Royal Decree 723/2026: what changes on 5 October, and what pay transparency will bring

From Monday 5 October, every contract arrives with its small print in writing: itemised pay, the formula behind variable pay, working hours, shifts and the algorithms involved in decisions. It is a rule on working conditions, separate from the EU directive on pay transparency. That directive is now past its transposition deadline and will set the course for the years ahead.

For almost three decades, the information a Spanish company had to give the people it hired fitted into a royal decree from 1998. That framework has fallen behind. Royal Decree 723/2026 of 9 September, published in the Official State Gazette (BOE) on the 15th, replaces it and comes into force on Monday 5 October. It transposes into Spanish law the European Directive 2019/1152 on transparent and predictable working conditions, and it applies to every company with people employed for more than four weeks.

Read quickly, it looks like one more administrative formality. Read carefully, it marks the start of a cultural shift: pay stops being something explained verbally and becomes something documented. Behind it comes a different rule, the EU pay transparency directive, which will take that logic much further.

What changes on Monday 5 October

The company must provide in writing, before the person starts work, the essential information about the employment relationship. It can do so in the contract itself or in a separate document, on paper or in electronic form, as long as it can be stored, printed and its delivery proven. The main blocks are these:

• Pay. Base salary and each supplement separately, the formula and criteria for any variable component, and the frequency and method of payment.
• Working time. Daily, weekly and annual working hours, how they are distributed, shifts, compensation for overtime and holidays.
• The job. Duties, place of work, the probation period with its specific length and, for temporary contracts, the reason that justifies them.
• The framework. The applicable collective agreement, the right to training offered by the company, the equality plan and anti-harassment protocol where they exist, and the procedure and notice periods in the event of termination.
• Algorithms. If the company uses automated systems that play a part in working hours, task allocation, pay, promotion or dismissal, it must disclose that they exist and explain their parameters, criteria and operating rules.

Any later change to those conditions must also be communicated in writing, at the latest on the day it takes effect. On 2 October the Spanish Public Employment Service (SEPE) published a guidance template for the information document that makes compliance easier.

What information must a company in Spain provide in writing from 5 October 2026? From that date, and before the first day of work, the company must provide in writing the base salary and each supplement separately, the formula for variable pay, working hours and shifts, overtime, the probation period, the applicable collective agreement and the existence of algorithms that make decisions about staff. It applies to employment relationships of more than four weeks.

Current staff are entitled to ask for it too

The rule stops short of requiring a mass mailing to the whole workforce on the same Monday. Instead, it gives people already working at the company the right to request this information, and the company has 30 working days to provide it. In practice, the first request can arrive at any moment, so it pays to have the document ready for every role, with the pay breakdown already in order.

Failure to comply is classed as a minor infringement under the Spanish Law on Social Order Infringements and Penalties (LISOS), with fines of between €70 and €750. The amount matters less than what an inspection reveals: a pay structure that nobody can explain in writing.

Does a company have to give this information to people hired before 5 October? Only if they ask for it. Royal Decree 723/2026 gives current staff the right to request the essential information about their employment relationship, and the company has 30 working days to provide it in writing. It is wise to have the document ready for each role before the first request arrives.

Algorithms enter the contract

This is the change with the longest reach for an SME starting to work with artificial intelligence. A program that assigns shifts, a system that scores applications or a tool that calculates variable pay are now matters for written information, with their criteria and rules. It fits with the EU AI Act, which treats systems used in recruitment and people management as high risk and will require full obligations from them from 2 December 2027. Taking stock of those tools today solves two problems at once.

What comes next: the EU pay transparency directive

Directive (EU) 2023/970 was due to be incorporated into Spanish law by 7 June 2026. That deadline has passed and the Spanish rule is still going through the process: the Government has put out for consultation a draft royal decree amending Royal Decree 902/2020. When it arrives, its main obligations will be these:

• Tell candidates the starting pay or its range before the interview, and refrain from asking about their previous salary.
• Make available to staff the objective, gender-neutral criteria used to set pay and career progression. The directive allows companies with fewer than 50 people to be exempted from the part relating to progression.
• Reply within a maximum of two months to anyone who asks to know their pay level and the average pay levels, broken down by sex, of those doing work of equal value.
• Remove clauses that prevent staff from talking about what they earn.
• Publish gender pay gap reports: companies with 250 or more people every year from 7 June 2027, those with 150 to 249 every three years from the same date, and those with 100 to 149 every three years from 7 June 2031.
• In companies required to report, when the average gap in a category reaches 5% without objective justification and remains uncorrected after six months, carry out a joint pay assessment with staff representatives.

What will the EU pay transparency directive require from SMEs? It will require every company to state the pay range before the interview, stop asking about previous salary, reply within two months to anyone who asks to know pay levels and remove pay secrecy clauses. Gender pay gap reports start in 2027 for companies with 150 or more people and in 2031 for those with 100 to 149.

What is already required today, and often forgotten

The directive arrives in an area Spain had already begun to regulate. Since April 2021, Royal Decree 902/2020 has required every company, whatever its size, to keep a pay register with the averages and medians of salaries, supplements and non-salary payments, broken down by sex and by job group or role. In companies with 50 or more people, a gap of 25% or more between the sexes requires a written justification, and those with an equality plan must include a pay audit. Many SMEs comply with the equality plan on paper and have left their pay register untouched for years.

Five decisions for this quarter

1. Prepare the information document for each role, using the SEPE template as a reference, and review contract templates so they are complete from day one.
2. Put the pay structure in order. If a supplement or variable component is hard to explain in writing, now is the time to simplify it or fix its formula.
3. Update the pay register and look at the gap through the lens of 2027, when the relevant threshold will be 5%.
4. Take stock of the algorithms involved in decisions about people, with their criteria, and decide who is accountable for each one.
5. Change the way you hire: a known pay range before the interview, and an end to questions about previous salary.

An advantage for those who move early

Pay transparency is usually presented as a regulatory burden. For an SME competing for talent with larger companies, it can work the other way round. A clear, explainable and consistent pay structure attracts better-informed candidates, reduces opaque negotiations and sustains the trust of those already inside. Companies that put their house in order now will reach the transposition rule with the work done, and with one more argument to retain their best people.

Judith Ruiz de Esquide Fernández is founding partner of DO'IN TALENT, a people leadership firm based in Madrid. She brings 26 years in people leadership and general management: 16 years of HR at L'Oréal and Air France/KLM, 10 years as General Manager of technology startups and scaleups, 6 years teaching digital transformation at IE Business School and 10 years as an executive coach and leadership speaker. Law and Psychology graduate, PADE from IESE and board education from ESADE. Full professional profile.

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