The EU Pay Transparency Directive asks larger employers to publish their gender pay gap. Most of the attention goes to the headline figure. The rule with real consequences sits one step further in: a gap of 5% or more in a single category of workers can lead to a joint pay assessment with your employees’ representatives, shared with the authorities.

Here’s when that happens, what the assessment has to contain, and how to keep a gap from getting that far.

The three conditions

Article 10 of the Directive, and regulation 10 of Malta’s L.N. 173 of 2026, require a joint pay assessment when all three of these are true:

The pay report shows a gap of at least 5% in average pay between women and men in any category of workers.
You haven’t justified the gap on objective, gender-neutral criteria.
You haven’t remedied it within six months of submitting the pay report.

It only applies to employers who have to report: 100 workers or more, on the dates set by headcount. The six months run from the date you submit the report.

So a 5% gap isn’t a breach by itself. It’s a question you have six months to answer, either with a reason that holds up or with a fix.

Categories of workers

The 5% is measured inside each category of workers, which is the employer’s grouping of people doing the same work or work of equal value. Equal value is judged on four criteria: skills, effort, responsibility and working conditions. A payroll clerk and a warehouse supervisor can sit in the same category if their jobs score the same.

This is why job evaluation matters so much. Draw the categories badly and the gaps you report won’t mean anything, and you won’t be able to explain them. See Job evaluation without Hay for how to build the scheme.

What justifies a gap

The Directive allows pay differences that rest on objective, gender-neutral criteria such as performance or competence, applied the same way to everyone. Examples that can hold up, if documented and applied consistently:

a pay step that follows length of service in the role, set out in your pay policy
a performance rating from a process that’s the same for everyone
a market premium for a scarce skill, recorded when the hire was made

Reasons that won’t hold up: “she didn’t negotiate”, “he came from a bigger company”, or anything that relies on past pay. Asking about pay history is banned under Article 5(2).

Write down the reason when you decide it, with the date and who decided. If it’s ever challenged, the record is your evidence, and the burden of proof sits with you.

What the assessment contains

Article 10(2) lists seven parts:

The share of women and men in each category of workers.
Average pay levels for women and men, and their variable components, in each category.
The differences in average pay between women and men in each category.
The reasons for those differences, on objective, gender-neutral criteria, established jointly with the representatives.
The share of women and men who got a pay rise after returning from maternity, paternity, parental or carers’ leave, if rises happened in their category during their leave.
Measures to address differences that aren’t justified.
How well the measures from previous assessments worked.

You make the assessment available to workers and their representatives and send it to the monitoring body. In Malta that’s the Department for Industrial and Employment Relations, within ten working days of finishing it. The unjustified differences then have to be remedied within a time agreed with the representatives, and that work includes a review of your job evaluation system.

How to avoid an assessment

Run the numbers before they count. Work out the gap per category on this year’s data now, so any 5% gap shows up while there’s time to act.
Decide each flagged gap explicitly. Justified, with a recorded reason, or being closed, with a plan and a date.
Fix the cause. If gaps cluster in a few categories, check how those jobs were scored and how starting pay was set.
Check pay rises after family leave. Part 5 of the assessment asks about it directly, so track it now.
Watch small groups. Where a category has only a few women or men, an average can reveal one person’s pay. Plan how you’ll report it.

How Squadra HR handles it

The pay transparency module flags every category with a gap of 5% or more, in either direction, and shows the six-month date from the day you submit. HR records the decision for each one: justified, with the reason, or being closed. If an assessment is needed, the module drafts it per category from the same data, with parts one to four and six filled in from the figures and the recorded decisions, and every decision goes to the audit log.

See it on the pay transparency page, or read the full EU pay transparency guide.

Sources

Directive (EU) 2023/970, Articles 9 and 10, EUR-Lex
L.N. 173 of 2026, regulation 10, legislation.mt

The 5% rule and joint pay assessments