In terms of Maltese employment law, employees in the same class of employment and carrying out work of equal value are entitled to the same rate of remuneration. This said, the recent EU Pay Transparency Directive (Directive (EU) 2023/970) (the “Directive”) emphasises equal pay for equal work or work of equal value, between genders across the EU by imposing measures of transparency relating to remuneration and other related benefits, therefore broadening the scope of the principle of “equal pay for work of equal value”.
When will the Directive begin to apply and who will it apply to?
The Directive is expected to be transposed into local legislation by June 2026 and employers should be prepared as to how the Directive measures will affect their employees and their businesses.
The Directive measures will be applicable to both public and private sector employers and employees.
What is the scope of the Directive?
The Directive focuses on transparency and access to remuneration information at hiring stage, whereby applicants have access to initial salary and the salary range, and expectations of pay progression going forward and employers will not be permitted to inquire about a prospective candidate’s pay history. In addition, the Directive provides that job vacancies and titles should be gender-neutral, and that recruitment processes are non-discriminatory.
During the course of their employment, employees will be afforded the right to request remuneration information on their individual pay level and the average pay levels of comparable employees broken down by gender, categories of employees carrying out the same work or work of equal value and the criteria used to determine pay and career progression, which criteria should be objective and gender neutral.
In terms of the Directive, employers with at least 100 employees will be required to and report on their companies’ remuneration structure as follows:
i) 250 or more workers: annual report from 7 June 2027 for the previous year;
ii) 150-249 workers: to publish a report every 3 years as from 7 June 2027 (for the previous year);
iii) 100-149 workers: to publish a report every 3 years as from 7 June 2031.
Employers falling within the above-mentioned threshold should report on a number of areas, including gender pay gap relating to wages and other employment-related benefits, the proportion of female and male workers receiving such employment benefits, and gender pay gap across different categories of workers.
Such information should be provided to employees and employee representatives and would be required to provide further clarification if requested.
Where the remuneration information indicates a difference in average pay between genders of at least 5% which difference cannot be justified on the basis of objective, gender-neutral criteria, a joint pay assessment would need to be carried out by the employer. The assessment should identify the differences in pay and include remedies and preventive measures to eliminate the difference in pay within a reasonable period of time.
What impact could this have on employers?
Member States will need to provide employees with the opportunity to claim and obtain full compensation for loss and damage sustained; including full back pay and related bonuses or payments in kind. Furthermore, claims to compensation may not be restricted by a prior capping agreed to by and between the parties.
It should be noted that in instances where claimants allege the infringement of the principle of equal pay, the burden of proof to prove that such actions are not based on discrimination shall shift to the employer.
What should employers look out for?
In anticipation of the local implementation of this Directive, employers can stay ahead of the curve by reviewing their employment contracts, policies and remuneration structure in order to align their employment documentation to Directive measures and ensure that such policies promote gender equality and pay transparency.
i) HR practices: employers should ensure that their HR practices are aligned with the Directive requirements;
ii) Employment documentation: documentation and contracts should not include practices or restrictions which are not permitted in terms of the Directive;
iii) Pay structures: Employee remuneration and pay structures should ensure that clear pay structures are in place, which are fair and reasonable, achievable, transparent and in line with the principle of equal pay for equal work or work of equal value. Employers should particularly ensure that pay structures are not discriminatory on the basis of gender.
How can PwC Malta help?
Review of HR practices and employment documentation and policies
Review of pay structure and practices, review of performance review systems, employee benefits and voluntary occupational pension schemes
Analysis of salary brackets in line with market standards
Review and implementation of incentive and share option schemes
Review and update Data Protection and Privacy policies
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