Employer Obligations and Practical Challenges for Pay Transparency
The EU Pay Transparency Directive introduces a significant shift in how remuneration practices are regulated and disclosed across Member States. Its central aim is to strengthen the principle of equal pay for equal work or work of equal value, by obliging employers to provide clearer pay information to both job applicants and existing employees. Although its objectives are relatively straightforward, the process of implementation raises important compliance, administrative, and practical considerations for employers of all business sizes.
From the 27th August 2025, Maltese law, through Legal Notice 112 of 2025, which amends the Transparent and Predictable Working Conditions Regulations (S.L.452.126), already provides job applicants with a right to receive information on the initial pay or its range, as well as the pay provisions of any applicable collective agreement, prior to the commencement of employment. Similarly, existing employees, may request information on their own pay level and on the average pay levels, of other workers performing the same work or work of equal value within their work category. In this regard, employers must comply with such requests within two (2) months from the request made by the employees. This represents the first step towards full alignment with the Directive.
The Directive, however, goes much further. It requires employers to establish transparent pay structures based on objective, gender-neutral criteria, and to maintain systems for assessing work of equal value. Importantly, employers must identify and address “outliers” within categories, being those employees who are paid significantly above or below the average, and ensure that differences can be justified on “objective grounds”, not defined by law. One must note that the scope of “pay” is broad and includes all elements of remuneration, with the exception of pay tools provided by the employer for the employee to be able to adequately perform the role itself (such as a car allowance for a pharmaceutical medical representative).
In practice, compliance with the law involves three stages. First, employers must collect the necessary data on pay, gender, and job categories. Second, they must establish a job evaluation system capable of grouping positions into comparable categories based on value, responsibility, and skills. Third, they must analyse this data to identify pay gaps, report on them where required, and be able to provide individualised explanations when challenged by employees. Employers that fail to adopt these systems risk not only legal sanctions by the competent authorities, which has yet to be confirmed locally, but also business reputational damage.
Implementation across Member States is progressing unevenly. The Netherlands, for example, published a draft bill in April 2025 to transpose the Directive, requiring employers to disclose pay ranges in job advertisements and prohibiting reliance on pay history. Yet, following recent governmental changes, full implementation has been delayed until the 1st January 2027, beyond the EU deadline of June 2026, illustrating how political transitions and administrative hurdles can stall compliance, even in jurisdictions that are otherwise aligned with the Directive’s objectives.
Moreover, in Germany, no draft legislation has yet been published to transpose the Directive. The existing Pay Transparency Act (2017) grants employees in undertakings with more than 200 employees the right to request median pay information for colleagues of the opposite sex in comparable roles. However, this law has been criticised as ineffective, as it excludes SMEs, places the burden on employees to make requests, and provides no real enforcement or sanctions. The Directive will therefore require significant reforms in Germany, mandating proactive disclosure and reporting obligations that go well beyond the current framework.
A particular gap in the local scene concerns small employers. Many of the Directive’s formal reporting obligations apply only to medium and large organisations, typically those with more than one hundred (100) employees. However, this does not mean that smaller companies are exempt from pay transparency obligations altogether. Applicants and employees in small organisations still enjoy the right to request information on initial pay, pay ranges, and average pay within their work categories. This creates a practical necessity for even the smallest employers to establish basic pay structures and job categories, so that meaningful comparisons may be drawn and communicated. The absence of such frameworks will make compliance impossible, and employers risk being unable to justify decisions if challenged.
The Maltese frameworks, like others in the EU, is still in its early phase, with full implementation expected between June 2026 and 2027, however employers should not wait until that deadline. Instead, they are advised to take immediate steps to build internal job evaluation systems, categorise roles according to value, document objective criteria for pay decisions, and prepare templates for responding to transparency requests. Even small discrepancies, if left unaddressed over time, can generate significant legal exposure and undermine employee trust.
For Maltese employers, the next steps are clear. It is advisable to carry out a preliminary review of pay structures and identify any existing gaps. Employers should also begin building internal systems that categorise jobs by objective and gender-neutral criteria. Written policies should be introduced to set out the grounds on which pay differences may be justified. Training for management and HR teams is recommended, so that requests for pay information are handled consistently and within the legal timeframe.
Employers must essentially recognise that compliance will require careful planning, robust systems, and ongoing monitoring. Early adoption not only mitigates risk but also positions employers as fair and responsible organisations in a changing European labour market.
How Can AE Help
AE Legal advises employers on aligning their pay practices with the EU Pay Transparency Directive and Maltese law. We assist in reviewing pay structures, developing job evaluation systems, and preparing policies to ensure compliance and effective handling of transparency requests.
