Salary Transparency: What We Hid About Salaries, We Hid!

Following last year’s European Parliament elections, which opened the door to more radical parties and ideologies, Brussels has begun to seriously reassess how its policies impact the business world for the first time. European bureaucrats suddenly understand that they have overburdened the business community with numerous obligations, reports, and regulations, leading to a pause on a series of already adopted EU directives, with their impact being reconsidered before being incorporated into national legislations.

However, one directive, adopted back in 2023, which is about to come into force, is not only not in question but is also not up for discussion. This is the Directive on Salary Transparency, which is expected to fundamentally revolutionize the approach to salaries in the Union.

Specifically, this directive, which will start to be applied in June next year, requires companies to completely change their paradigm regarding salaries. They must publish salary ranges for individual job positions, ensure equal pay for the same job for all regardless of gender; in addition, they must thoroughly report on gender pay gaps. The consequences for European companies are far-reaching.

Those that have resisted this so far or simply have not dealt with it must now reshape their internal processes to adapt to the new rules. They need to restructure pay scales and introduce reporting systems, which is not simple. While some companies are already embracing transparency, others, especially smaller ones unaccustomed to such standards, are expecting a demanding adjustment. Non-compliance with the Directive carries the risk of penalties and reputational damage, yet there is no backing down, even though critics warn that it could further burden companies already struggling with regulatory complexity.

No More Taboos

These are not the only novelties. According to the Directive, all employees, both existing and potential, can not only request information from their employer about how much a colleague sitting two offices away earns – but it is even encouraged. Salaries are no longer a taboo, and this is the ‘new normal’ we are just beginning to adjust to.

This is not only a challenge for domestic employers; many companies around the world are facing this issue. Salary transparency is not just a European topic; it is increasingly being discussed in Southeast Asia as well. Multinational companies face a significant challenge in balancing transparency across all corners of the globe, and the pressure for salaries to be equal in a global context is growing. Of course, this does not suit employers who have employees in Palo Alto and Ho Chi Minh City; an IT worker in California and Vietnam should not be paid the same. Or should they? This is now a global dilemma. The impression is no different at the EU level. Bankers in Luxembourg and Zagreb should have similar earnings, even though Luxembourg is a hub for the financial industry. Although the general impression is that European employers are more open to the idea of more transparent salaries, as is the public, it is enough to skim through comments under articles in other European media. Communism is making a comeback, which is the essence of what EU readers think about it!

End of Bans

In our country, this almost simple word is, of course, not mentioned, which is logical since we are not talking about a Thompson concert or a church sermon. The story of salary transparency in Croatia is not considered ideological, and the impression of Lider is that it meets with general approval from the domestic public, which traditionally sees employers as the main culprits for the emigration of Croats to the diaspora, for low wages, for excessive profits, for a large number of foreign workers, for the breakdown of Maja Šuput’s marriage…

Regardless, salary transparency will become a topic here when the law prescribes it – because in Croatia, this simply is not discussed. The amount of salary is a private topic that spouses discuss behind closed doors, far from the ears of children, let alone from mothers-in-law and sisters-in-law and curious neighbors. Salaries have been further tabooed by contracts and work regulations. Provisions have been included in them stating that income must not be discussed. As many as 69 percent of workers, according to a survey by the MojPosao portal, have faced formal or informal bans on discussing salaries. Well, according to the new rules, that has come to an end! From next year, all such provisions in employment contracts, regulations, and other internal rules must be removed.

The new directive changes this approach by introducing transparency as a key element of business culture. Instead of salaries remaining a secret, they become the result of a clear policy based on objectivity and gender neutrality. This change poses a challenge for employers, as they now need to establish a system where salaries are based on defined criteria such as competencies, job complexity, responsibilities, and working conditions, along with clear evaluation, approval, and revision procedures.

Salary Discussions

This transparency also requires a new approach to communication. Managers and human resources professionals will need to undergo training to learn how to discuss salaries in a way that meets legal obligations while also preventing discrimination in hiring and promotion. These skills are crucial for aligning with the new standards that impose the need for clear and fair communication with employees about their rights and working conditions.

In addition to new communication, financial implications should not be overlooked. If, for example, an unexplained pay gap greater than five percent is discovered in salary transparency reports, it will need to be corrected, which may involve salary increases. Such changes directly impact company budgets, requiring careful planning to ensure financial stability while also complying with legal requirements.

– The EU Directive on Salary Transparency, which comes into force on June 7, 2026, imposes obligations on all employers in the European Union to strengthen pay equality, reduce gender discrimination, and increase transparency in the workplace. The obligations arising from it apply to all employers regardless of size, except when it comes to reporting pay differences, which is being introduced gradually, depending on the number of employees – explains Ema Buković, senior human resources consultant at the Selectio Group, a Croatian group specializing in human resources consulting.

