The EU Directive on Pay Transparency: Key Aspects

Directive (EU) 2023/970, of 10 May 2023, strengthens pay equality requirements through greater transparency and implementation within companies. The Directive requires companies to disclose, report on and justify their pay practices, whilst granting new rights to workers and their representatives.

The deadline for transposition is 7 June 2026, with reporting obligations coming into effect in 2027.

Whilst Spain may adopt stricter measures during the transposition process, this Q&A addresses the main obligations and practical considerations for Spanish companies.

1. Under current legislation, when is there a pay gap? Does the Directive alter this definition?

Spanish law currently requires justification for pay differences of 25% or more between male and female employees in the same job or a job of equal value. The Directive reduces this figure to 5%, significantly broadening the range of pay differences that employers will be required to justify.

2. What obligations already exist in Spain?

Spain has the following obligations regarding equal pay. Specifically, all companies must maintain:

• Salary register: a record must be kept detailing, on an annual basis, the average and median pay figures, broken down by pay component, gender, occupational group, category, level and position.

• Pay audits: Companies with 50 or more employees must include a pay audit in their equality plan, verifying compliance with the principles of equal pay.

3. What is "work of equal value"?

Equal pay implies equivalent duties, educational requirements, professional qualifications and working conditions. It is not limited to comparing jobs at the same professional level. The Directive sets out gender-neutral job evaluation criteria based on skills, effort, responsibility and working conditions. Employers should review their job classification systems to identify any potential biases.

The Spanish Ministry of Employment provides an assessment tool. Available here.

4. Does the Directive apply to all employers?

The Directive applies to all employers, public and private, without sector exclusions.

Companies with fewer than 100 employees may be exempt from certain reporting obligations, although individual rights apply regardless of the size of the company.

5. Does it cover all employees?

The Directive applies to all workers with an employment contract or employment relationship, as well as to candidates in recruitment processes.

The coverage extends to part-time workers, those on fixed-term contracts and workers supplied by temporary employment agencies, as well as managers, interns and remote workers.

6. What changes apply to recruitment?

• Pre-interview salary information: Employers must inform candidates of the starting salary or salary band before the first interview, or, failing that, provide information based on gender-neutral criteria. They must also provide details of the provisions of the applicable collective agreement relating to the post to be filled.
• Ban on asking about previous salaries: Employers may not ask job applicants about their salary history (whether in their current or previous employment). This prevents historical pay gaps from being perpetuated.

7. Must companies publish salaries in job offers?

Yes, or the applicable salary band.

8. Can employees find out what their colleagues earn?

They will not be able to find out the exact salary of a specific colleague. However, employees may request written information about their own pay level and about average pay levels broken down by gender for employees performing the same work or work of equal value.

Employers have two months to respond and must inform employees of this right annually. Requests for information may be made directly on an individual basis, through employees’ legal representatives or through an equality body.

9. What information must employers provide to employees?

Employers must inform employees of the objective and neutral criteria used to determine their pay and pay progression. Companies with fewer than 50 employees may be exempt from this obligation.

10. Can employers prohibit employees from disclosing their salary?

No. Salary confidentiality clauses are not permitted. However, employees are under no obligation to disclose their own salary; the Directive simply prohibits employers from restricting voluntary disclosure.

11. Must companies disclose gender pay gaps?

Yes. Unless the company has rectified the unjustified pay gap within six months of the date on which the pay information was submitted. This obligation requires that, where pay gaps exist, companies must submit reports to the designated national authority and publish them on their website. The mandatory content includes: the overall gender pay gap and the gender gap in variable pay, the average pay gap, the proportion of employees receiving variable pay, the distribution by pay quartiles by gender, and the gaps by employee category. The reports cover the previous calendar year.

Workers’ representatives (for example, trade unions, works councils) are entitled to access the full report. Furthermore, at their request, employers must provide data for the previous four years.

12. Do the same obligations apply to all companies?

No. Obligations vary by workforce size:

13. What happens if a pay gap is found?

Where the pay gap reaches 5% or more and cannot be objectively justified within six months, companies must carry out a joint pay review with the workers’ legal representatives. The review must:

• Identify categories of workers facing unjustified discrimination;
• Determine root causes and assess whether job classification systems disadvantage either sex;
• Analyse gender distribution and average pay within each category;
• Review the pay arrangements for workers returning to work after taking leave for the birth of a child or to care for family members; and
• Establish remedial measures with defined timelines, and monitor their implementation.

Workers’ legal representatives have the right to be consulted at every stage; they may request information and clarifications, appoint an external expert (at the employer’s expense, unless this would be disproportionate) and monitor the corrective measures. The results of the assessments must be communicated to the workers, their representatives and the national authority.

14. What are the penalties for non-compliance?

Beyond reputational exposure, employers face the following risks:

• Administrative fines, with aggravated penalties for repeat offenders;
• Loss of public benefits;
• Exclusion from public procurement and incentive programmes;
• Termination clauses in public contracts triggered by non-compliance or gaps exceeding 5%;
• Shift in burden of proof: where employers fail to comply or justify pay gaps, courts may presume discrimination. The employer must then demonstrate that the gap results from objective, gender-neutral factors-creating both litigation risk and reputational exposure;
• Compensation liability: Affected workers may claim salary differences, interest on late payment, unpaid variable remuneration and compensation for the violation of fundamental rights. The limitation period is at least three years from the date on which the worker became aware of the discrimination, and claims may be brought individually or collectively;
• Employees' right to terminate their contracts: Affected workers may request the termination of their employment relationship on the grounds of pay discrimination. If discrimination is proven, those affected shall be entitled to compensation equivalent to that payable for unfair dismissal, as well as compensation for damages.

15. How should employers prepare for the challenges of the Directive?

• Job description chart: establish a clear organisational chart within the company, setting out the roles, responsibilities, experience and training required for each position, with a view to creating a gender-neutral system. This will help to ensure consistency and transparency.
• Internal pay audit: The aim would be to identify, prior to the transposition of the Directive, categories and/or job roles where the pay gap exceeds 5%. In such cases, it would be advisable to reassess pay criteria and review job evaluation systems to ensure gender neutrality. It would also be advisable to consider whether reclassifying employees into other roles would reduce exposure.
• Establish pay monitoring systems: Implement mechanisms to monitor pay gaps, pay distribution by quartile and variable pay, with automatic alerts triggered when deviations exceed 5%.
• Update contracts and policies: Clearly document pay criteria and remove any salary confidentiality clauses. Annual reminders must be sent to employees regarding their right to information.
• Training relevant staff: HR teams and recruitment managers must receive training on the principles of equal pay and gender-neutral assessment methods. Internal procedures must ensure that requests for salary information are responded to within two months. The training must also cover recruitment practices that comply with the Directive, including offer letters and hiring procedures.
• Work with employee representatives: Companies with employee representation should establish channels of communication for joint reviews. Assign responsibilities – whether to the HR department or a remuneration committee – before the legal obligations come into force.

Key Takeaways for Spanish Employers

• Transposition deadline: 7 June 2026. The relevant Spanish implementing regulations should be closely monitored.
• During recruitment processes, candidates may not be asked about their previous pay, and the starting salary or salary band must be clearly stated.
• The threshold is reduced from 25% to 5%: Gaps equal to or greater than this level trigger a mandatory joint assessment with the workers’ legal representatives.
• Large employers (250+): must submit the first report on pay data for 2026, due on 7 June 2027.
• Disclosure: in the event of a pay gap that has not been rectified within six months, it must be published on the company’s website.
• Compliance: Non-compliance shifts the burden of proof to the employer. Affected workers may claim pay differences for the last three years.