The draft law implementing EU Directive 2023/970 (form UC127) on gender equality raises concerns among employers. Entrepreneurs point out that increasing pay transparency has effects that go beyond the equality goal itself.
This applies to both companies' pay policies and employment structure – and it is these less obvious consequences that may be most important for the labor market.
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Differences in wages of new and long-term employees
Pay transparency does not only mean revealing gender inequalities, but also other disproportions, e.g. those resulting from employment history. According to the analysis of ADP experts, one of the real, although not obvious, threats are the consequences of revealing salary differences between new employees and those with long experience in the company.
Employees with long experience often they earn less than newly employed people in the same positions, because their salaries were not indexed as dynamically as the market rates offered to new candidates.
— Revealing these differences in parallel positions without objective justification – and such cases are necessarily more common in larger companies that will be subject to reporting – will in many cases cause dissatisfaction of the staff and encourage employers to introduce new pay policy – emphasizes Anna Barbachowska, HR director at ADP Polska. For companies, this means an emergency increase in fixed costs.
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Weaker wage growth dynamics, stronger negotiating position
There has been a popular rule in Poland for years: the best way to get a raise is to change your employer. According to the ADP expert, this mechanism may weaken because employers, wanting to avoid “mines” in the remuneration structure and the risk associated with disclosing these differences, will equalize the wages of long-term employees.
Companies will be more careful when building offers, looking at the consistency of internal salary ranges. For candidates, this will mean a weaker salary increase when moving to a new employer. In turn, for companies – lower employee turnover.
Anna Barbachowska also emphasizes that the employees themselves will receive additional arguments to talk about salary adjustments, which will increase their negotiating position in discussing pay increases inside the organization.
Wage transparency may therefore increase pressure for internal corrections. As Mateusz Żydek, leader of the Randstad communication team, explains, what is at stake will not only be employee satisfaction, but also the real risk of outflow of experienced staff.
— Retaining a long-term employee for 70 percent the salary of a newly employed person will become legally risky, recruitment expensive and image-disastrous – he emphasizes.
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Risk of manipulation of the form of employment and more part-time jobs
The second problem highlighted by the ADP expert raises more concerns. As he emphasizes, compared to other countries, in Poland we have a very high percentage of full-time employees. Meanwhile, reporting and analytical obligations will apply to companies exceeding established employment thresholds. The bill assumes that the number of employees in the company will be calculated as full-time equivalents in a given calendar year.
— The limit numbers are 100 and 250 employees. So we are talking about quite large employers on a city or county scale – such as production plants or representatives of the trade industry. In order to reduce the reporting obligation, companies may aim not only to cut jobs, but also to cut jobs shortening the working hours in a given position to achieve fewer full-time positions with the same number of people – explains Anna Barbachowska.
Mateusz Żydek admits that in the short term, employers may try to protect themselves by creating extremely narrow and specific job descriptions.
— If the role of a senior accountant is divided into five subcategories differing in one scope of responsibilities, direct comparability will actually be more difficult. However, the directive emphasizes work of equal value, which means that in the end it is actual contribution and competence, not just the name on a business card, that will be decisive. As a consequence, this solution will not cloud the image of wages in the company at all, explains the expert.
B2B contracts as a way to circumvent regulations
However, the risk of manipulating the number of full-time positions does not have to be limited only to shortening working time. According to Mateusz Żydek, companies balancing on employment thresholds may encourage employees to switch to B2B contracts, which are formally not covered by wage gap audits. As he explains, the directive focuses on employees within the meaning of the code.
— Although we see positive changes in the area of civil law contracts, B2B contracts are still gaining in importance due to cost optimization. This may be especially visible in the IT, creative and consulting services sectors, where openness to such forms of cooperation is greater – emphasizes the expert.
However, he adds that EU jurisprudence may verify this interpretation in the future and cover other forms of cooperation. — The growing awareness of employees also increases the risk of intervention at the labor court level. Even if the announced reform of the National Labor Inspectorate has been slowed down.
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Pay transparency can strengthen employees' negotiating position, but also increase the risk of legal disputes and micro-conflicts in teams if pay differences are not clearly justified. Therefore, the Act may turn out to be not only an equality regulation, but also a catalyst for deeper changes in the organization of work and the remuneration policy of companies. However, this does not change the fact that in the long run it has a chance to permanently increase the transparency of the entire labor market.
