Pay transparency in Portugal: what changes for SMEs and how to prepare salary bands
Pay transparency turns a communication choice into a management obligation. The work for an SME is to have levels, bands and written criteria in place before anyone asks.
Pay transparency turns a communication choice into a management obligation: the company will have to state a pay range or a starting salary before the interview, stop asking candidates what they earned before, and be able to explain, against written criteria, why two people doing the same work or work of equal value are paid differently. For a company of 50 to 300 people the real work is not legal work. It is having levels, salary bands and progression criteria in place before anyone asks for the information, because a company that starts once the first request arrives will answer by improvising, and improvisation is exactly what these rules make visible.
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 rules come from Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023, which Member States have to transpose by 7 June 2026. Portugal does not start from nothing here: Lei n.º 60/2018 already introduced obligations on pay equality between women and men, and much of what the directive asks for sits on that base rather than replacing it.
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.
| Obligation | What it means in practice in a company of 50 to 300 people | What has to exist internally |
|---|---|---|
| Publish a pay range or the starting pay before the interview | The advert, or the information sent to the candidate, carries the pay range for the role. The exploratory question on the first call disappears. | 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 | Employers with 250 or more workers come in first, then those with 150 to 249, and later those with 100 to 149. A company that keeps growing can enter scope without noticing. | Headcount and pay data that are clean and comparable over time, and someone accountable for keeping them that way. |
| A joint pay assessment when an unjustified gap of five percentage points or more appears | A difference can no longer be explained by what was possible at the time. The explanation has to rest on criteria that existed before the question was asked. | 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 oblige any company to hold internal bands under that name. It obliges you to state pay or a pay range before the interview, to apply objective criteria, and to explain differences between people doing the same work or work of equal value. Meeting that without bands is possible once and unsustainable by the tenth hire, because every answer has to be reconstructed from scratch. Bands are simply the cheapest way to give the same answer every time.
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.
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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