Croatia is entering the final phase of aligning its Labour Act with the EU Pay Transparency Directive. Although the deadline for transposing the Directive expired in June, amendments to Croatian legislation are still being prepared. A public consultation is expected during the summer, after which the proposed amendments should enter the next stage of the legislative process.
The new European rules aim to ensure equal pay for equal work, requiring organisations to adapt their remuneration systems, job evaluation processes, and reporting practices related to gender pay differences. While Slovakia, Italy, and Lithuania successfully completed the transposition of the Directive within the deadline, Croatia remains among the EU Member States still finalising its draft legislation.
Pay transparency becomes part of the Labour Act
According to the current draft amendments, pay transparency will be regulated through a new, separate chapter of the Labour Act. The aim is to avoid changing the existing definition of pay within the Labour Act, while the new provisions will primarily focus on employees’ rights to pay-related information, employers’ obligations, and reporting on gender pay gaps.
Since the law must go through two readings in the Croatian Parliament, the earliest realistic timeline for its adoption is estimated to be the end of the year. This will likely be followed by a transition period, allowing employers to align their internal policies, employment regulations, and other procedures with the new requirements.
What will change for employers?
The new rules will go beyond simply publishing salary ranges during recruitment processes. Employers will need to demonstrate that their pay systems are based on objective criteria and that employees performing the same work or work of equal value have equal opportunities to achieve the same level of pay.
In practice, this means that many organisations will need to conduct a systematic analysis of their existing pay structures for the first time. Job evaluation will become particularly important, requiring employers to clearly define factors such as skills, responsibilities, effort, and working conditions.
When will pay gap reporting obligations begin?
One of the key questions for employers concerns the first reporting period. Although the Directive envisages reporting for 2026, discussions are ongoing in Croatia on whether, due to the delayed transposition, the first full reporting obligation could be postponed until 2027.
A final decision has not yet been made and will depend on the final wording of the legislation and the decision of the Ministry of Labour.
What if employees are already asking for salary information?
It is important to understand that the Pay Transparency Directive is a legal instrument that obliges EU Member States to transpose its provisions into national legislation, rather than directly imposing obligations on employers.
Until an individual country incorporates the Directive’s provisions into its national legal framework, employees generally cannot directly require private employers to apply the Directive’s provisions.
Under European law, an unimplemented directive after the expiry of the transposition deadline may have an effect in relation to the state and its bodies (known as direct vertical effect), but it does not have a direct effect in relationships between private parties, such as employees and private employers.
In other words, an employee of a private company cannot automatically rely on the Directive itself to require an employer to implement new obligations before they become part of national legislation. Any potential claims would instead need to be pursued through separate legal proceedings, for example in the context of discrimination claims before a competent court.
Of course, employees have always had the right to ask questions about pay. However, under the new rules, employers will have an obligation to provide information regarding gender pay differences. This means that employees will be able to request information on average pay levels by gender for the same work or work of equal value, either for their specific position or for the category of positions their role belongs to, and employers will be required to provide an answer.
Employers that strive to build an organisational culture based on trust and two-way communication – such as those holding the Employer Partner certificate – already base their recruitment, compensation, reward, and promotion systems on transparency principles, including timely and transparent communication with employees. Such practices are desirable in every organisation, regardless of the EU Directive.
A regulatory obligation or an opportunity to strengthen employee trust?
The key to success lies in employers using these new requirements as an opportunity to systematically review their reward strategies and practices. This includes objective job evaluation, analysis of pay structures, identification of potentially unjustified pay differences, and the establishment of clear and transparent criteria for determining salaries, career progression, and variable compensation.
Professional tools and external expertise can play an important role in this process. For example, Equal Pay Champion, a methodology developed by SELECTIO, helps organisations assess how aligned their practices are with the principle of equal pay for work of equal value and identify areas that require improvement.
Organisations can therefore gain a “compass” and practical guidance on how to improve the transparency and fairness of their pay systems. This enables pay transparency to become more than just a regulatory requirement – it can become a tool for strengthening employee trust, reducing the risk of discrimination, and building a more sustainable and competitive approach to human capital management.
Would you like to assess your organisation’s readiness for the new era of pay transparency and identify areas for improvement? Contact us!
