EU Directive 2023/970 (the “Pay Transparency Directive”), adopted on 10 May 2023, marks one of the most significant shifts in workplace regulation in recent years. It was introduced to reinforce the principle of equal pay for equal work, or work of equal value, between men and women… but its implications extend far beyond payroll adjustments. It does so by requiring greater salary transparency and establishing clearer enforcement measures. Member States, like Malta, must implement the necessary national laws, regulations, and administrative provisions to comply with the Directive by 7 June 2026. For employers in Malta and across Europe, this directive will probably require structural, cultural, and procedural change.

What the Directive Introduces

At its core, the directive seeks to eliminate unjustified pay gaps, particularly those linked to gender. To achieve this, it introduces several new rights for employees and obligations for employers:

• Salary transparency in recruitment – Employers will be required to disclose salary ranges in job advertisements or before interviews take place. Questions about candidates’ previous pay will no longer be permitted.
• Right to pay information – Employees will have the right to request information about their own pay level and the average pay levels for comparable roles, broken down by gender.
• Mandatory pay gap reporting – Larger employers will be required to report on gender pay gaps at regular intervals.
• Corrective measures – Where unjustified pay gaps exceed a certain threshold, employers may need to conduct joint pay assessments and implement remedial action.

These measures signal a shift toward measurable accountability rather than general and vague commitments to equality.

Some key dates to keep in mind: Employers with 150 or more employees will be required to file their initial gender pay gap report by 7 June 2027. Those employing between 100 and 149 staff members must submit their first report by 7 June 2031. Even organisations with fewer than 100 employees are not exempt from the Directive, as they must still adhere to transparency obligations – including supplying pay-related information when requested.

Why This Matters for Employers

Some organisations may initially view the directive as an administrative burden. In reality, it represents a structural reset in how pay decisions are documented and justified.

Many companies operate with legacy salary structures built over time through negotiation, incremental increases, or market pressures. Without a clear job evaluation framework and transparent grading system, explaining pay differences may prove difficult under scrutiny. The directive effectively forces organisations to formalise what may previously have been informal.

There is also a reputational dimension. Salary transparency is increasingly expected by younger professionals and skilled candidates who value fairness and clarity. Employers who adapt early will likely gain trust and strengthen their employer brand.

The Risks of Inaction

Ignoring preparation until reporting becomes mandatory exposes organisations to legal, financial, and reputational risk. Non-compliance may result in penalties, but perhaps more critically, unresolved pay disparities could lead to employee claims and internal distrust.

Transparency also changes internal dynamics. Once employees gain access to comparative pay data, inconsistencies that previously went unnoticed may surface quickly. If businesses have not conducted internal audits beforehand, they may find themselves managing morale issues under pressure.

Practical Steps to Take Now

Preparation should begin before reporting obligations apply and employers can take several proactive measures:

1. Conduct a Pay Audit
Analyse existing pay structures across comparable roles, departments, and seniority levels. Identify any unexplained disparities and document legitimate factors such as experience, performance, or qualifications.

2. Review Job Evaluation Frameworks
Ensure roles are clearly defined and graded according to objective criteria. Vague role descriptions and overlapping responsibilities create ambiguity that makes fair comparison difficult.

3. Standardise Recruitment Practices
Introduce structured salary bands and review how offers are made. Moving away from negotiation-driven salary setting reduces long-term disparities.

4. Train Managers
Line managers and HR teams must understand how pay decisions are made and how to communicate them confidently. Transparency without clear explanation can erode trust.

5. Prepare Communication Strategies
Internal communication will be critical. Employees should understand what the directive entails and what steps the organisation is taking to ensure fairness.

A Cultural Shift, Not Just Compliance

The directive is ultimately about accountability. Organisations that approach it purely as a compliance exercise risk missing the broader opportunity. Transparent pay structures can improve employee engagement, reduce attrition, and create clearer pathways for progression.

For employers operating in Malta’s relatively small labour market, reputation travels quickly. Demonstrating commitment to fairness strengthens long-term credibility.

The future

The EU Pay Transparency Directive is around the corner, and it is a structural change that will reshape hiring practices, compensation frameworks, and internal reporting. Businesses must begin reviewing their systems as soon as possible to adjust accordingly, correct inconsistencies, and communicate with confidence.

Preparation is not simply about meeting a deadline. It is about building pay systems that can withstand scrutiny, support growth, and reflect the values modern workplaces claim to uphold.