It is not only controversial provisions in contracts that need to be removed; there are a number of processes that need to be adjusted to the Directive. Some companies in Croatia began preparatory actions immediately after the Directive was adopted, mainly those with mature human resources processes. Buković notes that these are generally companies with defined job systematization, established pay grade systems based on objective job evaluation criteria, and transparent income policies. However, there are also companies that are just at the beginning of the process.

– The readiness of companies varies depending on sectors and the size of the organization. Generally, larger companies, especially those from sectors such as finance, telecommunications, pharmaceuticals, FMCG, and IT, are the most prepared, as their HR processes are already very developed and they are more aware of the importance of transparency and pay equality. In these sectors, pay grade systems and job evaluations have often existed for years with appropriate technological and organizational support. On the other hand, in sectors such as manufacturing, construction, or smaller retail companies, where HR processes are often still in their infancy or fragmented, preparation for the Directive is slower as it requires comprehensive, and thus more expensive and time-consuming interventions. There are also companies that have shown that with a structured and systematic approach, strong management support, and dedicated budgets, significant progress can be made in a relatively short period – noted Buković.

Some Start from Scratch

A similar path is being followed at Alma Career, a multinational company that connects employers and job seekers and deals with human resources. Their impression is that many companies have only recently begun to realize that the implementation of the Directive is literally around the corner, and they notice that most still do not have a pay system that would meet the new standards, and even fewer have a well-organized and quality job systematization.

– The adjustment will certainly be less painful in companies that already have at least a basic pay system and that foster more open communication with employees. The technology sectors have an advantage in this regard as they are accustomed to greater transparency and quicker implementation of new practices due to the nature of their work. It will be more challenging in traditional industries and companies that have pushed this topic aside for years and are now starting almost from scratch. The biggest problem is precisely that this issue has been neglected for a long time and has not been approached strategically. Today, less than a year before the implementation of the Directive, many employers are just starting to ask the first questions, beginning with what exactly they need to do, how to design a pay system that is sustainable in the long term, and how to communicate all this to their people – said HR professionals from Alma Career.

And that the technology sector is at an advantage is evidenced by the example of Odašiljači i veze. This company is in a low start position regarding the Directive.

– As a company with 350 employees, we should be required to report once a year, and it is extremely important for us to prepare adequately. According to the information we have, we meet most of the Directive’s requirements. We continuously work on equality for all regardless of gender, age, and other personal characteristics of employees; our priorities are abilities, competencies, and expertise. An internal analysis concluded that there are no pay differences based on gender, age, and personal characteristics of employees. These are regulated by a series of regulations that have been agreed upon with employee representatives and are available to employees. We are also preparing for a detailed analysis, and we expect more concrete information after the Directive is transposed into our national legislation – said Marija Pezo, head of the Human Resources Department at OiV.

In addition to the fact that some employers, mainly large ones, will have to prepare special salary reports, they are also concerned about salary transparency. Zrinka Vrtarić, a lawyer at the Vrtarić and Partners Law Firm, in collaboration with Deloitte Legal, notes that employers ‘fear the reaction of workers after the implementation of the Directive begins’.

– The reaction of employers is not unusual considering the specifics of Croatian business culture, where salary transparency is neither common nor valued. They are also concerned about how the Directive will affect salary growth – said Vrtarić, emphasizing that for now, ‘the initial activities of employers do not include radical changes aimed at increasing salaries, but rather adjustments to existing systems with minimal changes to be ready for the implementation of the Directive’.

Low Start

Employers are in a low start position, preparing as much and as best as they can, but the state is lagging and is typically catching the last train. Namely, Croatia has not yet transposed the Directive into national legislation, and it is unclear when it will do so. We dug and found that in the Annual Work Plan of the Ministry of Labor, Pension System, Family, and Social Policy for 2025, it states that ‘in 2025, the alignment of general labor legislation with Directive (EU) 2023/970 will begin’. This means that the Labor Law and the Gender Equality Law will also change, and new subordinate regulations are being developed that will define the methodology for reporting and job classification according to the principle of ‘equal value of work’. According to Lider’s information, the draft law will be in e-Consultations during the fall of 2025, and in the Croatian Parliament by spring 2026 at the latest, so that employers have at least a few months for adjustment.

It should also be noted that the principle of equality between men and women regarding equal pay was established as early as the Treaty of Rome in 1957, which is the first document that led to the EU as we know it today, and subsequently by the Lisbon Treaty. The problem is that employers have not adhered to these principles for years, resulting in a binding directive. Therefore, this opportunity must not be missed now.