Pay Transparency after the expiry of the transposition deadline

Directive (EU) 2023/970 on pay transparency represents one of the most significant recent legislative instruments of the European Union in the field of gender equality in the labour market. Its objective is to reduce pay disparities between women and men by introducing a higher degree of pay transparency, new obligations for employers, and strengthened mechanisms for the legal protection of employees.

The deadline for transposing the Directive into national law expired on 7 June 2026. Although its implementation in Croatia through amendments to the Labour Act has not yet been completed, this does not mean that employers in either the private or public sector are operating in a legal vacuum.

At the same time, practices related to “pay secrecy” are being restricted, and asking candidates about their previous salary during recruitment processes is prohibited.

Different starting points: public and private sector

For public authorities, public institutions and other entities in the public sector, the provisions of the Directive are binding even in the absence of its implementation into national legislation, provided that those provisions are clear, precise and unconditional. This means that employees in the public sector may rely directly on such provisions before national courts, and courts may order a public employer to act in accordance with the Directive.

Private employers are formally in a different position. According to the established case law of the Court of Justice of the European Union, the Pay Transparency Directive does not have horizontal direct effect, which means that an employee cannot base claims against a private sector employer directly on the provisions of the Directive.

However, it should be emphasised that national courts are required to interpret existing provisions of national law, within the scope of their competence, in accordance with the objectives and requirements of European Union law, including this Directive. Such consistent interpretation means that existing national rules must be applied in the light of the relevant provisions and principles of the Directive, but it does not imply the automatic application of entirely new rules or obligations deriving exclusively from the Directive, particularly in horizontal relationships between private parties.

What if an employee requests pay information?

The principle of equal pay for equal work or work of equal value has long been embedded in the Croatian legal system. Under the Labour Act, an employer is required, upon request, to provide information on the criteria on the basis of which an employee performing the same or similar work has received a certain level of pay, if such an employee exists, and where this is necessary to ensure the right to equal pay between women and men.

The Directive expands the scope of information to which employees are entitled. Under the Directive, employees will have the right to access the criteria used to determine and increase pay. In addition, they will have the right to request and receive written information on their individual pay level and on average pay levels, broken down by gender, for employees performing the same work or work of equal value within the same category.

In the public sector, a request for all information to which an employee is entitled under the Directive should be considered legally relevant and binding. By contrast, for private sector employers, such a request beyond the current obligations prescribed by the Labour Act—would not yet be binding.

If an employee’s request is not fulfilled, once the Directive is implemented, employees will be in a more favourable procedural position. In particular, the burden of proof will shift to the employer, and courts will be able to order the employer, in the case of a claim alleging a violation of equal pay, to disclose all relevant evidence in their possession, including information that may otherwise be considered confidential.

If the employer is found liable in such proceedings, the employee will be entitled to retroactive payment of the salary difference, as well as other related compensation.

New obligations for employers

In addition to the obligation to provide information to employees, employers with 100 or more employees will be required to regularly report on pay gaps between men and women.

Stricter reporting obligations apply depending on the size of the employer. Employers with 100 to 149 employees must submit their reports by 7 June 2031 and every three years thereafter for the preceding year. Employers with 150 to 249 employees must submit their reports by 7 June 2027 and every three years thereafter. Employers with more than 250 employees must submit their first report by 7 June 2027 and annually thereafter for the preceding year.

If a pay gap of 5% or more between men and women is identified and cannot be justified on the basis of objective and gender‑neutral criteria, the employer will be required to analyse its pay system and address the inequality. If this is not done within six months of submitting the pay report, the employer must carry out a joint pay assessment in cooperation with employees’ representatives.

Such a joint pay assessment is conducted on the basis of prescribed criteria, including, for example, the distribution of men and women across different categories of workers, differences in average pay levels, and the proportion of women and men who received pay increases after returning from maternity or paternity leave.

Conclusion

Given that, according to the competent ministry, the implementation of the Directive into Croatian national legislation is expected by the end of this year, the relatively short period during which the Directive will not yet be formally transposed is unlikely to result in extensive case law on its direct application.

Nevertheless, the rules introduced by the Directive will inevitably become part of national legislation. From a risk management perspective, the key question for employers is how objective, well-documented and defensible their pay systems are.

It is therefore particularly important during this transitional period to begin preparatory activities, such as defining and documenting pay-setting criteria, reviewing existing job classifications and job descriptions, evaluating roles, and identifying whether pay gaps exist for the same or equivalent positions and whether such differences can be objectively justified. These steps are essential to ensure timely alignment with the forthcoming requirements.