Pay transparency within the EU: The Czech Republic

JUDr. Nataša Randlová, Ph.D. and Mgr. Bc. Lucie Krejčí – Randl Partners

The Ministry of Labour and Social Affairs has already published a draft bill intended to transpose the European directive, the purpose of which is to enhance the transparency of employee remuneration and eliminate pay gaps between women and men. The new legal obligations apply (with certain exceptions) to all employers, regardless of their size or industry. Below we summarise the key points of the forthcoming legislation – from a new approach to recruitment, through obligations towards existing employees, to a new reporting obligation for certain employers towards the state.

Current status of Czech transposition

On 26 March 2026, the Ministry of Labour and Social Affairs published a draft of the Czech transposition. The draft bill is currently undergoing a consultation process. The planned effective date of this Act is 1 January 2027, with certain obligations not coming into force until 2028 or 2031 (further described below). The Czech Republic is therefore clearly stating that it will not meet the 7 June 2026 deadline required by the European Union, in line with some other countries, such as the Netherlands. Employers should therefore have sufficient time to prepare properly for the new legislation.

Obligation to categorise employees according to work of equal value

The draft bill imposes an obligation on all employers to classify employees into “groups graded according to the value of the work”. These groups (pay grades) may only be determined on the basis of the complexity, effort and responsibility of the work in question. These terms are defined in more detail in the current wording of Section 110 of the Czech Labour Code. According to the explanatory memorandum, employees must be classified into these pay groups in advance, i.e. not based on the actual performance of the employee.

It follows from the proposed wording of the Act that only the three factors mentioned above may be taken into account when classifying employees into groups in the Czech Republic. However, this does not mean that it is prohibited to apply different pay based on the nature of working conditions and the work performance of a specific employee.  Other factors under Section 110 of the Labour Code such as these may still be taken into account when differentiating pay for employees who find themselves in the same pay group.

The categorisation of employees according to work of equal value must be applied across the entire company. Thus, the same pay group may include, for example, an HR Manager and a Marketing Director, or two accountants in two different departments of the same company. The employer is obliged to include in the pay groups not only employees on employment contracts, but also so-called agreement workers (known as DPP and DPČ in Czech) and agency employees, to whom the user’s remuneration system applies.

The Ministry of Labour and Social Affairs has promised to provide employers with a tool to assist them with the categorisation of employees described above. However, employers will not be obliged to follow it and may develop their own methodology or use one of the internationally recognised methodologies (Mercer, Korn Ferry, WTW and others) and adapt it to comply with the new law. The categorisation process may take several months, particularly in large companies, and therefore the related work should be started as soon as possible.

New recruitment obligations

Employers will be obliged, at the latest before commencing negotiations on the conclusion of an employment contract (or agreement), to demonstrably inform candidates of the minimum amount of remuneration for work and other monetary payments and benefits of monetary value to which the candidates would be entitled from the date of commencement of the employment relationship. In this respect, the Czech draft law falls short of the requirements of the Directive – only the minimum amount is provided, not a range.

According to the explanatory memorandum, in cases where an interview takes place, this obligation must be fulfilled prior to the interview. However, it is not necessary to include the information directly in the job advertisement; that is, candidates may be informed, for example, in the invitation to the interview. Failure to comply with this obligation may result in a fine of CZK 200,000 for the employer.

The draft bill further prohibits employers from asking candidates about their current or previous remuneration for work and other previous monetary payments or payments of monetary value. Otherwise, the employer faces a fine of CZK 1 million. However, candidates may still be asked about their salary expectations; the employer should, however, do so only after providing information on the minimum amount of their starting remuneration.

The result of the proposed legislation will therefore be a completely new approach to recruitment, in which salary negotiations, or taking the candidate’s previous salary into account, are significantly restricted. Furthermore, newly recruited employees will be subject to the employer’s mandatory internal salary regulations, which classify employees into groups based on work of equal value according to specifically defined criteria. As a result, if a higher salary is negotiated, these salary regulations must reflect this.

Unlike the Directive, however, the Czech draft law does not include an obligation to provide the applicant in advance with the part of the collective agreement containing the remuneration rules for that employer. Employers are therefore not currently required to comply with this obligation.

Prohibition on confidentiality regarding remuneration for work and other monetary payments and payments of monetary value

Last year, the so-called ‘flexi-amendment’ introduced a ban on confidentiality regarding pay, under which an employee is entitled to communicate information about the amount and structure of their own salary at their own discretion, for any reason. This ban will now apply to all monetary payments and benefits of monetary value provided by the employer to the employee. This ban will therefore likely apply not only to benefits but also to severance pay.

In the event of a breach of this prohibition, the employer faces a fine of CZK 400,000 and a shift in the burden of proof to the employer in legal disputes concerning unequal pay.

