third, increasing legislative pressure, as exemplified by the aforementioned EU Directive. Fourth, organizations are beginning to recognize the strategic benefits of greater openness on pay issues, such as increased trust, engagement, a better reputation as an employer or easier talent attraction.
The strategic imperative for organizations therefore becomes not a question of “whether” to implement pay disclosure, but “how” to do so in a thoughtful, responsible and win-win manner. This requires moving away from the traditional view of pay as a taboo subject and building a culture in which open and constructive conversation about pay is possible and desirable. Pay transparency, if implemented well, ceases to be a threat and becomes a tool for building stronger, fairer and more effective organizations.
The eu pay transparency directive as a catalyst for change: a detailed discussion of key obligations for Polish employers
Directive (EU) 2023/970 of the European Parliament and of the Council of May 10, 2023 on reinforcing the application of the principle of equal pay for men and women for equal work or work of equal value through pay transparency and enforcement mechanisms (hereinafter the Pay Transparency Directive) is a real milestone and catalyst for change in the approach to pay transparency across the European Union. Member states, including Poland, are required to transpose its provisions into national law by June 7, 2026. The directive introduces a number of specific and far-reaching obligations for employers to increase the transparency of pay systems and make it easier for employees to assert their rights in the event of pay discrimination. For Polish companies, this means they need to take preparatory measures now to be ready for the new regulations.
Key responsibilities and changes introduced by the Directive include:
- Pre-employment wage disclosure: Employers will be required to inform candidates of the starting salary level or its ranges (salary ranges) for a given position. This information will have to be provided in such a way as to allow the candidate to make an informed decision and negotiate, such as in the job advertisement, before the interview or, at the latest, before the conclusion of the contract. Importantly, employers will not be able to ask candidates about their salary history with previous employers, which is intended to break the cycle of perpetuating possible previous salary inequalities.
- Workers’ right to wage information: The directive grants employees the right to request from their employer information on their individual salary levels and average salary levels, broken down by gender, for categories of employees doing the same work or work of equal value to them. The employer will have to provide this information within a reasonable time (e.g., within two months of the request) and in an accessible form. Employees will be able to exercise this right through their representatives (e.g., unions) or equality bodies.
- Wage gap reporting obligations: Employers that are entities with a certain number of employees (initially with at least 250 employees, then the threshold will be lowered to 150, and after subsequent years to 100 employees) will be required to publish regular (every one or three years, depending on the size of the company) information on the gender wage gap in their organization. These reports will have to include, among other things, information on the wage gap by category of employee, the wage gap with respect to supplementary or variable components of compensation, and the percentage of female employees receiving such components. This information is to be made available to public authorities, as well as to employees and their representatives.
- Joint Pay Assessment: If the wage gap report shows that the difference in the average wage level between men and women in a given category of employees is at least 5%, and the employer has not justified the difference with objective and gender-neutral criteria or eliminated it within six months, the employer will be required to conduct a joint pay assessment, in cooperation with employee representatives. The purpose of this assessment is to identify, remove and prevent the wage gap.
- Criteria for determining wages and job evaluation and classification systems: The directive requires employers to provide employees with access to the criteria used to determine salary levels and their progression. These criteria must be objective and gender-neutral. In this context, job evaluation and classification systems(job valuation) play a key role as tools to ensure that work of equal value is rewarded equally.
In addition, the Directive strengthens mechanisms for enforcing the right to equal pay by, among other things, facilitating employees’ access to justice, reversing the burden of proof in wage discrimination cases (the employer will have to prove the absence of discrimination), and providing effective sanctions for employers who violate the regulations. Employers should start analyzing their compensation systems, job evaluation processes and pay policies now to identify potential areas of non-compliance and prepare for the implementation of new, more transparent standards.
Foundations of effective pay transparency: from objective job valuation to clear pay structures and policies
Introducing greater pay transparency, especially in the context of the requirements of the new EU Directive, requires organizations not only to change their communication approach, but above all to build a solid foundation in the form of objective, fair and well-thought-out compensation management systems. Without such a foundation, transparency can expose existing inequalities and chaos, leading to frustration and conflict instead of building trust.
