Pay transparency: obligations begin even before the Spanish law comes into force

European Union directives bind Member States as to the result to be achieved, whilst leaving it to each country to determine the form and means of transposition (Article 288 TFEU). However, when the deadline expires without domestic transposition, the situation changes significantly.

The case law of the Court of Justice of the European Union has recognised that certain provisions of a directive that has not been transposed may have direct effect, meaning that they may be relied upon before national courts if they are clear, precise and unconditional.

Furthermore, the State cannot rely on its own delay in enacting legislation to the detriment of individuals, a doctrine established since the Ratti judgment. Translated into business terms: the lack of national legislation does not necessarily equate to an absence of obligations or an absence of risk. We are not just talking about pay, but also about recruitment, promotion and internal management.

Directive (EU) 2023/970 on Pay Transparency is not limited to pay reporting. It introduces obligations with a direct impact on multiple internal processes:

1. In the area of recruitment and selection, this includes the obligation to provide advance information on the starting salary or salary band for the post, to ensure that selection processes are neutral and non-discriminatory, to limit questions about previous salary history, and to review job advertisements and recruitment practices.
2. Regarding job classification and promotion, the need for objective criteria for professional promotion, comparable job evaluation systems, traceability in career decisions and the review of potential indirect biases in internal progression is reinforced.
3. With regard to internal information and individual rights, the right of employees to request pay information is recognised, along with greater transparency regarding pay and progression criteria, a greater need for supporting documentation, and a potential increase in individual claims.
4. Finally, in the area of reporting and corporate compliance, periodic reporting obligations are envisaged for certain companies, along with pay gap analyses, the adoption of corrective measures in the event of unjustified differences, and greater reputational and compliance exposure.

Where does Spain stand?

Until now, the European context called for a degree of caution: to wait and see how other countries developed and to avoid premature action, as the pace of change varies greatly across Europe. With the launch of the procedures for the Royal Decree on Friday 25 April, we are beginning to gain a clearer picture of the timetable that will affect businesses.

But transposition does not depend solely on political will. It follows a strict legal procedure, regulated by Article 26 of Government Law 50/1997. Put simply: approving the legislation requires passing through several administrative and technical stages, each with its own timeline.

The usual stages are as follows:

1. Firstly, preliminary studies and technical consultations are carried out, during which the relevant ministry analyses options, impacts and legal feasibility, and may seek technical opinions. Next, a preliminary public consultation is launched on the official website, during which businesses, members of the public and representative organisations can comment on the need for the regulation, its objectives and possible alternatives.
2. The regulatory impact assessment is drawn up, which must justify why the regulation is being approved, what exactly it changes, its economic and budgetary impact, the administrative burdens, the gender impact and its legal basis. Subsequently, the text is subject to reports and opinions, including internal ones and, where appropriate, those of the Council of State.
3. A public consultation and information process is then opened to allow for formal submissions from businesses, employers’ organisations, trade unions and the public. Finally, following these stages, the text is submitted to the Council of Ministers for approval and subsequent publication in the Official State Gazette.

What does this mean in practical terms?

Everything suggests that the process will not be an exceptionally fast-track one, but rather the standard procedure, and although it is very difficult to make an estimate, we might expect it to be around the start of 2027. We are therefore entering a phase in which we must ensure we do our homework.

If we translate this into a business calendar, the timeline would be as follows:

• 2026 → Actual year of preparation
• Early 2027 → Entry into force
• First few months of 2027 → First requests for information from employees
• June 2027 → Mandatory reporting for certain companies

What should be in place by the end of 2026?

Whilst there is no need to overreact or implement external measures prematurely, there are a number of areas where it makes perfect sense to have things sorted out in advance. Above all, because they can have a direct impact on business decisions: the 2027 budget, organisational structure and policies.

Until the Royal Decree has been approved, there is no obligation to implement visible measures. And in many cases, it is not advisable either.

When will organisations first really feel the impact?

Beyond formal approval, the first time this will really be felt will be during the next pay review cycle.

That is when concrete decisions will be made, communication regarding pay positioning will take place, and transparency will then begin to be implemented in practice. It should be borne in mind that the obligation to submit pay gap documentation will come into effect in 2027, based on pay data from 2026.

How can this be translated into a roadmap?

Put simply, the roadmap can be structured into three phases. The current phase, the diagnostic phase, involves understanding the structure, roles and remuneration situation, identifying inconsistencies and risks, and conducting a simulation based on a 5% adjusted pay gap to quantify the impacts and, where appropriate, set aside a budget allocation for 2027. In the following months, the definition phase involves adjusting the remuneration model, clarifying criteria and strengthening governance. Finally, by the end of 2026, the organisational preparation phase must focus on aligning senior management and line managers, preparing how the model will be explained, and ensuring that data and processes are ready to respond to both employees and the regulator.

The aim is to reach 31 December 2026 with a model that is understandable and explainable to the various stakeholders: owners, management, employees, workers’ legal representatives and candidates.

* A joint alert from Grant Thornton and Esperta.