Transparency of remuneration within the employer’s organisation

The draft bill imposes an obligation on employers to adopt a mandatory salary and benefits policy (more specifically, an internal policy concerning monetary payments and benefits of monetary value other than remuneration for work), regardless of the employer’s size. These would be the first mandatory internal regulations in the Czech Republic.

The mandatory salary regulation must include the aforementioned categorisation of employees according to work of equal value, as well as the form, components and method of grading the amount of wages, salaries and remuneration of agreement workers under a contract (collectively referred to as ‘remuneration for work’), i.e. all payments made for work performed. The employer is obliged to pay all remuneration for work on the basis of this internal regulation.  According to the explanatory memorandum, the internal salary regulation should also contain a “grading of difficulty between groups” reflected in the amount of remuneration for work. In our view, this means that the grading of remuneration for work within individual groups must be explained transparently in some way, e.g. through greater responsibility.

Instead of an internal regulation, the remuneration system may be agreed in a collective agreement; however, the draft law leaves the choice to the employer. In this case, the Czech draft law does not meet the requirements of the European Directive, according to which at least the categorisation of employees should have been part of the agreement with employee representatives.

The employer will also be obliged to draw up mandatory internal benefit regulation (or to agree this information in a collective agreement), which will cover all other monetary payments and benefits of monetary value provided to employees in addition to their remuneration for performed work, in other words, payments connected with the employment itself and not work performance. However, this will not include benefits whose amount is set by legislation from which the employer cannot deviate (e.g. salary compensation in cases specified by law and in the amount specified by law, such as during an employee’s annual leave). These internal regulations must contain objective and non-discriminatory criteria on the basis of which such benefits are provided to employees. The explanatory memorandum cites the length of service as an example in the case of a work anniversary bonus.

A breach of the obligation to adopt a salary regulation (or the relevant part of a collective agreement) may result in a fine of up to CZK 1 million for the employer; in the case of a benefits regulation, the fine would be up to CZK 400,000. In both cases, the breach would also result in the burden of proof shifting to the employer in any related dispute, unless the employer can demonstrate that the breach was clearly unintentional or of minor significance.

Furthermore, the employer will now be obliged, upon the employee’s request, to inform the employee within a maximum of two months of:

     a) the amount of the employee’s remuneration for work and other monetary payments and payments of monetary value for the previous calendar year;

      b) the average amount of remuneration for work and other monetary payments and payments of monetary value for the previous calendar year, broken down by gender within the employee’s pay grade.

This information will be stated as a gross amount for the entire previous calendar year and the corresponding gross hourly rate. The exact calculation should be set out by the Ministry of Labour and Social Affairs in a decree. For the purposes of agency workers, the user will be obliged to provide the employment agency with all necessary cooperation.

Employees will also be able to request this information through a trade union, an employees’ council or the Czech ombudsman.

The employer will also be obliged to provide the employee, upon request, with an explanation of the information provided within a maximum of two months.

However, if it were possible to determine the remuneration of a specific employee from the information on average remuneration (according to the explanatory memorandum, this typically concerns cases where 1–2 people of the same gender work in a given pay group), the employer shall provide this information only to the Czech ombudsman. The ombudsman will assess the information and inform the employee concerned of their assessment (e.g. inform them that they are being treated unequally) and advise them on how to proceed. Furthermore, the ombudsman will now have the option to represent employees in related court proceedings in cases of unequal pay.

The employer will also be obliged to inform all employees once a year of their right to submit the above-described request for information, including the option to request it through an employee representative or the Czech ombudsman, in a “manner customary to the employer and accessible to all employees”. According to the explanatory memorandum, this could involve, for example, publishing this information on the employer’s intranet, sending a mass email to all employees, or posting the information on a noticeboard

Under the draft bill, employers will only be required to fulfil these information obligations from 2028 (i.e. for the year 2027).

State reporting obligation and joint assessment of inequalities

From 2028, employers with 150 or more employees will be required to submit a report to the Ministry of Labour and Social Affairs on gaps of average remuneration for work and other monetary payments and benefits of monetary value within pay groups according to sex. The Ministry will issue a decree setting out the method for calculating such a pay gap and a template for the prescribed form, which the employer will be required to complete and submit via a data box.

Employers with 250 or more employees will do so annually, while employers with 150–249 employees will do so once every three years.

From 2031, employers with 100–149 employees will also be required to submit this report once every three years.

The employer will be required to discuss this report in advance with the trade union, if one operates at the workplace. The employer will also be required to provide the completed report to all their employees and the works council or trade union, if one operates at the workplace, by 30 April. At the request of an employee or an employee representative, the employer will be required to explain this report to them. However, if any part of the report would lead to the determination of a specific employee’s remuneration, the employer shall instead provide that part to the ombudsman (as in the case of the disclosure obligation described above).

The method for calculating the number of employees for the purposes of the reporting obligation will be set out by the relevant ministry in a decree – employees working shorter hours will be counted on a pro rata basis, and contract workers according to the hours worked. Agency workers will be counted as the user’s employees for these purposes, but only from 2031 onwards. Until then, only permanent staff will be counted.

