Equal pay for equal work or work of equal value will become the standard for employers in Croatia and the European Union in less than two years. Although institutions and organizations are already taking decisive steps to combat discrimination based on any grounds, pay disparity still exists. According to the latest report by the European Commission, the gender pay gap in the European Union still exists. Directives introduced by the EU will create a legislative framework to reduce the gap to 5%, while also ensuring the creation of conditions allowing the underrepresented gender (mostly women) to have a greater presence in leadership positions. Employers will be required to regularly report on pay disparities and the steps and actions taken to reduce the gap to or below the allowed threshold.
How is the pay gap measured?
To better understand the pay gap, we must first understand how it is calculated.
The unadjusted pay gap between men and women considers companies with more than 10 employees and refers to the average gross hourly pay (excluding overtime) between women and men. This calculation does not take into account differences in worker or job characteristics such as education, work experience, or sector.
The adjusted pay gap can serve as an indicator of whether an employer is paying equal wages for equal work or work of equal value because it considers data such as position, education, and work experience. Although this calculation provides a much more realistic insight into the pay gap compared to the unadjusted pay gap, it does not include indicators that are often linked to discrimination and unequal opportunities, such as negotiation skills or job preferences.
Let’s take the fictional company "Ana Ltd." as an example. In this company, the annual average gross salary for men is €36.000, and for women, it is €32.000. The unadjusted pay gap in this scenario is approximately 11%, which equals €4.000. However, after conducting a regression analysis that takes variables into account, the company finds that the adjusted pay gap is actually 5%. Despite being smaller than the unadjusted pay gap, the adjusted pay gap can still indicate discriminatory practices. This suggests that, within "Ana Ltd.," women may have a 5% lower salary than their male colleagues who have the same job tasks, education, and experience.
The pay gap is not the same as the gender equality index. The gender equality index is a much broader calculation. It is measured by the European Institute for Gender Equality (EIGE) across six areas: work, money, knowledge, time, power, and health. The trend scale ranges from 1 to 100, with 100 meaning full gender equality. With a gender equality index of 60.7 out of 100, Croatia ranks 20th out of 27 EU member states. The biggest progress Croatia has made is in the areas of power and money, meaning that the pay gap is slowly decreasing.
Do women in Croatia earn less, and why are quotas being introduced?
The gender pay gap in Croatia is 11,2%, while the average pay gap in the European Union is 13%. In order to reduce the pay gap, the European Union has adopted the Pay Transparency Directive. According to the Pay Transparency Directive, by June 2026, the pay gap should not exceed 5%. Organizations in member countries will have to create pay grades that will be available to all employees. This means that every company must have analytical tools and methodologies for comparing values and categorizing jobs. In this way, the EU seeks to encourage employers to use pay structures that reduce gender-based wage discrimination. In this context, the pay gap refers to the adjusted pay gap, i.e., the difference in pay between men and women with identical education and experience working in the same position.
Women in Croatia hold less than 20% of leadership positions
According to the ILO (International Labour Organization), companies with gender-balanced boards of directors are almost 20% more likely to have better business results. However, Croatia is showing a negative trend in the share of women in leadership positions. The SELECTIO women index, which has been measuring the share of women on the management boards of companies in the CROBEX index for 20 years, was 19.4% in 2024, compared to 22.2% the previous year.
Therefore, the continued underrepresentation of women in leadership positions will be regulated from 2026 by the introduction of the Directive for Gender Balance on Corporate Boards. That Directive determines that the underrepresented gender should have at least 40% of appointments in supervisory boards or at least an average of 33% of all positions in supervisory or executive boards. In this way, the European Union seeks to ensure that when two candidates with identical qualifications are competing for a job, the underrepresented gender is given priority.
Isn't hiring someone just because they are a woman or a man also discrimination?
This question is just one of many showing that an organization may not be fully aware of EU Directives. When we delve a bit deeper into the topic, it becomes clear that HR departments often lack a clear perspective, not only about the new Directives but also about the entire spectrum of activities that lead to (in)equality for women in business.
The issue of gender equality and creating equal opportunities for all employees that will result in equal pay for equal work is complex and comprehensive. To adequately address these challenges, it is necessary to think critically and try to see the bigger picture. The first step towards creating fairer business systems starts with openness and informing. Only when we establish the reality faced by women who want to advance can we think about solutions.
To help raise awareness of discrimination, we have listed the most common myths about equal pay and equal opportunities that neither employers nor HR professionals are immune to, and which shape business policies and sometimes cloud the broader perspective.
1. Concluding without conducting an analysis
"We have discrepancies in key positions, but colleagues have been in these positions longer, and that’s why their pay is, rightfully, higher."
