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HomeTaxationCompanyEmployee management in Malta: what you need to know

Employee management in Malta: what you need to know

From its membership of the EU to its low tax rates and business costs, there are numerous advantages to choosing to bring a business to Malta, or part of it. Starting with workforce management and employee-related paperwork, thanks to fair and simplified employment legislation. Let’s review below what needs to be considered in this specific aspect when deciding to open a new business or office in Malta.

Workforce

English is one of Malta’s two official languages, and many people also speak Italian and/or French. This makes the Mediterranean archipelago an easy place to do business with the rest of the world, as most companies use mainly English.

Malta can also rely on high educational standards, and therefore a well-educated and skilled workforce, particularly in the areas of technology, information and communications.

Obligations

Of course, Malta also has legislation governing employee rights and employer obligations. It is important to know and understand at least the salient points of this legislation. of the legislation regarding employee rights and employer obligations.

A key element is obtaining a PE Number (Employment Permit), which is necessary to be able to hire workers and deduct taxes and social security contributions from employees’ wages. There is a simple procedure to obtain this code, but the documentation varies depending on the type of business and the industry in which it operates.

Wages

Malta has a minimum wage that, as of January 1, 2022, is set at €182.83 per week (€9507.16 per year) for people of legal age.

Social security

Malta has a social security system that is funded through contributions from employers and employees (including the self-employed). The range of benefits that these contributions help support include: maternity leave and benefits; sickness benefits and medical care; accident benefits and pensions; and more.

In Malta, both employers and employees are required to make social security contributions, the rate of which is determined by the employee’s age and annual salary paid.

As of January 2022, employer contributions are 10% on annual wages up to €25,986, or a flat rate of €49.97 per week for annual wages above €25,986 per year (provided the employee was born after 1.1.1962). Employees also pay social security contributions at the same rate.

This level of contributions is average internationally, i.e., significantly lower than the jurisdictions with the highest rates in the world (Mexico 43.72%, Russia 38.5%, and South Korea 24.84%), but higher than the countries with the lowest rates such as South Africa, Georgia, and Macedonia (2%, 2%, and 0%, respectively).

Leave

There is legislation covering all aspects of employee leave in Malta.

Full-time employees work 40 hours per week and are entitled to receive 216 hours of paid annual leave. This does not include public holidays (there are 14 per year in Malta) and is regulated on a pro rata basis for employees working less than 40 hours per week. Unless employment is terminated, the minimum four-week vacation period cannot be replaced by other benefits.

The Wage Regulation Order (WRO) regulates employee sick leave, and in all cases all employees are entitled to two weeks of sick leave per year. At the end of the two weeks, additional sick leave benefits may be provided through welfare contributions.

Maternity leave in Malta is set at 18 weeks, beginning 4 weeks before the due date, and female employees are required to take a minimum of 6 weeks of leave after the birth of the child. The initial 14 weeks of maternity leave are paid by employers at 100% of regular salary; after that, the leave is paid by social security.

There is no mandatory paternity leave in Malta, but there is a 4-month parental leave entitlement until a child reaches the age of 8 years (provided the employee has been employed for more than 12 consecutive months).

Other forms of statutory leave to which employees are entitled in Malta include marriage leave, bereavement leave, jury service leave, and court witness leave.

Termination of Employment

Malta has a number of regulations in place regarding employee termination, which can vary depending on the employee’s status and length of service.

A fixed-term contract may be terminated by an employer for business or personal reasons, or as a result of employee misconduct (in which case advance notice is required).

An employee may be terminated for cause, by layoff, or by reaching retirement age. The amount of notice that must be provided depends on the length of the employee’s service, with a maximum of 12 weeks (however, it is possible for an employee to receive a refund in lieu of notice).

Malta, on the other hand, has no laws in place regarding severance pay.

For more information or specific advice on managing employees in Malta, contact the Malta Business Agency team by filling out the form below.

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