Malta’s Labour Code and a combination subsidiary laws and European Union directives create a comprehensive range of compensation, benefits and guarantees for employees. These cover
- National Minimum Wage
- Holiday entitlements
- Working hours
- Termination, dismissal, notice periods and severance regulations
- Sick leave and benefits
- Maternity and paternity allowances
In addition Malta’s social security structure covers the entire population and underpins the country’s welfare system. The main authorities are the Ministry for the Family and Social Solidarity and the Department of Social Security.
Managing benefits and compensation comprises a key element of human resources management. Bradford Jacobs’ thorough understanding of these sectors of Maltese employment law ensures all requirements will be met in a trouble-free process.
What Malta Compensation Laws exist?
- National Minimum Wage – is set at €777.10 per month, though higher levels may be set by collective agreements or Wage Regulation Orders. Employees on the minimum wage will, after the first year of employment with the same employer, be entitled to an increase of €3 a week and a further €3 a week increase for the second and third years with the same employer
- Holiday entitlement – from January 1 2020, an employee with a 40-hour working week is entitled to 216 hours (27 days) of paid annual leave; that is, the 192 hours (24 days) basic leave entitlement plus 24 hours (three days) in lieu of the three Public Holidays that fall on weekends. In 2021 this allowance increases to 224 (28 days) hours
- Working hours – these vary according to the sector and Wage Regulation Orders but are usually based on 40 hours a week (excluding overtime). The total can be more but must not exceed 48 hours averaged over a 17-week period. An employer requiring an individual to work more than 48 hours must have the employee’s written agreement, in which case the employer must guarantee the daily and weekly rest periods governed by law
- Termination, dismissal, notice periods and severance regulations – are governed by the Labour Code but may vary according to individual contracts. One week’s notice must be given during a probation period if more than one month has been served. Notice is calculated on unbroken service and ranges from one week for up to six months’ service to 12 weeks for more than 20 years’ service. Longer periods may be agreed between the employer and employee in the case of technical, administrative, executive or managerial posts. The established notice period cannot be extended. Other termination provisions include the dismissed employee’s right to a certificate stating the length of service, nature of the work and rate of pay, the employee’s right to be re-engaged if the ‘redundant’ position is filled by a new recruit and the employee’s right to have all dues settled in terms for such as holiday pay, bonuses and wages
- Sick leave and benefits – vary according to relevant Wage Regulation Orders (WRO) for that sector, otherwise the employee’s sick leave entitlement is two working weeks per year (calculated in hours) as stipulated in the Minimum Special Leave Entitlement Regulations. Employers are only required to pay wages for the amount of sick leave granted by law, after which the employee will only continue to receive benefit from the social security to which they are entitled and depending on the Medical Board’s decision
- Maternity leave – Maternity leave lasts 18 weeks and the first 14 are paid by the employer at full salary. The employee can take up to six weeks immediately after the birth and four weeks before or as agreed between employee and employer. Maternity Leave Benefit is paid by the government for an additional four weeks at €179.33 per week
Social Security in Malta
The Ministry for the Family and Social Solidarity and the Ministry for Health and the Department of Social Security are the main authorities supervising the Maltese social security system. The main provisions are benefits towards retirement, disability, sickness, death, maternity, family, unemployment, health, long-term care and workmen’s compensation.
Social security deductions are divided into Class 1 and Class 2 contributions and the criteria for calculating rates are complicated. They vary for people over and under the age of 18, and for those born before December 1961 and after January 1962.
For example, workers born after January 1 1962 and whose basic weekly wage is between €179.34 and €480.49 contribute 10% of their weekly wage, but if the wage exceeds €480.50 their contribution is €48.05.
Contributions are deducted from the employee’s wage or salary and paid monthly on their behalf by employers to the Department of Inland Revenue. Employers contribute an equal amount for each employee on their payroll.
Part-time employees who work less than 40 hours per week and earn less than the National Minimum (weekly) Wage, can opt to have their share of social security contributions paid at the rate of 10% of their basic weekly wage.
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.
Statutory Employment Costs in Malta
Statutory employment costs facing employers in Malta are:
- Meeting the National Minimum Wage for each employer, set at €10 per month
- Matching the employee’s social security contribution, which is 10% of salary if it is between €179.34 and €480.49, or €48.05 if their salary is over €480.50
- Government bonuses are mandatory quarterly payments made by the employer to the employee regardless of industry, commercial sector or type of company and are in addition to the monthly wage. The four payments total €512.48 annually, comprising two payments of €135.10 and two of €121.16 and are taxed as income
What Benefits are guaranteed in Malta?