The first and absolutely key foundation is the implementation of a reliable and objective job valuation system. As we discussed in detail in a previous article, valuation allows the relative value of individual roles in an organization to be determined based on gender-neutral criteria such as required skills, responsibilities, effort and working conditions. The results of valuation provide a logical basis for creating an internally consistent job hierarchy and grouping roles of comparable value, which is necessary to ensure the principle of “equal pay for work of equal value.” Without such a system, any attempt to justify differences in pay could be seen as arbitrary.
Based on the results of the job evaluation, the organization should develop a clear pay structure (pay structure). It usually involves defining pay categories or grades (gradas) for groups of positions of similar value, and establishing pay ranges (pay forks, pay ranges) for each grade, defining minimum, average and maximum base salaries. The design of these ranges should take into account both the intrinsic value of positions and market data (external competitiveness), as well as the company’s pay strategy. Having such a structured salary grid is essential for making consistent and fair pay decisions.
Another element is the development and communication of a clear remuneration policy (compensation policy). This policy should describe the company’s compensation philosophy, the rules for setting starting salaries, the criteria for awarding raises (e.g., performance appraisal, acquisition of new competencies, promotion), the rules for operating bonus systems and other components of compensation in a way that is understandable to employees. It is important that these policies are applied consistently and non-discriminatorily to all employees. Transparency in pay policy, even if it does not mean disclosure of individual salaries, builds a sense of fairness and predictability.
Finally, organizations must ensure that their compensation systems are regularly reviewed and audited to ensure that they remain adequate, fair and in line with applicable laws and changing market conditions. Proactively identifying and correcting potential inequities is a much better approach than waiting for employee complaints or intervention by regulatory bodies. Only on such a solid foundation can an effective and credible pay transparency strategy be built.
Step-by-step process for implementing payroll disclosure strategy: from internal audit and data preparation to communication with employees
Implementing a payroll disclosure strategy, especially in the face of new legal requirements, is a complex project that requires careful planning, involvement of multiple parties in the organization, and thoughtful communication. It is not a one-time action, but a transformational process that should be implemented in stages, taking into account the specifics and maturity of a given company.
An absolutely crucial first step is to conduct a thorough internal audit of current pay systems and practices (internal pay audit). The purpose of this audit is to identify any existing pay inequalities (e.g., based on gender, but also other potentially discriminatory factors), analyze the causes of these inequalities, and assess the compatibility of current policies and procedures with equal pay principles and the requirements of the upcoming directive. The audit should include an analysis of pay data, a review of the job evaluation system (if it exists, and if not, its implementation becomes a priority), an assessment of the transparency of current processes, and the identification of risk areas.
Based on the results of the audit, the next step is to develop and implement a corrective action plan to eliminate identified unjustified pay inequalities. This may mean adjusting the salaries of certain employees, modifying the pay policy, reviewing the criteria for promotions or improving the job evaluation system. This is an extremely important stage, as implementing pay transparency without first “cleaning up” internal irregularities could do more harm than good, leading to frustration and conflict.
In parallel, the organization should be prepared on the systemic and procedural side to meet the new transparency requirements. This includes, among other things, developing methodologies and tools for regular pay gap reporting, defining processes for providing on-demand salary information to employees, and preparing for possible joint salary evaluations. It is also crucial to create or update a clear pay structure and salary ranges for each position or grade.
It is critical to develop a comprehensive communication strategy on pay transparency, targeting both managers and all employees. Communications should explain the goals and principles of the new policy, the benefits of greater transparency, and address potential questions and concerns. It is crucial to train managers to discuss salaries in the new, more open context, equipping them with the necessary knowledge and skills.
Implementation of a pay transparency strategy should be a gradual and monitored process. It is worth starting with certain areas (e.g., transparency of processes, publication of recruitment forks) and then expanding the scope of transparency as the organization is ready. Regularly collecting feedback from employees and managers and analyzing the impact of new developments on morale, engagement and perceptions of fairness are essential for possible adjustments and refinement of the strategy.
The art of communicating remuneration in the era of transparency: the role of managers and HR in building trust and having effective payroll conversations
The shift toward greater pay transparency poses significant new communication challenges for managers and HR departments. The ability to have open, constructive and fact-based conversations about pay is becoming a core competency, essential to building trust, managing expectations and keeping employees engaged in the new, more transparent environment. It is no longer enough to simply announce a new policy or publish salary ranges; it is necessary to create a culture of dialogue and support in this sensitive area.
