Malta Employee Benefits

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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.

Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into Malta.

Employee Benefits and Entitlements in Malta

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.

It is a complex picture.

This is where Bradford Jacobs steps in to point you in the right direction, drawing on over 20 years’ experience as a Professional Employer Organization (PEO) and Employer of Record (EOR).

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.

  • Sick Leave: Entitlement depends on the relevant WRO for the sector, or entitlement equals two weeks per year, calculated in hours. A medical certificate is required, in the absence of which the employee may need to apply for leave. Employees receive benefit from the fourth day as the first three days are payable by the employer.

    Sickness benefit is payable up to 156 days and may be extended up to 468 days over two years depending on the Medical Board’s decision. Amounts depend on social security contributions paid during the claimant’s employment.

  • 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.

  • Paid Vacations: In 2021, employees on a 40-hour working week received 216 hours paid leave (27 working days), comprising 192 hours basic entitlement plus 24 hours for three public holidays falling on weekends.

    In 2022, the total entitlement is 224 hours (28 working days) comprising an extra 32 hours, while in 2023 the total entitlement is 208 hours (26 working days) as only two public holidays are on weekends. Employer and employee can agree to leave being taken in hours.

    Under Organization of Working Time Regulations, if average working hours (excluding overtime) average less than or exceed 40 hours over 17 weeks, vacations are adjusted accordingly. Only 50% of unused vacation can be carried forward to the following year. Leave is adjusted pro rata for employees who have worked fewer than 12 months.

    Annual vacation continues to accrue when an employee is on maternity leave and can be carried forward to the following year if it is not possible to take the vacation during the same year when the maternity leave began.

  • Maternity / Paternity / Parental Leave: Maternity leave totals 18 weeks, with eight before the birth and six post-natal. Taking six weeks is compulsory after the birth, four weeks before birth, with the remaining weeks taken as the employee wishes.

    The employee should give a minimum four weeks’ notice before she intends taking leave; after leave she has the right to return to her former or a related position. There is no statutory provision for paternity leave, beyond fathers being entitled to one day’s paid leave following the birth

    Parents can take up to four months’ unpaid parental leave until their child is eight years old.

  • Maternity Benefit: Full pay from the employer applies for the first 14 weeks of the 18-week maternity leave. Under the Social Security Act, the government pays €181.08 (US$207.56) for the remaining weeks.

    ‘Self-occupied’ women (a different category to self-employed) receive €181.08 per week from the government. Women not in employment receive a flat rate of €99.59 (US$114.16) per week. Application for maternity benefit is made through the Department of Social Security and must include a medical certificate.

  • 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.

What Benefits are guaranteed in Malta?

Some employee benefits are guaranteed by mandatory regulations, others by individual employer-employee contracts or by Collective Bargaining Agreements (CBAs). Statutory minimums include the following:

Maternity / Paternity Leave: The allowance is 14 weeks with eight pre-birth (four of which are compulsory) and a compulsory six weeks after birth, with the balance taken as the mother wishes. Employees should give a minimum four weeks’ notice they intend applying for leave.

Maternity Benefit: Pregnant women receive full pay from their employer for the first 14 weeks of the 18-week maternity leave. Under the Social Security Act, the government pays €181.08 (US$207.56) for the remaining weeks.

Sick Leave: Employees receive benefit from the fourth day since the first three days are payable by the employer. Sickness benefit is payable up to 156 days and may be extended up to 468 days over two years depending on the Medical Board’s decision.

Working Hours: Normal working hours for full- and part-timers are based on 40 hours a week. Hours can exceed 40 but must not exceed a 48-hour average over 17 weeks.

Holiday Entitlement: In 2021, employees on a 40-hour working week received 216 hours paid leave, comprising 192 hours basic entitlement plus 24 hours for three public holidays falling on weekends. In 2022, the total entitlement is 224 hours comprising an extra 32 hours in lieu of four public holidays.

What Restrictions exist for Benefits and Compensation in Malta?

Unemployment Benefit: To qualify under the contributory scheme, the unemployed person must have 50 weeks’ paid contributions and 20 weeks of paid or credited contributions for two previous years. Voluntary unemployment invalidates compensation.

Special unemployment benefit for a single parent or a married person whose spouse does not work full time is means-tested. After 156 days of benefit the individual does not qualify for future benefit until they have been employed for at least 13 weeks.

Health Insurance and other Benefits in Malta

Employer and employee national insurance contributions fund the National Health Service, covering all healthcare issues. European Union (EU) and European Economic Area (EEA) nationals are covered as local residents. However, relevant documentation, such as a European Health Insurance Card or an SI Certificate of Entitlement to Healthcare from their home country may be required. Alternatively, they must pay national insurance in Malta.

Non-EU or EEA nationals may access the National Health Service if paying national insurance or pay privately or access through their employer.

Benefit from our advice!

Legally protected compensation and benefits are an essential factor in ensuring contracts comply with Malta’s various labor regulations which can be set by statutes or collective and trade union agreements. Bradford Jacobs ensures compliance with these crucial requirements to avoid delays in becoming operational.

Contact one of our consultants today to learn more!