Pay transparency in Portugal: what changes for SMEs and how to prepare salary bands
The EU pay transparency framework and Portuguese equal-pay law are distinct sources. See how to prepare job levels, pay bands and decision criteria.
Directive (EU) 2023/970 sets out measures for greater pay transparency: information for candidates, objective criteria and access to information on pay differences. Its application in Portugal must be distinguished from national legislation already published. For a company of 50 to 300 people, practical preparation starts with levels, salary bands and written progression criteria, so requests for information can receive consistent answers.
None of it requires a long project or a new pay philosophy. It requires writing down decisions the company already makes every week, and being willing to stand behind them in front of the person they affect.
What pay transparency requires
The transposition deadline for Directive (EU) 2023/970 was 7 June 2026. In Portugal, Lei n.º 60/2018 already establishes equal-pay measures. Parliamentary Resolution 196/2026 of 21 July recommends a national strategy linked to transposition; a recommendation does not replace transposing legislation.
The core obligations are few, and they all point at the same internal requirement: objective, gender-neutral criteria for pay and progression, written down before they are needed.
| Measure in the directive | What it means in practice in a company of 50 to 300 people | What has to exist internally |
|---|---|---|
| Provide starting pay or a range in time for informed negotiation | Article 5 provides for this information, for example in the vacancy notice or before the interview. It does not require every employer to publish a range in every advert. | Bands by level, approved by the leadership team, and a rule on which part of the band is published. |
| No questions about salary history | The question leaves the application form and the interview guide. The offer is anchored on the level of the role rather than on what the person earned before. | A revised interview guide and an offer rule tied to the level, not to the negotiation. |
| The right to information about your own pay level and about average pay levels by category of workers doing the same work or work of equal value | Any employee can ask, and the company has to answer. Holding the data is not enough; someone has to be able to explain it. | Job categories defined, pay data organised by category and by sex, and a named owner for the response. |
| Gender pay gap reporting, phased in by employer size | The directive provides for reporting from 7 June 2027 for employers with at least 250 workers (annually) and 150–249 workers (every three years). For 100–149 workers, reporting starts on 7 June 2031, every three years. | Headcount and pay data that are clean and comparable over time, and someone accountable for keeping them that way. |
| Joint pay assessment when the conditions in Article 10 are all met | For employers subject to reporting: an average pay gap of at least 5% in a category, without objective, gender-neutral justification, that remains unremedied six months after reporting. All three conditions must be met. | A written record of pay decisions, and criteria that survive being read by someone outside the company. |
| Objective, gender-neutral criteria for pay and progression | Every increase and every promotion needs a reason that fits a criterion, not only a manager's judgement of the person. | Level definitions, written promotion criteria, and one named approver for exceptions. |
In a company of this size the missing piece is rarely the data. It is the vocabulary. Nobody has agreed what a level means, so nobody can say which roles are comparable, and the first request for information turns into an internal debate that should have happened a year earlier.
Transparency does not create pay differences. It makes the existing ones visible, and it obliges the company to have an explanation for each one.
Five steps to prepare
The order matters as much as the content. Skipping a step is the reason pay projects get redone eighteen months later.
- Levels and job architecture. Group roles into categories and define three or four levels per track, with a short description of what is expected at each one. Without this there is nothing for a band to be a band of, and no defensible way to say which roles carry work of equal value.
- Market positioning. Decide, before opening any benchmark, which market you compare against and which percentile you aim for. That is a commercial decision for the leadership team, not an output of the data, and it should take an hour rather than a quarter.
- Bands. Build one range per level, with a clear midpoint and a width in the order of twenty per cent from bottom to top. Fewer bands you can defend beat one band per job title, which multiplies every time somebody invents a title.
- Placing the people you already have. Put everyone on a level using the definitions alone, with salary hidden, and only then overlay pay. This is where the differences the company will have to explain show up, and it is far better to find them now than in a request for information.
- Communication and governance. Prepare managers to explain the model in their own words, decide who approves exceptions and how they are recorded, and set an annual review of the ranges. Announcing transparency without preparing the people who will field the questions is the most expensive mistake in this project.
A worked example of one band
The table below is an illustrative example, built to show the mechanics. It is not market data, it does not come from any company, and it should not be used as a pay reference.
| Band (illustrative example) | Minimum | Midpoint | Maximum |
|---|---|---|---|
| Level 3, mid-level role, annual gross base salary | €30,000 | €33,000 | €36,000 |
Read it like this. The midpoint is what someone who meets the level in full is paid; it is the number the band is really built around. The lower half is where a new hire who meets the level starts, which leaves room to reward growth over the next two years. The upper part is for people who are consistently beyond what the level asks and are not yet in the next one. Moving beyond the maximum is a promotion decision, not a pay decision, and treating it as a pay decision is how bands quietly stop meaning anything.
The questions leaders ask first
Are salary bands mandatory?
The directive does not require an internal document called “salary bands”. It provides for transparency about starting pay and objective, gender-neutral criteria. Ranges by level are a practical way to organise these decisions; they do not replace legal assessment of the requirements in a particular case.
What is pay equity?
It is paying the same for the same work and for work of equal value. The second half is the part that surprises people: it means comparing different roles against each other when they demand equivalent skills, effort, responsibility and working conditions, which is how an administrative role and a technical role can end up in the same comparison. Pay equity is not paying everybody the same. It is being able to say, against criteria, why you pay differently.
Can we still negotiate salaries case by case?
Yes, with one condition: the negotiation happens inside the band, and the reason is recorded. What stops working is negotiation as the whole system, where the person who negotiates hardest is paid most for the same role and nobody can explain the outcome afterwards. A band with a named approver for exceptions keeps the company's room to manoeuvre and still produces an explanation that holds up.
Where to start
If the company only does one thing in the coming months, it should be this: levels and bands written down, with progression criteria a manager can explain without help. Adverts, answers to information requests and reporting are all consequences of that. Starting from the reporting instead is how companies end up with a compliant spreadsheet and the same unexplainable salaries.
This is the work we do in careers and compensation. For the detail of building the ranges, see how to build salary bands for the first time; for the level structure that holds them up, see career frameworks for scale-ups.
Sources and references
References for the concepts and rules discussed. The models and implementation recommendations in this article are our practical application.
Co-founder — People & Management
Ana Reis
Builds the People foundations of growing companies — and stays with them until they work day to day.
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