New Pay Transparency Law: A Structural Change in Compensation Management

New Pay Transparency Law: A Structural Change in Compensation Management

The future implementation of EU Directive 2023/970 on pay transparency in Spain will mark a turning point in how companies manage, communicate, and justify salaries. This is not merely a new formal obligation, but a profound shift in compensation culture, aimed at ensuring pay equity between men and women through more stringent transparency and oversight rules.

The regulation is rooted in a clear premise: pay opacity fosters inequality. Consequently, it introduces individual rights to information, new corporate obligations, and a substantial sanctions regime. The deadline for transposition is 7 June 2026.

Main Corporate Obligations:

1. 1. Pre-employment Pay Transparency: Changes in Recruitment and Hiring

One of the most visible impacts will be on recruitment processes, which must adhere to the following guidelines:

• Job descriptions must include salary information or, at least, the salary range for the position.
• Job advertisements and job titles must be gender-neutral.
• During the recruitment process, companies shall be prohibited from asking applicants about their salary history in current or previous employment.

These measures aim to level the playing field in negotiations and enable better-informed professional decisions.

2. 2. New Rights for Workers

Staff will have enhanced access to pay information. Workers will be entitled to request the following pay information:

• Pay levels: the average pay levels within the company, broken down by gender and categorised by employees in positions of equal value to that of the person making the request.
• Pay criteria: the objective criteria used to determine employee remuneration and career progression.

Furthermore, in practice, pay confidentiality clauses that prevent the exchange of salary information among workers will be prohibited.

3. 3. Pay Gap Reporting and Analysis

Companies must maintain clear and structured pay information that enables the detection of potential inequalities.

If a pay gap exceeding 5% without objective cause is detected, a joint pay assessment and remedial action will be mandatory. The assessment shall include:

• A review of professional classification systems
• An analysis of categories and positions of equal value
• Identification of the root causes of the differences
• A Corrective Action Plan

4. 4. Obligation to provide information on the pay gap and implementation schedule according to company size

Implementation schedule by company size:

• Companies with over 250 employees: 7 June 2027
• Companies with between 150 and 249 employees: 7 June 2028
• Companies with between 100 and 149 employees must comply by 7 June 2031.
• Companies with fewer than 100 employees are not required to report periodically but must comply with recruitment transparency and the right to access information.

Frequency of periodic reporting by company size:

• Companies with over 250 workers: annually.
• Companies with between 150 and 249 workers: every 3 years.
• Companies with fewer than 100 employees are not required to report periodically but must guarantee individual access rights to pay information of their staff.

5. 5. Salary Ranges Are Not Enough

Many companies already utilise salary ranges, but this alone does not guarantee compliance.

It will be essential to:

• Effectively assess job positions of equal value
• Define objective criteria for progression and promotion
• Ensure that pay differences within the same salary range are objectively justified.

6. 6. Sanctions Regime: Fines and Consequences for Non-compliance

Non-compliance with the Pay Transparency Law entails a progressive penalty system that may significantly affect corporate finances.

Fines may range from EUR 626 to EUR 225,018, depending on the severity of the infraction. Higher penalties will be applied in cases of deliberate or repetitive pay discrimination.

In addition to fines, companies will be required to compensate workers who have suffered pay discrimination due to their gender. This compensation will include back pay as well as indemnification for any economic loss derived from the discriminatory situation.

In this regard, companies failing to comply with the regulations might lose access to public aid, subsidies, or incentives, and may face suspension from public procurement procedures.

A crucial aspect of the Directive is the reversal of the burden of proof: it is no longer the responsibility of the worker to prove pay discrimination; rather, it is the company’s responsibility to demonstrate that pay differences are based on objective, gender-neutral criteria.

What should companies be doing now?

Before the transposition of the new Law, it is advisable to:

• Perform an internal compensation audit
• Review job position evaluations and staff classification
• Define coherent and justified salary ranges
• Document salary-setting and review criteria
• Adapt job offers and recruitment protocols
• Provide training to HR and middle management
• Prepare an internal communication strategy

At Bové Montero’s Labour Department, we can assist you in complying with the new regulations and mitigating legal risks.