The Ministry of Labour and Social Affairs will always notify the employer by 28 February at the latest that they have reached the required number of employees and that they are therefore subject to the reporting obligation in the nearest reporting cycle according to their size (i.e. smaller employers, for example, only in 2031, 2034, 2037… whilst larger employers will be required to report annually).

At the same time, the Ministry of Labour and Social Affairs will use the data provided (in the standard monthly report) to compile further statistics on equal pay by gender for these employers.

Failure to comply with the reporting obligation may result in a fine of CZK 1 million for the employer, as well as a shift in the burden of proof to the employer in disputes concerning unequal pay.

If the above obligation reveals a difference of 5% or more between men and women in any pay group, which the employer fails to justify in accordance with the law (e.g. by the employee’s work performance) or fails to eliminate within 6 months, the employer will be obliged to carry out a so-called pay assessment, i.e. a detailed analysis of inequalities and their resolution, as specified by law.

The employer will be obliged to carry out this assessment:

- with an existing trade union or works council

- by itself after a 30-day period has elapsed without result following employer´s mandatory notification to all employees indicating that the employer will carry out the assessment themselves, unless a trade union has been established at the workplace by that time or employees have initiated the process of electing a works council (i.e. effectively ‘encouraging’ employees to form a trade union).

For a breach of the obligation to carry out a joint assessment, the employer will face a fine of CZK 1 million and, furthermore, a shift in the burden of proof to the employer in disputes concerning unequal pay.

The role of employee representatives

The European Directive envisaged a relatively high level of involvement of employee representatives in remuneration matters. In this respect, the Czech draft law often falls short of the Directive, particularly in the absence of an agreement on the criteria for determining work of equal value. Employee representatives will thus benefit mainly from additional consultation rights – regarding internal salary and benefits regulations, the report to the state, and joint assessment. Employee representatives may also request information from the employer on behalf of employees regarding the average remuneration in their pay group by gender.

Single source and comparison with predecessors/successors

Employees may, through legal proceedings, seek equal pay even in relation to employees performing work of equal value in another company. The condition is that these are companies with a so-called single source, i.e. a central remuneration source that sets common remuneration conditions for multiple employers, relevant for comparing employees. Typically, this will involve business groups where the parent company uniformly sets the terms for wages, bonuses or benefits.

In all other respects, however, obligations (duty to provide information, reporting obligations, etc.) remain solely with individual legal entities, i.e. based on their company registration number.

Employees will also be able to use statistics or compare themselves with their predecessors and successors performing the same work, which merely confirms existing case law of both European and Czech courts (Judgment of the ECJ of 27 March 1980, Case No. 129/7 – Macarthys Ltd v Wendy Smith, Judgment of the Supreme Court of the Czech Republic, case no. 21 Cdo 3521/2023, dated 16 April 2025).

Conclusion

We now recommend that employers:

- collect all necessary data for comparing employees and creating a categorisation based on work of equal value – i.e. data on salary, bonuses, benefits, but also on specific roles (actual responsibility, strenuousness and complexity of the work), and

- monitor further developments regarding the draft of the Czech transposition.

In the event that there are no fundamental changes to the Czech proposal, we further recommend that employers

- create pay groups graded according to the value of the work – based on responsibility, strenuousness and complexity;

- identify any inequalities within the pay groups and determine whether they can be explained by factors permitted by law (Section 110 of the Labour Code regarding remuneration for work, and objective gender-neutral criteria for other monetary payments and payments of monetary value), and begin addressing unjustifiable inequalities;

- prepare an internal salary and benefit regulation;

- prepare for questions that employees may raise (“Why do I earn less than the average in my pay group?”);

- discuss equal pay for work of equal value within business groups as a means of preventing legal disputes;

- learn a new approach to recruitment – to not ask about current pay, to provide minimum offer before the interview.

Nataša Randlová

Lawyer/Partner
Tel: +420 222 755 311
randlova@randls.com
Nataša Randlová is one of the founding partners as well as head of the employment law team at Randl Partners. She has been recognized for the thirteen consecutive years in the renowned European guide Chambers Europe as a "Star Individual:; i.e., a personality with an exceptional reputation in her field. Multiple other global rankings, such as Legal 500, Practical Law Company, Best Lawyers, and Who's Who Legal, have repeatedly recognized
Nataša Randlová as a legal expert in the field of employment law. Nataša focuses mainly on collective bargaining, transfer of rights and obligations arising from employment relations, temporary assignment of employees, termination of employment, reorganisation, posting of employees, employee remuneration and other HR-related issues. Nataša also provides her services as an official mediator for collective bargaining disputes registered in the list of the Ministry of Labour and Social Affairs and provides a range of practical training courses and workshops in the field of employment law.