On August 31, 2026, the government approved an amendment to the Labor Code , which transposes the European Directive on Pay Transparency into Czech law . Companies will be required to describe their compensation system, define groups of jobs of equal value, and inform job applicants of their salary no later than upon signing the contract. We asked Milan Barták what this means in practice, when is the right time to start, and what most often surprises companies during a compensation audit.
What should a typical Czech company understand by “transparent compensation,” and what will actually change for it compared to the current situation?
Transparent compensation does not mean that individual salaries will be posted on the intranet. The main point is for the company to have clear, understandable, and justifiable rules: how it determines salaries, why compensation for people in similar positions may vary, and how employees can grow both professionally and financially.
The basic principle already applies today: equal pay for equal work or work of equal value. The new legislation expands on this principle, adds obligations for employers and rights for employees, and, most importantly, makes it possible to enforce these rules. Companies will therefore need more clearly defined job descriptions, job classifications, pay scales, and, above all, the ability to explain their pay decisions.
I’d like to mention a situation that you, as managers or HR professionals, are surely familiar with. When an employee comes to you today and asks for a raise, you might grant it—or you might not. But I’m sure that starting next year, you’ll think more carefully about whether it’s worth it and what the consequences of such a decision will be. Is this really the right person—do they have unique expertise and deliver exceptional performance? After all, giving one employee a raise could lead to raises for others if you can’t justify the decision according to your own compensation policies.
Which requirements apply to all employers, and which apply only to larger companies? What is the timeline?
All employers are already subject to the aforementioned principle of equal pay for equal work and the prohibition against discrimination. Furthermore, employees cannot be restricted in how they handle information about their own wages.
Under the approved proposal, all companies would be required to describe their compensation system in an internal regulation or collective bargaining agreement, define groups of work of equal value, and establish gender-neutral criteria for job evaluation. Recruitment procedures will also change: job applicants must be demonstrably informed of the minimum compensation and other benefits before the employment relationship begins. Conversely, employers are prohibited from asking applicants about their previous salary.
Employees at all employers will have the right to request information about their own compensation and the average compensation in their job category, broken down by gender. Employers must respond within two months and inform employees at least once a year that they have this right.
Regular reporting on pay gaps, on the other hand, will apply only to employers with 100 or more employees. Companies with 250 or more employees will report annually, while those with 100 to 249 employees will report once every three years. The first reporting requirement will apply in 2028 to employers with 150 or more employees; companies with 100 to 149 employees will be required to report starting in 2031.
When is the right time to start? Does it make sense to discuss this now, when the amendment hasn’t been approved yet?
Now is the time to get started, especially if you have no idea whether your company is ready for the new legislation.
I’m an optimist, and I believe that the vast majority of companies do not intentionally discriminate. However, every company carries the consequences of its past decisions. Employee A simply asked for a little, so why should we give him more? And Employee B was on maternity leave for six years, so she naturally has to earn less. Does she really have to? She does the same work and achieves the same results, doesn’t she?
It can take years to eliminate pay disparities, especially when you only have a 3 percent increase in the payroll budget to address the issue. If you don’t start thinking about corrective measures right away, you’ll miss the chance to resolve the issue sooner. You might tell yourself that a significant portion of the requirements won’t take effect until 2028, but the calculations will be based on data from 2027.
How SmartFP solves it
That’s exactly what the Transparent Compensation module is for. You have positions, pay grades, individual pay components, work schedules, pay changes, and performance evaluation results all in one place. This means you don’t have to compile reports from multiple Excel files, and you can respond to an employee’s inquiry in a matter of moments.
What is a compensation audit in practice, what is reviewed, what documentation does a company need, and what is the outcome?
Just as the directive affects multiple processes, a compensation audit also covers multiple areas. It is not just a matter of comparing individual salaries with the average salaries of women and men. The audit examines whether the compensation system is set up consistently and whether the company can explain the differences between employees in comparable positions. It also examines whether individual roles have clearly defined job descriptions and base salaries, whether bonus criteria are evaluated fairly, what rules govern salary increases and promotion decisions, and whether these rules are accessible to employees.
