Maltese Employee Benefits

What are the Employee Benefits in Malta?

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Malta might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Malta including local benefits.

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Malta, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.

Benefits and entitlements for Maltese employees are based on the Employment and Industrial Relations Act (the Labor Code), European Union (EU) directives and a framework of supplementary laws and statutes. Incoming foreign companies hiring employees in Malta must operate within this legislation that provides safeguards and guarantees for the workforce.

Minimum guaranteed benefits, either from legislation or collective agreements, include such as:

• Minimum wages
• Paid vacations
• Working hours
• Termination, notice periods and severance
• Sick leave
• Maternity allowances and benefits

The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations, however. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship.

What Compensation Laws exist in Malta?

The employer-employee relationship in Malta is based on the Employment and Industrial Relations Act (the Labor Code), European Union (EU) directives and various supplementary laws and statutes. Incoming foreign companies hiring employees in Malta must meet their obligations to employees.

The requirement for employers to respect employees’ rights stretches further than simply complying with tax and payroll procedures. Legislation applies to such as maternity allowances and benefits, holidays, sick pay and severance payments, minimum wages and working hours, for example.

Drawing up contracts is tricky enough, but in Malta it is vital for employers to be up to speed with responsibilities to their staff over benefits, compensation, and minimum requirements. Do not take the risk of paying penalties for ignoring these responsibilities.

Compensation, entitlements, and benefits include:

• National Minimum Wage: In 2021 the minimum was increased to €784.08 (US$906) per month or €9,416 (US$10,876) per year, based on 12 monthly payments for full-time workers aged 18 and over. Wage Regulation Orders (WROs) applying to different sectors take precedence over national minimum rates.
  
  The minimum wages of part-time employees are calculated pro rata with the hourly rate for full-time employees.
  
• Working Hours and Breaks: Working hours for full-timers are based on 40 hours a week. Hours can exceed 40 but must not exceed a 48-hour average over 17 weeks. In sectors such as manufacturing and tourism the average period is one year.
  
  Employees must give written consent to average over 48 hours per week.
  
  Employees have a minimum 15 minutes’ rest after six hours. A minimum uninterrupted rest of 11 hours applies between workdays, with uninterrupted 24 hours’ rest every seven days, or 48 consecutive hours in 14 days.
  
• Overtime: Where not covered by a WRO an employee is paid 150% of normal hourly rate for hours worked over 40 a week averaged over four weeks, or a shift cycle determined by the employer.
  
  Contracts not specifying rates of overtime contravene the Information to Employees Regulations.
  
  The Protection of Maternity (Employment) Regulations stipulate that regardless of any other laws, collective agreements or contracts a person cannot be asked to perform overtime during pregnancy or for 12 months either from the birth or adoption of a child. Since Malta’s 2020 Budget, 15% tax applies to income from qualifying overtime for full-time employees (not managerial) where the basic weekly wage does not exceed €375 (US$433).
  
  There are proposals to reduce the level of taxation in the 2022 Budget.
  
• Termination and Severance: Termination, dismissal and severance are governed by the Employment and Industrial Relations Law (the Labor Code) but can vary contractually.
  
  Compensation is waived if there is a justifiable cause, such as disciplinary action or long-term medical incapacity. Employees on fixed-term contracts have the same ‘last in / first out’ redundancy rights as employees on indefinite contracts. With indefinite contracts, notice can be given by either party and is calculated on employees’ length of service.
  
  Malta’s ‘Guarantee Fund’ covers unpaid wages to employees whose contract is terminated due to insolvency. Employees should receive all entitlements and remuneration including wages, overtime payments, statutory bonuses, notice pay and settlement of outstanding holidays. If the employer refuses, the Department of Industrial and Employment Relations can act.
  
• Notice Periods: This is calculated on unbroken years of service. Up to one month - no notice. One month to 6 months - 1 week; 6 months to 2 years - 2 weeks; 2 years to 4 years - 4 weeks; 4 years to 7 years - 8 weeks; 7 years to 8 years - 9 weeks.
  For more than seven years there is one extra week’s notice for each subsequent year up to a maximum of 12 weeks. Longer periods may be agreed between the parties in the case of technical, administrative, executive, or managerial posts.

Social Security in Malta

The Ministry for the Family and Social Solidarity and the Ministry for Health and the Department of Social Security administer the social security system. The main benefits cover health, retirement, disability, sickness, death, maternity, family, unemployment, long-term care, and workers’ compensation.

Deductions are divided into Class 1 and Class 2 contributions and vary for people over and under the age of 18, and for those born before December 31, 1961, and after January 1, 1962.

For workers aged over 18 and born before December 31, 1961, with a basic weekly wage between €181.09 (US$207.57) and €372.35 (US$426.81), both employers and employees contribute 10% of the weekly wage.

Contributions from both stay at 10% for workers born on or after January 1, 1962, applying to a weekly wage between €181.09 and €485.74 (US$556.78). In this category there is a flat rate of €48.57 (US$55.61) for salaries over €25,258 (US$28,921). Employers deduct contributions from the employee’s wage or salary and remit monthly on their behalf to the Commissioner for Revenue.

Class 2 contributions refer to self-employed or self-occupied workers whose contributions comprise 15% of the previous year’s net profit and are paid every four months. The maximum contribution for those born on or after January 1, 1962, is €72.68 (US$83.22).

Statutory Employer Costs in Malta

• Employer Payroll Taxes for Social Security: Employer remits the equivalent of 10% of employee’s salary to the Commissioner for Revenue for the Directorate of Social Security.
• Corporate Income Tax (CIT): Employers must pay CIT. The standard rate is 35% and includes worldwide income and certain capital gains. Malta’s tax refund system is attractive for international businesses taking advantage of the island’s proximity to Europe, North Africa and the Middle East and can leave entrepreneurial companies paying around only 5% corporation tax.
• National Minimum Wage: This is a statutory cost as employers must comply with national minimum wages, even though contracts and agreements can allow for more than the base rate. In 2021 the minimum was increased to €784.08 (US$906) per month or €9,416 (US$10,876) per year, based on 12 monthly payments for full-time workers aged 18 and over.