Pay transparency is expected to become an increasingly important aspect of corporate governance in the coming years. Directive (EU) 2023/970, adopted in 2023, strengthens the mechanisms designed to ensure the principle of equal pay for equal work or work of equal value between women and men.
EU Member States, including Portugal, have until 7 June 2026 to transpose the Directive into their national legal systems.
While some of its key principles are already established at EU level, the specific rules applicable in Portugal will depend on how the Directive is implemented into national law.
Among the main changes introduced by the Directive are:
For companies with 100 or more employees, the Directive also introduces reporting obligations regarding gender pay gaps. Where reporting reveals a gender pay gap of at least 5% that cannot be justified by objective and gender-neutral criteria, employers may be required to carry out a joint pay assessment together with employees' representatives.
This is precisely where the issue moves beyond legal compliance and becomes a matter of business management.
In many companies, particularly SMEs, remuneration policies have evolved gradually over time, often without formalised criteria. Salaries may have been determined through individual negotiations, adjusted over the years, or linked to roles that have evolved without corresponding updates to contractual job titles. As a result, differences in pay may exist whose original rationale is no longer easy to identify.
The Directive does not prohibit pay differences. Rather, it requires that any such differences can be understood and objectively justified. This is likely to be one of the most significant changes businesses will face. In Portugal, this issue carries particular significance. According to Statistics Portugal (INE), micro, small and medium-sized enterprises account for 99.9% of all non-financial companies.
This does not mean that all companies will be subject to the same obligations. The reporting requirements established by the Directive apply only to companies with 100 or more employees.
Nevertheless, smaller businesses will not be unaffected. The new rules on recruitment transparency and employees' rights to access pay information form part of the broader pay transparency framework and are likely to require many companies to reassess how salaries are determined and communicated.
The precise scope of these obligations in Portugal will, however, depend on the future national implementing legislation.
It is also within SMEs that the practical challenges are likely to be most apparent.
Challenges for SMEs
The first challenge is organisational. In order to respond confidently to information requests or justify differences in pay, companies need a clear understanding of how roles are structured, which criteria are used to determine salaries and what factors justify different levels of remuneration. Where this information has not been systematically documented, compliance will inevitably become more complex.
The second challenge concerns formalisation. In many SMEs, the day-to-day reality of work is more flexible than the company's internal documentation. The same job category may encompass different responsibilities, while similar roles may carry different job titles. In a more transparent environment, this lack of alignment may make it more difficult to compare positions and consistently justify pay differences.
The third challenge relates to management and communication. As pay becomes a more transparent issue, companies may increasingly be required to explain decisions and remuneration criteria that previously went unquestioned. This requires not only legal compliance, but also sound internal governance and effective communication.
For this reason, successful adaptation will depend not only on the forthcoming implementing legislation, but also on each company's organisational maturity and level of preparedness.
Businesses with clearly defined roles, identifiable remuneration criteria and well-documented HR practices are likely to experience a smoother transition. Others may require a more extensive internal review before the new framework comes into force.
The Directive still needs to be transposed into Portuguese law, and that legislation will ultimately determine the detailed scope and application of these new rules. One point is already clear, however: discussions about pay will no longer remain entirely informal. For many Portuguese SMEs, that may prove to be the greatest challenge of all.