When we see this practice, we must go back to the reasons behind the pay gap between men and women. Are men in those positions longer because they generally have more years of work experience, or because they have progressed faster? Does it happen in your organization that men more frequently and quickly advance? Does it happen, even though your organization employs more women than men, that there are more men in leadership positions? Have you ever tried to analyze why that is?
Of course, it can happen that in some positions or departments employees of a certain gender, on average, have higher salaries, and there may be logical explanations for this. However, if differences exist in many positions or in almost all departments in the organization, further investigation is necessary to check if there might be subconscious discrimination in the organization. Therefore, to ensure that the pay differences are justified, the organization must first conduct a pay gap analysis. Only then can we say that the pay difference is justified.
2. Conducting an analysis that is not layered
"We looked at the salaries and on average, there are no significant discrepancies, which means there is no inequality in our company."
Companies often conduct a pay gap analysis at the organizational level and draw absolute conclusions from it. However, an unadjusted pay gap analysis is actually (only) the first step. That doesn’t mean that conducting a pay gap analysis at the organizational level doesn’t carry weight – on the contrary, it is desirable and important as it lays the foundation for all further actions. However, after the unadjusted pay gap analysis, it is necessary to also conduct an adjusted pay gap analysis, which will show the differences at different seniority levels, different job positions, and so on. Various parameters need to be examined, depending on the type of organization and industry, which may cause justified or unjustified pay differences. Only when a layered pay gap analysis is conducted can the organization discover if there are inequalities and what the causes of those inequalities are.
3. Justifying the pay gap with the number of male or female employees
"We are a 'male' industry, so we have more men in leadership positions, and they are paid more."
When we look at "female" industries, we notice that, as a rule, these industries do not have more female leaders, and women are also paid less than their male colleagues. For example, an annual report from the American company Namely shows that 71% of HR professionals are women. While female HR professionals earned an average of $91.981 annually, their male counterparts earned almost 13% more – $103.644. In other words, for every dollar earned by male HR professionals, female HR professionals earned 0,89 dollars. The situation in the European Union is not much different.
Numerous studies show that an increase in the number of women in "male" industries leads to a devaluation of those industries. For instance, when education was predominantly male, it was considered a highly valued profession in society, but today, as the percentage of women in education has significantly increased, it is one of the lowest-paid and least-valued sectors in Croatia.
To prevent such phenomena, it is necessary to investigate the reasons behind the pay gap, but also behind the decision to work in a particular industry. Instead of citing the number of women or men in an industry as the main reason behind the pay gap, a pay gap analysis should be conducted. Additionally, it is recommended to explore employee motivations to implement programs that will encourage the underrepresented gender.
4. Justifying the low percentage of women in leadership positions with a lack of motivation among women for such positions
"We would gladly promote women, but they usually don’t want to."
It is often mentioned that a lower and slower advancement of women, which causes lower salaries and a smaller percentage of women in management, is due to women’s lower motivation to take on these responsibilities. Indeed, it is possible to find studies that show that women, on average, are less motivated to take on managerial positions. But can we re-examine this phenomenon and try to understand why this is the case? Is there something in the requirements of high-ranking positions that discourage women from applying? Is there something in women's lives that prevents them from taking positions with high responsibility? Over 75% of unpaid care for family members and household work is carried out by women. High-ranking positions (often implicitly and against the Labor Law) require a lot of overtime work.
Although women, on average, are more educated than men, a larger percentage of unemployed people are women, and women are also more likely to work part-time to balance private and professional life. If this continues and as long as it is socially acceptable for women to take on more responsibilities in their private lives than men (only 4% of fathers take parental leave), fewer women will be motivated to advance to management positions.
What kind of company do we want to build?
If you want to create a humane working environment where men and women can reach their full potential without compromising their personal lives, you are probably already implementing programs for stress management and achieving better work-life balance. You may also have revised your KPIs and redefined the concept of a successful organization.
The transformation of workplaces and the creation of equal opportunities for all employees, regardless of gender, cannot begin without revising diversity and inclusion policies. Additionally, it is important to ensure opportunities for advancement, and education, and establish systems that will enable easy access to salary information.
Organizations that were the first in Croatia to disclose data on pay gap and the action plans they have to reduce it, became part of the first generation of employers in Croatia with the Equal Pay Champion certificate last year. Holders of this certificate are setting an example and encouraging others to develop fairer and more attractive work environments. Besides recognition from the HR community, these companies have gained visibility as employers who create humane working environments – exactly the kind that new generations of employees expect and demand.
Applications for the Equal Pay Champion certification process are open until December 15, 2024. Contact us for more information and be ready for June 2026!
