The issue of equal treatment between men and women in the workplace is nothing new; however, it gained new impetus with the publication, in May 2023, of Directive (EU) 2023/970.

Although published and in force for over a year now, this Directive does not seem to have received due attention by many organisations in Portugal.

In fact, according to recent studies on pay transparency in Portugal, although the majority of the companies covered by the studies stated that they were working on the issue of pay transparency, the truth is that almost half revealed that they were still unaware of the Directive and its implications.

The fact that the transposition deadline is set for June 2026 may be contributing to organisations’ lack of sense of urgency in anticipating the Directive’s implications.

It is true that Portugal already has in place Law 60/2018, of 21 August, the purpose of which is to promote equal pay for women and men for equal work or work of equal value, notably by imposing on companies the obligation to establish a transparent remuneration policy, compliance with which has recently been widely scrutinised by the Authority for Working Conditions (Autoridade para as Condições do Trabalho, or “ACT”), as well as Law 62/2017, of 1 August, establishing a regime of balanced representation between women and men in the management and supervisory bodies of public sector companies and listed companies, and Law 26/2019, of 28 March, establishing a regime of balanced representation between women and men in Public Administration executive positions and governing bodies.

However, according to the latest data collected by the Portuguese Gender Pay Gap Barometer, published by the Strategy and Planning Office of the Ministry of Labour, Solidarity and Social Security, for the year 2022, a slight increase was registered in the gender pay gap compared to 2021 – a trend that had been reversed since 2010.

The new Directive imposes a set of obligations on companies in terms of pay transparency, which, once transposed, will entail a considerable change to the applicable framework (in both the public and private sectors).

What are the Directive’s main obligations in terms of pay transparency?

Job seekers

(i)     Job seekers will be entitled to receive information about the starting salary or salary range for the position they are applying for, before the job interview (e.g., in the job advert).

(ii)     In addition, candidates should not be asked how much they earn or earned in their current or previous job, thus putting an end to interview questions about salary expectations.

(iii)     Job adverts and job titles shall be gender neutral, and recruitment processes shall be conducted in a non-discriminatory way.

Workers

(i)      Workers shall have access to the criteria used to determine their pay, pay levels, and career progression. These criteria shall be objective and gender neutral.

(ii)     Upon written request, workers shall have access to information on their individual pay level and the average pay levels, broken down by sex, for categories of workers performing the same work as them or work of equal value to theirs.

(iii)     Workers cannot be prevented from disclosing their pay in order to guarantee the effective application of the principle of equal pay, and it will no longer be possible to include a clause in the employment contract subjecting such information to a duty of confidentiality.

(iv)      Workers who consider themselves wronged as a result of the violation of a right or obligation related to the principle of equal pay will be entitled to claim compensation for the damage suffered or full reparation, with the burden of proving that there was no violation being placed on the employer whenever workers present facts that give rise to a presumption of discrimination.

Employers

(i)     Employers will be obliged to inform all workers, on a yearly basis, of their right to request and receive pay-related information.

(ii)     Employers with 100 or more employees will now have to periodically report to the ACT information on pay disparities existing between female and male employees.

In this regard, we highlight that Law 60/2018 already provides a broader subjective scope, extending the need to implement a pay gap assessment plan to employers with more than 50 workers. As such, we anticipate the maintenance of this limit as possible for the purposes of the obligations arising from the Directive. 

(iii)     If the information reported reveals a gender pay gap greater than 5%, employers will have to provide the corresponding justification in an objective and gender-neutral way.

(iv)     If this justification is not provided or the disparity is not corrected within six months of the date on which the pay gap information was communicated, employers will be subject to a joint pay assessment, carried out in cooperation with the representatives of the relevant employees, with a view to identifying, correcting and preventing pay gaps between female and male workers that are not justified on the basis of objective, gender-neutral criteria.

(v)     In addition to the possible payment of compensation to workers, other sanctions, such as fines, may be imposed on organisations in the event of non-compliance with pay transparency obligations.

What should organisations start doing in terms of pay transparency?

Although the deadline for transposition of the Directive is still more than a year and a half away and the exact terms of its implementation in Portugal are not yet known, organisations should start preparing and implementing measures to promote pay transparency, such as:

• Implementation and/or revision of the transparent remuneration policy in force;
• Provision of training on pay discrimination;
• Identification of existing job positions and critical analysis of their various components in order to determine any pay differences between jobs of equal value;
• Drawing up action plans for equal pay;
• Review of pay and career progression structures;
• Review of the information included in recruitment and selection processes;
• Review of employment contracts.

Organisations should view the measures arising from the Directive as a business opportunity, considering that by eliminating discriminatory factors they not only make themselves more attractive, but also encourage the building of a more diverse workforce, with all the benefits this brings. In this way, organisations’ anticipation of the measures outlined will certainly prove a competitive advantage.  

In sum, the anticipation of these measures in line with the guidelines set forth by the Pay Transparency Directive is not only a prudent management goal but should be assumed as a strategic priority for organisations given the impact that failure to do so will have on their business, costs, and people management.

Has your company started to implement measures to promote pay transparency and mitigate pay disparities?