Malta gears up for introduction of EU Pay Transparency Directive

The Employment 360 Conference, organised by Shireburn and Fenech & Fenech Advocates on Thursday (yesterday), provided valuable insights into Malta’s employment landscape, with a particular focus on equal pay and upcoming legislative changes.

Kicking off the conference, Paul Gonzi, Partner at Fenech & Fenech Advocates, led a session addressing pay structures, the gender pay gap, and the upcoming EU Pay Transparency Directive.

A quick survey of attendees at the session revealed that:

• 78 per cent believe that the companies they work at have a pay structure, while 22 per cent do not believe they have one.
• 59 per cent of attendees believe that their companies have assessed the value of their jobs.

Despite structured pay schemes, Malta continues to struggle with a gender pay gap. In 2022, the gap stood at 12.7 per cent, representing only a 2.8 per cent decrease over the past decade. This means that, on average, women earn 87 cents for every euro earned by a man and would need to work an additional 1.5 months annually to close the earnings disparity.

Malta ranks sixth in the EU for gender pay gap – a relatively strong position compared to Latvia, which has the highest pay gap at 22.3 per cent, he added.

The legal framework for equal pay in Malta

Malta already has a comprehensive legal framework to uphold equal pay, Dr Gonzi noted, which includes:

1. The Constitution of Malta
2. The Employment and Industrial Relations Act
3. The Equality for Men and Women Act

In addition to these local laws, Malta is also bound by eight EU treaties and directives, alongside over 20 European Court of Justice (CJEU) rulings related to equal pay.

Enforcement challenges

Despite Malta’s legal framework, enforcement remains a challenge. The National Commission for the Promotion of Equality (NCPE) has received only one equal pay complaint since 2015. Additionally, the Industrial Tribunal has only ruled on a handful of cases.

A notable case involved Air Malta, where the Industrial Tribunal ordered the airline to pay €585,056 to 33 former cabin crew members in 2023. The tribunal ruled that a 2017 collective agreement created wage discrimination based on overtime and personal circumstances, disadvantaging those on maternity leave or reduced hours.

Preparing for the EU Pay transparency directive

A new EU Pay Transparency Directive is set to take effect in 2026, and Malta must transpose it into national law by June 2026. By 7th June 2027, Maltese employers will be required to submit their first pay gap report under the directive.

The directive introduces stricter pay transparency obligations, which will apply even to companies with just one employee in Malta.

Key provisions include:

• Disclosing pay ranges to job applicants
• Banning salary history inquiries
• Upholding the Right to Information (employees can request information on pay levels)

Dr Gonzi described this shift as “an evolution of policy and law, but a revolution in the workplace.”

Who does the EU pay transparency directive apply to?

The EU Pay Transparency Directive applies to all public and private sector employers in the European Union.

There will be a staggered rollout, with large companies impacted first:

• Employers with 150 or more employees will need to submit gender pay gap reporting in June 2027, reporting on the calendar year of 2026.
• Employers with less than 150 employees will need to submit gender pay gap reporting in June 2031, reporting on the calendar year of 2030.

The gender pay gap reporting requirements also vary depending on company size, as follows:

• Companies with more than 250 employees will be required to report annually.
• Companies with 100-249 employees will be required to report every three years.
• Companies with less than 100 employees will not be required to report (though individual EU member states could choose to change this during implementation).

The directive is built on four key pillars:

1. Definitions – Clarifying terms related to pay transparency and discrimination.
2. Employee representation – Strengthening the role of worker representatives in pay discussions.
3. Categorisation – Employers must classify jobs into comparable pay categories.
4. Reporting – Companies above a certain size must report gender pay gaps.

Malta played a significant role in shaping this directive at the EU level, Dr Gonzi noted. European Parliament President Roberta Metsola signed the directive, underscoring Malta’s commitment to compliance. As Dr Gonzi wryly noted, “that gives value, that means we have to comply” – a remark that elicited chuckles from the audience.