Pay Transparency: The Key Measures in the Draft Bill

On 5 August, the draft bill was published, partially transposing into Portugal Directive (EU) 2023/970 on pay transparency and equal pay for men and women for equal work or work of equal value.
The proposal, which is still undergoing public consultation, provides for significant amendments to Law No. 60/2018 of 21 August and the Labour Procedure Code, strengthening employers’ obligations in this area.

What are the main changes?

1. Greater transparency in recruitment

Candidates will have the right to know, before entering into an employment contract, the initial salary or salary range.
Employers will no longer be allowed to ask candidates about their current or previous remuneration.

2. More transparent pay policies

Employers will be required to ensure a transparent pay policy based on objective criteria applicable equally to men and women and free from sex-based discrimination. They must disclose to employees the criteria used to determine remuneration, pay levels and career progression.
Companies with fewer than 50 employees will be exempt from disclosing information regarding pay progression.

3. Strengthening employees’ right to information

Employees will be entitled to request information on their individual pay level and on the average pay levels, broken down by sex, of employees performing equal work or work of equal value. Employers must inform employees annually of this right and respond to requests within two months.

4. New reporting obligations for companies

Companies with 50 or more employees will become subject to reporting obligations regarding pay differences between men and women. This information will include, among other things, average and median pay differences, including differences in supplementary or variable components of remuneration, as well as the distribution of employees by sex across the different pay quartiles.
Reporting will be annual for companies with 250 or more employees and every three years for companies with between 50 and 249 employees. These obligations will be introduced gradually: from 2027 for companies with 150 or more employees and from 2031 for companies with 50 to 149 employees.

5. Measures to address pay diferences

Where differences in average pay levels between men and women are identified, the employer may be notified by the labour inspectorate (ACT) to justify those differences or present corrective measures within 90 days. The ACT will have 45 days to assess the justification or measures submitted.
If an unjustified difference of at least 5% remains, the employer may be required, within 45 days, to carry out a joint pay assessment involving employee representatives, where applicable. The purpose will be to identify the causes of the differences and the measures required to correct them, which must be implemented within 90 days.

6. Pay confidentiality

Contractual clauses or provisions of collective bargaining agreements preventing employees from disclosing information regarding their remuneration will be null and void.

7. Sanctions

In cases of repeated or recurring violations, in addition to administrative liability, additional sanctions may be imposed, including the loss of financial incentives or public benefits and disqualification from participating in public tenders for up to two years.

8. Strengthening employee protection

Pay differences that are not duly justified by the employer will be presumed to be discriminatory.
The proposal strengthens the protection of employees who file complaints relating to equal pay, with dismissal or other disciplinary action taken within three years following the complaint being presumed abusive.
The exercise of the rights arising from this protection will be subject to a one-year limitation period starting on the day following the termination of the employment contract.

9. Strengthening judicial protection

In cases involving violations of rights or obligations relating to equal pay, the court may order full compensation for both financial and non-financial damages, plus interest, even where no specific claim for such compensation has been made.

10. Practical implications for companies

The proposal represents a significant strengthening of pay transparency requirements, with an impact ranging from recruitment to the definition and implementation of internal pay policies.
Although the legislation may still be amended during the legislative process, companies should already begin assessing whether their pay-setting and career progression criteria are objective and sufficiently transparent, and whether there are any pay differences requiring justification. They should also review their recruitment processes and internal mechanisms for collecting and managing remuneration data.