It has been more than a year since the European Parliament’s Directive 2023/970 known as the EU Pay Transparency Act was passed, which aims to reinforce the principle of equal pay for women and men, eliminate the gender gap and ensure that companies offer equal pay for equal work or work of equal value. The time is therefore approaching for companies to implement this regulation. From 7 June 2026, it will be mandatory to provide prior salary information in job advertisements and to communicate salaries and explain the criteria used to determine salary levels. In addition, companies will have to take action when they detect a significant pay gap.
New rules for recruitment processes
In selection processes:
- Employers may not ask applicants about their current or previous salaries.
- Candidates will have the right to know the starting salary or pay band for the position for which they are applying before the interview. It will no longer be sufficient to refer to the relevant collective agreement.
Transparency in salary levels and remuneration criteria
Companies are obliged to make available to their staff the criteria used to determine the remuneration of each employee, as well as the salary levels and pay progression.
In addition, each worker may request his or her individual pay level and average pay levels, which the company shall provide broken down by sex for categories of workers performing the same work or work of equal value.
Additional obligations for companies with more than 100 employees
Companies with a workforce of more than 100 employees must, after consultation with employee representation, communicate to the competent authority specific information on their pay gap. The periodicity of this obligation varies according to the size of the workforce. Companies with between 100 and 249 employees must do so every 3 years. Companies with more than 250 employees must update the information on an annual basis.
Companies with a 5% wage gap will have to take action
The EU’s ultimate goal is to fix the pay gap at a maximum of 5%, while the current European average is 13%. For this reason, the regulation goes further than just requiring transparency in wage information to impose corrective measures. Companies with a pay gap of 5% or more will have to carry out a pay assessment together with workers’ representatives with the aim of closing this unjustified gap. They will have a maximum period of six months to do so.
Workers who suffer pay discrimination on grounds of gender may receive compensation. The Directive also provides for penalties for companies where there is pay discrimination. Depending on the seriousness of the offence, fines range from €626 to €225,018.
Conclusion
The implementation of the Pay Transparency Act represents an important legal change for companies. Until now, the burden of proof has been on the employee to prove that he or she is suffering from pay discrimination. From next year onwards, however, it will be the employer’s obligation to prove that he or she has not violated EU rules on equal pay and pay transparency.
This Directive, still pending transposition into Spanish law, entails significant risks for companies, such as a general increase in salaries or less room for wage negotiation. Confianz’s team of labour law advisors can help you comply with the new regulations while minimising the negative consequences.