EU Pay Transparency Directive 2026: A Comprehensive Guide for Employers in Malta

Introduction

The EU Pay Transparency Directive is set to transform compensation practices across Europe by mandating clearer salary disclosures, enhanced gender pay gap reporting, and greater accountability for employers. With Malta required to transpose this Directive into national law by 7 June 2026, it is essential for Maltese employers to understand the legal requirements, potential challenges, and practical steps for compliance. This guide explores the Directive's key provisions, its impact on recruitment and internal practices, and offers actionable recommendations for both employers and employees in Malta.

Background & Rationale

For decades, the principle of "equal pay for equal work" has been enshrined in European law, yet pay disparities persist across industries and countries. On average, women in the EU earn around 13% less than men for similar roles ? a gap that not only affects individual livelihoods but also has broader economic and social implications. The EU Pay Transparency Directive was introduced to address these longstanding inequities by forcing employers to shed outdated practices that perpetuate secrecy and inequality.

In addition to promoting fairness, the Directive aligns with growing expectations in environmental, social, and governance (ESG) standards. Companies are increasingly expected to operate transparently and ethically, with pay equity now seen as a critical component of corporate reputation and employee engagement. In Malta ? a dynamic market with both multinational and local businesses ? the move towards salary transparency is expected to foster trust, improve internal morale, and attract top talent. By laying out clear guidelines and compliance steps, the Directive not only protects employees but also encourages businesses to modernise their HR practices and remain competitive in an evolving labour market.



Legal Requirements Under the Directive

Salary Range Disclosure and Pre-Employment Transparency

  • Job Advertisements: Employers must include a clear salary range or starting salary in job postings, enabling candidates to make informed decisions.

  • Salary History Ban: Employers are prohibited from asking candidates about their previous earnings, ensuring that past pay disparities do not influence new salary offers.

  • Gender-Neutral Advertising: Job titles and descriptions must be free of bias to attract a diverse range of applicants.

Transparency on Pay Setting and Criteria

  • Clear Documentation: Employers must communicate the objective, gender-neutral criteria used for determining pay, promotions, and career progression.

  • Accessibility: This information should be readily available through resources such as employee handbooks or internal portals, with formats adapted for persons with disabilities.

Employee Right to Information

  • Right to Request: Every employee has the right to request written information on their own pay and the average pay for colleagues performing similar work.

  • Annual Communication: Employers must annually inform employees about this right and provide the requested information within a "reasonable period."

Gender Pay Gap Reporting

  • Reporting Thresholds:

    • Companies with 250+ employees must report gender pay gap data annually.

    • Firms with 150 - 249 employees will report every three years.

    • Employers with 100 - 149 employees also face reporting obligations, with timelines varying as defined by national transposition.

  • Detailed Metrics: Reports must include mean and median pay gaps, data on variable pay components, and the distribution of employees across pay quartiles.

Joint Pay Assessments and Remedial Actions

  • Triggering Assessments: If a gender pay gap of 5% or more is found without objective justification, employers must conduct a joint pay assessment with employee representatives.

  • Legal Remedies: Non-compliance can lead to fines, reputational damage, and compensation claims. The burden of proof shifts to employers to demonstrate that any pay differences are based on neutral factors.

Ban on Pay Secrecy

  • Open Disclosure: Employers must not enforce pay secrecy clauses. Employees are free to discuss their salaries for the purpose of ensuring equal pay, provided such discussions are used constructively.


Implications for Employers in Malta

Preparing Your Organization

Maltese businesses must begin preparing for these changes well before the 2026 deadline. Key steps include:

  • Conduct Comprehensive Pay Audits:

    • Review existing pay structures and identify any unexplained gender pay gaps.

    • Use legally privileged audits to protect sensitive data.

  • Update Job Architecture:

    • Establish clear salary bands and career progression frameworks based on objective criteria.

    • Ensure that these structures can be easily communicated and defended.

  • Revise Recruitment Practices:

    • Update job ads to include salary ranges and remove questions about previous pay.

    • Train HR teams and hiring managers on the new, non-discriminatory practices.

  • Revise Internal Policies:

    • Remove outdated pay secrecy clauses from employment contracts and handbooks.

    • Implement a clear process for handling employee pay information requests.

  • Enhance Data Collection and Reporting Systems:

    • Upgrade HR systems to capture and analyse pay data by gender and job category.

    • Run trial reports to ensure accuracy before formal reporting begins.

  • Engage with Employee Representatives:

    • Establish regular dialogue with unions or employee councils to prepare for joint pay assessments if necessary.

  • Consult Legal Experts:

    • Ensure that all policies comply with both EU and Maltese labour laws.