- Vacations: Employees on a 40-hour week have 216 hours (27 days) paid annual leave, which is the basic 24-days’ vacation plus the three Public Holidays that fall on weekends. In 2021 the allowance increases to 224 hours or 28 days
- Working hours: Wage Regulation Orders, collective agreements and individual contracts can all influence working hours. The norm is a four-hour week, excluding overtime, but must not exceed 48 hours averaged over a 17-week period. Employees must agree in writing to work more than 48 hours
- National Minimum Wage: This is set at €777.10 per month, which is increased by €3 per week after the first year of employment and a further €3 a week for the second and third years with the same employer
Notice periods: These are calculated on unbroken service in the same employment and range from one week for up to six months’ service and 12 weeks for 20 years’ service. A one week notice period applies during a probation period if more than one month has been served
- Sick leave and benefits: Unless varied by a specific Wage Regulation Order, an employee’s guaranteed entitlement is two working weeks per year as laid down in the Minimum Special Leave Entitlement Regulations. After this the employee continues to receive benefit from the relevant social security scheme to which they belong
- Maternity Leave: Leave lasts for 18 weeks and for the first 14 the employer pays the full salary. For the remaining four weeks Maternity Leave Benefit is paid by the government at €179.33 per week
What Restrictions exist for Benefits and Compensation in Malta?
- Unemployment benefit: To qualify under the contributory scheme, the unemployed person must have 50 weeks of paid contributions and 20 weeks of paid or credited contributions in the two years preceding the year in which the claim is made
- No benefit is paid for six months if unemployment was voluntary or due to misconduct
- Unemployment benefit is €11.80 per day to a single parent or married person whose spouse is not employed full time and €7.72 for all other insured persons to a maximum of 156 days
- The total of benefit days must not exceed the total of contributions paid since the person entered the system
- Special Unemployment Benefit: This is means tested and restricted to €19.83 a day and is paid to a single parent or married person whose spouse is not employed full-time. The benefit is €12.94 for other insured persons. The benefit is payable from the first day of unemployment, and for a maximum of 156 days
- After 156 days of benefit, the person no longer qualifies for benefit unless they take up employment for at least 13 weeks
Health Insurance and other Benefits in Malta
Malta’s National Health Service is funded by employer and employee national insurance contributions. It covers all healthcare including accident and emergency, hospital stays and visits to government clinics for non-emergency care. European Union (EU) and European Economic Area (EEA) nationals are entitled to the same healthcare as local residents. However, they need documentation from their country, such as a European Health Insurance Card, valid for temporary stays and unplanned healthcare, or an SI Certificate of Entitlement to Healthcare from their country of origin. Alternatively they need to be paying national insurance in Malta.
Non-EU or EEA nationals may have the right to use the National Health Service if they are paying national insurance – check with the Department of Health. If not, they will need to purchase private health insurance or obtain it through their employer. They can then access care at public or private hospitals and clinics. Without insurance, health care costs can rapidly spiral and patients will be asked to pay before leaving the premises.
Other employee benefits in Malta will largely depend on those offered by employers, such as company health or life insurance schemes and dental health schemes
Bonuses in Malta
Apart from any bonus payments that may be contractually agreed between employers and employees, there are also mandatory government bonuses that must be paid by employers. Government bonuses are quarterly payments made by the employer to the employee regardless of industry, commercial sector or type of company and are in addition to the monthly wage. The four payments total €512.48 annually, comprising two payments of €135.10 and two of €121.16. They are taxable according to the employee’s individual tax rates.
Work with Bradford Jacobs
Understanding the rules and laws applying to compensation and benefits in Malta is vital to successfully operating a subsidiary in Malta. But they are complex and relate not only to Malta’s Labour Code but also to subsidiary laws plus directives from the European Union. Compensation and benefits, statutory costs, social insurance payments, health insurance and bonuses are issues that cannot be overlooked for the smooth transition of opening a subsidiary in Malta. There is a simple solution. Be on top of these issues by working with Bradford Jacobs to utilise our Employer of Record payroll services in the certainty that we have all the solutions. Contact us here