First and foremost, an audit requires individual data on employees, job positions, work schedules, and all components of compensation, including employee benefits. It is important to have the data standardized—for example, converted to full-time equivalents or to a comparable hourly rate. The audit’s output is not just a list of discrepancies, but also a proposal outlining which measures should be taken and which ones should be prioritized.
How is “work of equal value” determined, and what most often surprises people during a company audit?
The good news for every company is that it doesn’t have to adopt any external benchmarking methodology and can build on its existing practices. After all, you know why you want to pay one employee more than another.
Work of equal value is not determined by job title. Two differently named roles that require a similar level of knowledge, responsibility, complexity, autonomy, and physical or mental demands, and that have similar working conditions, may belong to the same category—that is, the same pay grade. Therefore, it is the actual content of the work that must be assessed, not the organizational structure or historical job titles.
Surprises can come from all sorts of places. Sometimes it’s the wording in internal documents that isn’t entirely gender-neutral. Even international companies that appear to have high HR standards at first glance are often surprised—they’ve never compared men’s and women’s salaries. After all, a 5 percent pay gap between men and women doesn’t sound like much, and then it comes as a shock to realize how much money is needed to correct it.
What if the audit reveals discrepancies? What steps should be taken to address the issue, and how should this be communicated to employees?
First and foremost, it is important to note that an audit conducted well in advance gives a company the opportunity to respond to the situation before the effective date.
Even later, however, a pay disparity does not automatically constitute a violation of the rules. First, it is necessary to verify whether there is an objective and verifiable reason for it, such as differences in performance and results, or a recent start at the company and the onboarding process. If there is no reason—or if the company cannot prove one—it is appropriate to develop a specific corrective action plan. This does not always have to mean an immediate wage increase of x%, but it should be fair, time-bound, and clearly justifiable.
When communicating, it’s best to focus primarily on the rules: how the company determines the value of work, how pay scales work, and how employees can earn a higher salary. The preparedness of managers is key. They will be the first to face questions, and inadequate explanations only serve to increase tension unnecessarily.
The salary range listed in the job posting, the prohibition on asking about salary history, and the right to ask about the average salary within one’s group. How should HR prepare for this, and what data is essential for managing it?
HR will need a standardized process from the moment recruitment for a vacant position begins. For each role, its classification should be clear, and thus the expected salary range and related criteria for determining the specific starting salary. The company should also decide in advance for whom it might be willing to make an exception. If an employer is unable to ask about a candidate’s salary history, it will be all the more important to be able to set a salary based on the role’s importance to the company and the candidate’s qualifications. Without clear guidelines in advance, there is a risk of unnecessary manual work and delays in the hiring process, which could result in losing a candidate.
The company will need information in one place about individual positions and employees, all salary components, work schedules, salary changes, benefits, and performance evaluation results. Without this information, it is impossible to respond reliably and quickly to employee inquiries, prepare reports, or protect the confidentiality of personal data.
What three steps should a company take before the end of this year?
The first step is to assess the current situation. Without knowing the numbers, it’s hard to make progress.
Second: If you don’t have an appropriate compensation system, you should start a discussion as soon as possible about what constitutes job groups of equal value in your organization.
Third, we need to start preparing our processes and people. In the first phase, this involves HR staff and managers, particularly in light of the changes to the hiring process that will take effect as early as January 2027. Certain questions will be prohibited and may result in penalties.
About the Expert
Milan Barták has been working in the field of compensation for over 25 years. Most recently, he led the compensation and benefits department for the Asahi Europe & International Group; prior to that, he worked at Plzeňský Prazdroj, O2, Nestlé, and PwC. Today, he focuses on the European Directive on pay transparency and pay equity.
She helps companies with payroll data audits, setting up compensation structures, and preparing for new requirements. She has experience with compensation programs in nine European countries and uses both Czech and English in her consulting work and projects.
Do you need to prepare for the new legislation?
That’s exactly what the Transparent Compensation module is for. You have positions, pay grades, individual pay components, work schedules, pay changes, and performance evaluation results all in one place. This means you don’t have to compile reports from multiple Excel files, and you can respond to an employee’s inquiry in a matter of moments.