The HR department has a fundamental role in preparing the organization for this change. Its task is not only to develop a consistent and understandable compensation policy and employee handouts, but most importantly to comprehensively train managers in the new rules and communication skills. Managers need to have a thorough understanding of the company’s compensation philosophy, the logic behind the pay structure and forks, and be able to explain to employees how their individual compensation is determined and what factors influence its amount and growth potential. Training should include, among other things, techniques for having difficult conversations, dealing with employees’ emotions, answering questions about pay differences and promoting a sense of fairness.
Line managers become the key ambassadors and enforcers of pay transparency policies within their teams. They are the ones who will have most of the direct conversations with employees about their salaries. That is why it is so important that they feel confident and competent in this role. During salary discussions, the manager should focus on objective criteria and principles derived from company policy, avoiding subjective assessments or personnel comparisons. He or she should be able to clearly justify the employee’s salary in relation to the value of his or her position (derived, for example, from valuation), competencies possessed, results achieved and position in the salary range. It is important that the conversation be a partnership and an opportunity to clarify any doubts of the employee.
When an employee raises concerns about his or her pay or perceives it to be unfair compared to others, the manager must be able to respond in an empathetic but fact-based manner. He or she should listen carefully to the employee’s arguments, refer to the prevailing pay policy and salary structure, and consult with the HR department if necessary. The key is to avoid empty promises and build realistic expectations. In the new, more transparent system, employees will have access to more information (e.g., average salaries in a given category), which may generate more questions and discussions. That’s why it’s so important that the compensation system is truly fair and based on a solid foundation, and that managers can competently explain and defend it. Open and honest communication is the best way to build trust and minimize negative emotions about the topic of compensation.
Managing the potential challenges and risks of payroll disclosure: from employee concerns to organizational culture adaptation
Implementing greater payroll disclosure, despite its many benefits, is a complex process that can generate some challenges and risks that require conscious management. Organizations need to be prepared for potential employee concerns, the need to adapt organizational culture, and possible short-term difficulties before the system begins to deliver its full benefits. One of the most frequently cited risks is the potential for increased dissatisfaction among employees, who, after gaining access to information about others’ salaries or average rates, may feel undervalued or unfairly rewarded, even if their pay is set according to objective criteria. This can lead to a drop in morale, wage claims or even leaving the company. That’s why it’s crucial to conduct an internal audit and “smooth out” unjustified pay differences before fully implementing transparency.
Another challenge is the need for managers to be thoroughly trained in communicating pay issues and having difficult conversations. Without the right skills, managers may not be able to effectively explain the principles of the pay system, answer employees’ inquisitive questions or deal with their emotions, which can exacerbate frustration. Pay transparency can also reveal weaknesses in the existing job evaluation system or inconsistencies in pay policies, which will require additional work to improve them.
There are also concerns about organizational culture. In companies where a low culture of trust, lack of open communication or strong internal rivalries prevail, introducing pay transparency can be particularly difficult and lead to interpersonal tensions. It is necessary to work on building a culture based on openness, respect and dialogue, where salaries are seen as part of a broader strategy to value employees, rather than as a taboo subject or source of conflict. Some organizations may also fear losing their competitive edge if information about their pay structures becomes too public, although the EU Directive focuses mainly on internal transparency and aggregate reporting.
To effectively manage these challenges, a carefully planned and gradual process of implementing payroll disclosure, preceded by sound diagnosis and corrective actions, is key. Intensive communication with employees at every stage is essential, explaining the goals, principles and benefits of the new solutions, as well as answering their questions and concerns. Investment in the development of managerial competence in communication and compensation management is absolutely fundamental. It is also important to establish clear procedures for reporting and addressing any complaints or concerns about compensation. Despite the potential difficulties, the long-term benefits of building a fair and transparent work environment usually far outweigh the short-term risks, provided the process is managed in an informed and responsible manner.
Benefits of implementing payroll disclosure for the entire organization: from strengthening the employer brand to increasing engagement and innovation
Implementing a well-thought-out payroll disclosure strategy, while it may seem like a challenging process, brings a number of fundamental and long-term benefits to organizations that far exceed just the compliance aspect of new regulations. It is an investment in building a stronger, fairer and more competitive organization based on the trust and commitment of its most valuable capital – its people. One of the most visible benefits is the significant strengthening of the employer brand (employer branding). Companies that are perceived as transparent and fair in compensation issues become much more attractive to potential candidates, especially representatives of younger generations, for whom values such as openness and equality are of utmost importance. This makes it easier to attract the best talent from the market and builds the image of an employer of choice.
