Following its adoption in 2023 as an official piece of EU legislation, EU member states are now actively working on integrating the EU Pay Transparency Directive into laws and regulations by June 2026.
The EU Pay Transparency Directive introduces innovative measures to promote fair pay, including salary disclosures for job seekers, the right for employees to access pay data for comparable roles, and mandatory gender pay gap reporting for companies across both public and private sectors, with the first gender pay gap reporting deadline set for June 2027. This will mark as a major shift toward pay equity and employer accountability.
To protect their brand, reputation, and avoid potential financial penalties, employers should take proactive steps to ensure compliance with the directive well ahead of the deadline. Acting early will not only reduce risk but also demonstrate a commitment to fairness and transparency, strengthening the organisation's standing in the market.
Key Implications for Employers
The EU continues to highlight the persistent gender pay gap, with minimal progress in recent years. To combat pay discrimination, the equal pay principal mandates fair, objective, and gender-neutral compensation for equal work. Organisations with 150+ employees must submit the first gender pay gap report by 7 June 2027, whilst organisations with 100–149 employees must submit the first report by 7 June 2031. Companies with less than 100 employees are also obliged to comply with transparency measures, such as providing pay information upon request.
Beyond reporting, organisations must conduct a joint pay assessment if a 5% or greater gender pay gap is identified and cannot be objectively justified. Employers are required to take corrective action within a reasonable timeframe to eliminate unjustified disparities.
- Develop structured job levels and implement job grading systems based on established objective value of the job role to ensure transparent and fair pay structures within the company.
- Proactively assess gender pay gaps, identify disparities, and define corrective actions.
- Mitigate risks of pay discrimination by embedding gender-neutral criteria in salary decisions and continuously reviewing compensation practices.
- Train HR on conducting pay reviews and gender pay gap analysis for regular monitoring.
Employers are required to enhance pay transparency within their hiring process by sharing salary ranges with job applicants upfront, either in job postings or before interviews. They must also focus on fair hiring practices by avoiding salary history inquiries and ensuring job titles and vacancy notices are gender-neutral, fostering a more inclusive and equitable recruitment process.
- Provide salary ranges with candidates before interviews to promote transparency and manage expectations.
- Support fair pay practices by avoiding requests for salary history from candidates.
- Review and revise job titles and vacancy notices to ensure gender-neutral language.
- Train hiring managers and talent acquisition specialists on pay transparency and unbiased recruitment practices.
- Leverage internal communication channels to reinforce pay transparency and ensure alignment across HR and legal teams.
The directive strengthens employees' rights to access pay-related information. Employers can no longer prohibit employees from discussing or disclosing their pay when enforcing equal pay principles. Additionally, employees have the right to request individual pay information about their own salary level, as well as average pay levels by gender for workers performing the same work or work of equal value. These measures enable employees to identify and challenge potential pay disparities while fostering a culture of fairness and accountability in the workplace.
- Align HR policies with the directive’s pay transparency requirements and update employment contracts accordingly.
- Ensure employees have access to pay information and set up clear processes to handle their requests.
- Provide training to HR and relevant stakeholders on employees' rights, including how to request salary information and address common concerns.
- Track employee sentiment through surveys and adjust communication strategies based on employees’ feedback.
Lead the Change – Take Action for Pay Transparency
The EU Pay Transparency Directive will impact the way organisations across EU Member States operate, emphasising the importance of engaging key experts and stakeholders to ensure successful implementation. By taking proactive steps to align with these new requirements, organisations can foster a culture of transparency and equity that will enhance reputation and long-term success.
At KPMG in Malta, we have extensive experience with conducting job grading, using the KPMG sKale Job Grading Methodology, and business change management, to help guide you on this newfound journey.
If you have any questions or are seeking personalised guidance for your organisation's success, please do reach out to us below or contact Claudine Borg Azzopardi directly at cborgazzopardi@kpmg.com.mt.
