Czech Republic publishes draft Pay Transparency Act: key deviations and practical issues for employers

The Czech Republic has published a draft act implementing the EU’s Pay Transparency Directive. If approved by Parliament, the core provisions are set to take effect on 1 January 2027, with pay gap reporting obligations and related enforcement powers commencing on 1 January 2028. The first reports, covering 2027 data, will be due by 30 April 2028. Below we highlight the principal areas where the Czech draft deviates from the Directive or raises practical concerns for employers.

1. Remuneration system and benefits system

The draft introduces a mandatory obligation for every employer to establish and document a remuneration system by way of an internal regulation or collective agreement. This system must classify all jobs performed by the employer into groups graded by the value of work. Separately, employers that provide non-wage monetary or in-kind benefits must also establish a benefits system, setting out objective and non-discriminatory criteria.

These are new standalone obligations that will require employers to formalise and document their pay and benefits architecture, even where informal or legacy structures currently exist.

2. List of job evaluation criteria

One of the most significant challenges for employers will be properly defining job evaluation criteria.

The Directive provides that the criteria used to assess equal work or work of equal value shall include skills, effort, responsibility and working conditions and, where appropriate, any other factors relevant to the specific job or position, making the list explicitly open-ended.

By contrast, the Czech draft retains the existing Labour Code framework and requires employers to set remuneration based on the complexity, responsibility, difficulty and working conditions of the job position, as well as work performance and results of the individual employee. This list is exhaustive, meaning employers may not introduce additional evaluation criteria beyond those expressly enumerated. This rigidity could prove problematic for employers seeking to justify pay differentials on the basis of legitimate factors, such as market benchmarks or specific individual skills, that are not captured by the applicable criteria. Notably, the draft does not allow for arguments based on regional pay differences, an issue that has attracted significant judicial attention in recent years, with Czech courts holding that regional labour market conditions cannot justify pay differentials for equal work.

3. Calculation methodology deferred to implementing decrees

The absence of a defined methodology for calculating average pay levels (broken down by sex) and pay gaps creates uncertainty for employers that need clarity on inputs, formulas and data requirements before designing compliant systems and processes. Responsibility for the methodology lies with the Ministry of Labour and Social Affairs, which has so far provided only high-level outlines. The method for calculating pay information to be provided to employees, as well as the methodology for computing pay gaps for reporting purposes, is deferred to implementing decrees to be issued. As of the publication of the draft act, only high-level indications of these decrees are available.

4. Employer size thresholds and reporting frequency

The draft defines two employer size categories for reporting purposes:

• employers with at least 250 employees, which must report annually; and
• employers with at least 150 employees (to be lowered to 100 from 2031) and fewer than 250 employees, which must report every three years.

The Ministry will determine employer size and prepare the headline pay gap report using data from the monthly payroll reporting. Employers are separately required to prepare and submit by 30 April each year a report on pay gaps within individual job groups. The dual-report structure proposed in the draft – one prepared by the Ministry and one by the employer – adds complexity beyond the single reporting obligation envisaged by the Directive.

5. Agency workers – split responsibilities and transitional period

The draft introduces specific rules for agency workers temporarily assigned to a user undertaking. During the assignment, the agency worker is subject to the user undertaking’s remuneration system and the agency must pay the worker accordingly. For pay gap reporting purposes, the agency worker is treated as an employee of the user undertaking and counts toward the user’s total headcount for threshold Determination. However, the obligation to report the worker’s pay data to the Ministry rests with the agency. Where the user undertaking must prepare a job-group pay gap report, it must include agency workers’ data, with the agency required to provide the necessary cooperation. This split of responsibilities creates a complex compliance dynamic. A transitional provision delays the inclusion of agency workers in the reporting framework until 1 January 2031. Until then, agency workers are excluded from employer size thresholds and gap calculations.

6. Limited guidance on the single-source concept

The draft transposes the Directive’s “single source” concept by providing that, where a single source sets common remuneration conditions for multiple employers, the comparator pool in equal pay disputes is not limited to the employees of the respondent employer. However, the draft legislation does not elaborate on how this principle is to be applied in practice.

7. Role of the public ombudsman

A notable Czech-specific feature is the expanded role assigned to the Public Defender of Rights (the “Ombudsman”). The Ombudsman will serve as the designated equality body and will, among other things, receive and evaluate individual pay data requests where disclosure would reveal the pay of an identifiable colleague. It may also provide opinions on remedial measures adopted following a pay assessment and represent employees in court proceedings.

8. Timeline risk and preparedness

Given that the draft has not yet been submitted to Parliament and several implementing decrees remain to be drafted, there is a material risk that employers will have very limited lead time to prepare once the final rules and methodologies become available.

The core provisions are expected to apply from 1 January 2027 with the reporting and enforcement provisions applying from 1 January 2028. A further lowering of the size threshold, to 100 employees, is scheduled to take effect from 1 January 2031. Employers are therefore advised to begin reviewing their existing pay structures, job classification systems and data capabilities now, so that they are well positioned to comply once the final legislation is enacted.