Pay transparency: new obligations on the horizon

Portugal has taken the first step towards transposing the EU Pay Transparency Directive. The draft legislative proposal published in August envisages significant changes to recruitment, pay policies, employees' information rights and companies' reporting obligations.

One of the main changes is the requirement to disclose the starting pay or pay range before hiring. Employers would also be prohibited from asking candidates about their pay history, to prevent previous salaries from perpetuating pay inequalities. Clauses preventing employees from disclosing their own pay would be void.

The proposal would allow employees to request information about their individual pay level and the average pay levels, broken down by sex, of employees performing the same work or work of equal value. Companies would have to define and disclose objective criteria for setting pay, pay levels and career progression.

Reporting obligations would also change. The proposal would extend them to companies with 50 or more employees and cover indicators such as mean and median pay gaps between women and men, distribution across pay quartiles and the share of variable pay.

Where an unjustified pay gap of at least 5% is identified, a joint pay assessment involving employee representatives could be required. It would identify the causes of the gap and establish corrective measures, whose implementation would then be monitored.

The sanctions regime would also be strengthened. Some breaches of transparency, information and reporting obligations could constitute very serious administrative offences and lead to additional penalties, including the loss of public incentives or exclusion from public procurement procedures.

Employee protection would be expanded. The presumption of abuse associated with dismissal or disciplinary action following a complaint about pay discrimination would be extended from one to three years. The proposal also includes procedural changes intended to facilitate full compensation for harm suffered by employees.

Although the text may still change and the proposed transposition is only partial, companies should begin preparing. Priorities include reviewing recruitment processes and pay policies, classifying roles objectively, identifying pay gaps, and adapting systems for collecting and processing data.

Early preparation will help companies identify risks, correct inequalities and demonstrate that their pay decisions rest on objective, transparent and non-discriminatory criteria.