A Progressive Era in the World of Work – New Social Norms on the Horizon

Recent years have proven to be incredibly challenging for employers in Poland, and the coming months are expected to continue in the same vein, heralding a new, progressive era in the world of work. This transformation is driven by advancements in artificial intelligence (AI) and its increased use in the workplace, as well as environmental, social and governance (ESG) considerations. Additionally, the incorporation of various EU Directives into the Polish legal framework – particularly those concerning pay transparency – are poised to set new standards in employment relationships. Furthermore, the recently implemented law on whistle-blowers has been a significant addition to the legal landscape. These changes will not only force a re-evaluation of established structures but will also refresh perspectives, provoke innovative solutions and, potentially, enhance employee awareness.

A straightforward question on the readiness of an organisation to discuss the details of employee remuneration, including the criteria for setting it and how it compares with the remuneration of other employees in the same role, encompassing both male and female staff, often elicits confusion. This reflects the substantial workload necessitated by the new stipulations of Directive (EU) 2023/970, enacted by the European Parliament and the Council on 10 May 2023 and referred to as the Equal Pay and Transparency Directive. This legislation bolsters the enforcement of equal pay for equal work or work of equal value among genders, and in particular, it introduces robust measures that enhance employee empowerment by ensuring access to information regarding their own and specific colleagues’ remuneration and the rationale behind it, which is ultimately aimed at fostering greater transparency in salary negotiations. Mandatory pay gap reporting, collective pay assessments, and a shift in the burden of proof during pay disputes are further novel solutions.

How will the Directive radically reshape existing remuneration structures and policies? The headache of criteria and evaluation

The Directive mandates that the criteria for differentiating employees’ remuneration must be objective, gender-neutral and based on factors such as skills, effort, responsibility and working conditions. These criteria may also consider other relevant job-specific factors. Importantly, these criteria must be applied in a manner that excludes any direct or indirect gender-based discrimination. The importance of not undervaluing relevant soft skills, which has often been the case in the past, is particularly emphasised. This focus aims to correct imbalances whereby such skills have been overlooked in previous remuneration practices. Accordingly, in light of the considerations mentioned above, the next pressing inquiry is whether employers are prepared to explain and justify any salary discrepancies when challenged by their employees. If not, they will have a lot to catch up on in the coming months.

To align with the requirements, employers can choose from various job evaluation methodologies. These methodologies generally fall into two main categories: global and analytical. Global (generic) methods involve ranking individual jobs according to an established criterion (eg, according to their value to the company) or, conversely, first establishing a specific number of groups and then assigning individual jobs to them. Analytical methods such as scoring or comparison, on the other hand, involve evaluating each job according to a set of specific factors. It is only after this assessment, including of factors such as skills, effort or responsibility, that remuneration is assigned to individual positions. Instead of ranking complete positions, each position should be evaluated according to specific factors. These factors include mental effort, physical effort, skills required, responsibility and other similar factors. Remuneration is assigned by comparing the weights of the factors required for each job.

The requirements of the Directive indicate that analytical methods may be more adequate as they provide for a more precise assessment and enable objective job evaluation. They also facilitate detailed justification for decisions made concerning the remuneration of individual employees, ensuring clarity and accountability. While the Directive does not introduce new principles for pay differentiation, it promotes those established through case law. The primary objective is to ensure consistent and pertinent application of these criteria across the EU, rather than to introduce new standards.

While defining the criteria for pay differentiation may be a significant challenge, their effective application in practice unveils even greater complexities. Job evaluation factors will be absolutely essential to ensure compliance; however, incorrect determination may lead to discrimination, despite scrupulous adherence to the adopted standards. For example, an overemphasis on factors typically associated with male-dominated roles, such as, traditionally, physical strength, and an insufficient recognition of soft skills, can skew results unfairly. The list of erroneously adopted criteria goes on, covering for instance practices of dual assessment of the same requirements (eg, various classifications of the required strength), or defining the “responsibility” of a position solely by its place in the organisational hierarchy of a given firm while ignoring the actual level of responsibility, or using different criteria for assessing male-dominated and female-dominated tasks.

Employers encompassed by the Equal Pay and Transparency Directive (and corresponding national provisions) will also face new obligations regarding gender pay gap reporting. They will have to transparently provide information on the gender pay gap and will have to inform about the reasons for any differences in average pay levels between female and male employees and proceed to a joint pay assessment if certain conditions are met. Employers will also have to make their employees aware of the remuneration structure in place and highlight the criteria used to determine the remuneration, pay levels and pay progression available, and also specifically remind their employees annually of their rights to this specific information.

The Directive must be implemented in Poland by 7 June 2026. In turn, the largest employers (those with more than 250 employees) must submit by 7 June 2027 the first reports required by the Directive (eg, on the pay gap), and of course the final shape of the domestic legislation will be decisive for the determination of their duties. While today the timeline appears to be generous and it may seem that there is plenty of time left to prepare for the requirements, this is a gross misconception. Establishing well-defined pay structures that comply with the new regulations is a complex process that demands strategic planning and cannot be achieved overnight (and in terms of actually reducing any identified gender pay gap to avoid having to report it publicly within the above timeframes).

The interesting observation is that most of the aspects mentioned above are already sanctioned by the existing anti-discrimination laws and jurisprudence; however, the EU has spotted their ineffectiveness thus far and frequent violations of the relevant laws. The good news for employers is that the vacatio legis set by the Directive should suffice for addressing any pitfalls, if internal remedial actions among employers begin now. It has to be borne in mind that for most companies in Poland, the transformation will entail the creation of an entirely new remuneration structure that will have to be implemented on actual persons, ie, towards employees who may currently receive imbalanced or unfounded amounts of remuneration.