Pay transparency also has a direct impact on boosting the confidence, commitment and morale of existing employees. When employees understand how their pay is determined, the criteria for promotion and raises, and see that the system is applied consistently and fairly, their sense of security and appreciation grows. This reduces the frustration of conjecture, gossip or feelings of injustice, and in return builds a stronger emotional bond with the organization and greater motivation to work. Higher engagement translates directly into better business results, higher productivity and lower employee turnover rates.
Moreover, pay transparency is a powerful tool to support Diversity & Inclusion goals. By disclosing and eliminating unwarranted pay gaps, especially the gender pay gap, organizations create more equal opportunities for all employees, regardless of their demographic characteristics. This fosters more diverse teams, which, as numerous studies have shown, are more innovative, creative and better able to solve complex problems. Pay transparency can also simplify and streamline management processes, such as by reducing the time spent on individual salary negotiations or resolving salary-related conflicts, allowing managers to focus on more strategic aspects of team management. Ultimately, a culture of transparency and pay equity contributes to building a healthier, more ethical and more effective work environment, which is fundamental to the long-term success of any organization.
The future of pay transparency and strategic partnership with EITT: how to successfully navigate the new pay reality
The era in which salaries were a taboo subject and information about them a closely guarded secret is inevitably coming to an end. The future of compensation management belongs to transparency, objectivity and dialogue, driven both by legislative changes such as the EU Directive and by the growing awareness and expectations of employees and the public. Organizations that ignore this trend risk not only legal problems, but also loss of trust, declining engagement and difficulties in attracting and retaining talent. In contrast, those that approach pay disclosure strategically and proactively can turn this challenge into a source of competitive advantage.
In the coming years, we can expect to see further development of tools and technologies to support pay transparency management. Advanced HR systems and analytics platforms will play an increasingly important role in monitoring the pay gap, conducting audits, modeling pay structures, and providing employees with personalized information about their compensation in the context of the entire organization. Developing managerial competencies to have open and constructive conversations about pay and to build a culture of trust around the topic will also become crucial. Organizations will need to invest in training and coaching for their leaders so that they are able to effectively navigate the new, more transparent pay reality.
There will also be an increasing emphasis on consistency between a company’s stated values and its compensation practices. Employees and candidates will take an increasingly close look at whether organizations are actually living up to the principles of fairness, equality and transparency they claim. Authenticity and consistency in performance will become key to building credibility and a positive employer brand.
EITT, as an experienced partner in strategic human resource management, labor law and organizational development, stands ready to support your company at every stage of this transformation towards greater payroll transparency. We help our clients to thoroughly analyze and interpret the requirements of the EU Directive and to adapt their internal systems and processes to the new regulations. We offer comprehensive support in conducting payroll audits, designing and implementing objective job value systems, and creating transparent compensation structures and policies. Our training and workshop programs for managers and HR professionals focus on developing the competencies necessary for effective compensation management in the era of transparency, including communication skills, eliminating unconscious biases and conducting effective pay conversations. We also support organizations in developing communication strategies and building an organizational culture based on trust, openness and dialogue. Our goal is not only to help ensure legal compliance, but more importantly to support the building of a workplace where every employee feels fairly treated, valued and motivated to make their best contribution to the company’s success.
In summary, pay transparency is an inevitable trend and a new standard in compensation management that brings both challenges and enormous opportunities for organizations. Preparing for this change requires a strategic approach, a thorough analysis of current practices, and consciously building a culture based on transparency, fairness and trust. The EU Remuneration Transparency Directive provides an important impetus to accelerate these efforts, but the drive for pay transparency should come first and foremost from a belief that it is fundamental to building an ethical, efficient and competitive organization.
If your company is facing the challenge of implementing payroll disclosure, complying with new legal requirements, or simply wants to make its compensation systems more transparent and fair, we invite you to contact EITT. Our experts are passionate and committed to helping you through the process, providing solutions tailored to your unique needs and supporting you in building a future-ready organization. Together, we can turn the challenge of payroll transparency into a strategic advantage for your company.