    • Document all pay decisions and justifications for transparency and legal protection.

Potential Legal Risks

If employers are not proactive, they face risks including:

  • Fines and Penalties: Non-compliance with reporting and information obligations can lead to severe fines.

  • Equal Pay Lawsuits: Employees may use disclosed data to challenge unfair pay practices, with the burden of proof on employers.

  • Reputational Damage: Failure to embrace transparency could harm a company's brand, making it less attractive to top talent.

Compliance Strategies

Adopt a comprehensive compliance strategy by forming an internal taskforce, upgrading HR systems, and establishing robust documentation and communication channels. This proactive approach will help mitigate legal risks and create a transparent, fair workplace.

Impact on Employees and Job Seekers in Malta

For Job Seekers

  • Clear Salary Information: Job ads will include salary ranges, allowing candidates to assess roles against their expectations without the guesswork.

  • Informed Negotiations: With salary data upfront, jobseekers can negotiate confidently, focusing on skills and market value rather than past earnings.

  • Enhanced Trust: Transparent practices signal that employers are committed to fairness, making companies more attractive.

For Current Employees

  • Right to Information: Employees can request written details on their pay relative to the average in their role, enabling them to identify and challenge disparities.

  • Empowerment: Access to transparent pay data supports informed discussions during performance reviews and salary negotiations.

  • Career Clarity: Clear criteria for pay progression help employees understand what is required to advance and earn more.


Comparative Insights: Malta and the EU

While Malta is starting from a lower base regarding mandatory pay reporting, many EU countries are already evolving their frameworks:

  • Ireland has been proactive, mandating salary information in job ads and banning salary history questions.

  • Germany and Italy are adapting existing pay transparency laws to meet the Directive's standards.

  • Nordic Countries like Sweden and Denmark have long-standing transparency practices, offering useful benchmarks.

Malta's forthcoming legislation will align with the EU's minimum requirements, and Maltese companies can learn from these examples to ease the transition.

Practical Recommendations for Maltese Companies

To ensure a smooth transition, consider these actionable steps:

  1. Initiate a Pay Audit:

    • Review salary structures across similar roles and document any discrepancies.

  2. Implement Transparent Salary Structures:

    • Establish defined salary bands and clearly communicate the criteria for pay progression.

  3. Update Recruitment Policies:

    • Ensure job ads include salary ranges and avoid salary history questions.

    • Train HR and hiring managers on new non-discriminatory practices.

  4. Revise Internal Communication:

    • Update employee handbooks and internal portals with detailed pay criteria.

    • Regularly remind staff of their right to request pay information.

  5. Engage Employee Representatives:

    • Collaborate with unions or employee councils to prepare for joint pay assessments if gaps exceed 5%.

  6. Upgrade HR Systems:

    • Invest in tools that capture and analyse pay data by gender and job category.

    • Conduct trial runs of your reporting processes.

  7. Consult Legal Experts:

    • Review all changes with labour law experts to ensure full compliance.

    • Keep thorough records of pay decision justifications.

  8. Turn Transparency into a Competitive Advantage:

    • Publicly share your commitment to equal pay and transparent practices.

    • Use your transparent policies to attract top talent and enhance your employer brand.



Future Benefits of Enhanced Pay Transparency

Despite the initial challenges, the long-term benefits are significant:

  • For Employers:

    • Increased employee engagement, retention, and productivity.

    • A stronger employer brand that attracts high-calibre talent.

    • Reduced legal risks and enhanced compliance with evolving regulations.

  • For Job Seekers and Current Employees:

    • Better-informed career decisions through clear salary benchmarks.

    • Enhanced negotiating power and fairness in compensation.

    • A transparent work environment that supports career growth and inclusivity.

Conclusion

The EU Pay Transparency Directive represents a transformative opportunity for Maltese employers to foster a culture of fairness, accountability, and transparency. By implementing comprehensive pay audits, updating recruitment and internal policies, and engaging proactively with employees, companies in Malta can not only comply with the law but also strengthen their competitive advantage. For jobseekers, the directive promises enhanced transparency, improved negotiation power, and a fairer job market.

As the implementation deadline of June 2026 approaches, proactive preparation will be key to a smooth transition. Embracing these changes now not only ensures legal compliance but also builds a more equitable, transparent, and competitive workplace.

At Jobhound, we are fully prepared for this legislative evolution. Our platform meets the highest standards of salary transparency and compliance, ensuring that Maltese employers and jobseekers alike benefit from a more equitable and open labour market. Trust Jobhound to guide you through the transition and help you stay ahead in a fair, competitive environment.