Navigating the tightrope: addressing the no longer silent “S” in ESG

Another pressing topic for employers is the “S” in ESG. Why now? Because although entities subject to the non-financial corporate reporting obligation in the first instance will have to publish their first report in 2025, they already have to gather, analyse and prepare the necessary data to compile their reports from 1 January 2024.

For proactive employers already doing their homework in advance, this is an excellent opportunity to tailor the appropriate systems and corporate culture principles, among others, through the implementation of internal policies such as diversity, employment, work-life balance or reintegration policies, and thus increase their attractiveness as counterparties and employers on the labour market. To achieve this, they have to determine the applicable scope of reporting and then decode which European Sustainability Reporting Standards indicators are mandatory for them and which indicators they have to examine in terms of the so-called double materiality (and include in or exclude from the report) and what kind of data will be analysed. It might also be necessary to designate those employees who will be responsible for gathering and organising data for reporting purposes and, subsequently, for developing the reports or their particular sections. This is the right time to identify potentially problematic areas in which an employer’s postulates and declarations will not match reality, as after the first reports are published, the employer may become exposed to allegations of increasingly frequent “social washing” (the neighbour of the infamous “greenwashing”), where the declared values and actions, although excellent on paper and in promotional materials, are not reflected by the hard data evidenced by the reports.

Although the above-mentioned aspects have gained momentum, there is one aspect that seems to not be getting enough attention. Namely, that the Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464 of The European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting) will indirectly, through the impact of their business partners – ie, entities subject to the non-financial reporting obligation in the first place – force many smaller entities (employers) to undertake activities with respect to gathering specific data, in particular in the social field, since they, as suppliers, will have to provide appropriate information along the value chain to their contract partners, who will in turn need this to prepare their own non-financial reports. If they fail to do so, they risk losing their contracts since their counterparties will not be able to include relevant information in their reports and may choose not to prolong such co-operation, thus exposing them to unnecessary risk. This means that not only the biggest employers will have to pay attention to the social aspects of the ESG reporting requirements in the next months.

The Artificial Intelligence Act: the convenience and threat of AI

The extensive discussion about the influence of AI on the labour market now has an even bigger audience due to the recent publication of European Regulation No. 2024/1689 of 13 June 2024, the so-called Artificial Intelligence Act (the “AI Act”) – published on 12 July 2024 in the Official Journal of the EU, with most of the provisions becoming applicable after a transitional period of 24 months following its entry into force. Notably, AI systems used in the EU must be safe, transparent, traceable, non-discriminatory and environmentally friendly. They should be overseen by people and not be automated in order to prevent any potential harmful effects resulting from their use.

The discussion about the use of AI tools in the employment space is definitely going to boost, eg, recruitment, task distribution, performance assessment tools, etc. Existing mechanisms will require certain internal audits by the employer to verify any risk exposure in order to avoid penalties imposed by the AI Act. Certain AI systems will be categorised as high-risk and some will even be prohibited. It is important to note that the legislation requires conducting a level of social dialogue with employee representatives; hence, a certain level of scrutiny should be applied by the employers. The EU authorities are planning to issue more detailed guidelines for employers; however, certain internal preparatory works and reviews can be initiated even earlier.

Whistle-blowers

Although Poland was one of the last countries to implement Directive 2019/1937 of the European Parliament and the Council of 23 October 2019 on the protection of persons who report breaches of Union law, this does not imply that the related Polish law is flawless. On 24 June 2024, the Act of 14 June 2024 on the Protection of Whistle-Blowers was published in the Journal of Laws of the Republic of Poland. This Act will enter into force on 25 September 2024, three months after the date of publication, with the exception of provisions regarding external reports, which will come into force after six months. The key actions that will need to be undertaken include: (i) implementation of an internal reporting procedure by legal entities where, as of 1 January or 1 July of a given year, at least 50 individuals perform paid work. This number includes not only employees but also individuals working under other legal forms, particularly under civil law contracts, (ii) conducting consultations within a defined timeframe regarding the said procedure with trade unions or (in their absence) representatives elected by persons providing paid work for the legal entity. The representatives should be elected in accordance with the procedure adopted by the entity, (iii) organising the said elections of the representatives, (iv) making the procedure accessible to various specified individuals and contractors, and (v) establishing structures and procedures and preparing the necessary documentation.

There is currently widespread discussion on whether capital groups can have a common policy and resources. However, this does not seem to be a viable option. While some intra-group common approaches, co-operation and unification may be allowed, the safest course of action, given the current interpretation of the respective provisions, is to introduce a local policy tailored to the specific requirements of the law, being mindful of the possible sanctions for any errors in fulfilling the requisite obligations.

Why a progressive era?

Modern employees – and, broadly speaking, workers – often have little in common with those for whom the initial labour codes were introduced, although the employing entities’ fundamental interests seem to remain unchanged over time. Based on the EU’s post-COVID-era initiatives, legislative directions and technological developments, it can be concluded that there will likely be a focus on enhancing employee rights, awareness and empowerment. Additionally, there will be a preference for entities that maintain coherent, employee rights-driven policies and practices and promote gender equality. Ensuring market transparency and providing informative insights will be key priorities, including for the authorities. Those entities that do not follow these mainstream trends may lose out both in the employment market and against their business competitors.