Malta Payroll and Benefits Guide

What global businesses need to know about payroll in Malta

For a country of only 316 square kilometers, Malta has always been far more important than it may seem.

In the Second World War, its position in the middle of the Mediterranean Sea made it of huge strategic importance to both sides, hence the intense and sustained bombardment this then-British territory suffered from the Axis powers. Malta’s resilience against these attacks led King George VI to award the George Cross for gallantry to the entire country in 1942, and it’s that cross that adorns the Maltese flag today.

Today, Malta is an independent country of around half a million people, with an incredible amount going for it in terms of international business. For starters, it’s a member of the European Union, the eurozone, and the Commonwealth (only Cyprus can also say it’s a member of all three). It exports a huge range of goods and services to a diverse mix of trading partners, and doesn’t rely on any single partner for much of its prosperity. And its superb year-round weather makes it a popular tourist destination, especially for British holidaymakers.

There’s lots to love about doing business in Malta, as long as you plan ahead: corporation taxes can be high, while collective bargaining has a considerable influence on employee rights. Get all the basics on running payroll in Malta, and more, in this guide.

Getting Started

Malta is a relatively straightforward country in which to set up a business, and the process should take no more than two weeks.

The first step is to prepare the Memorandum and Articles of Association, and open a Maltese bank account. Within that bank account, you will have to deposit at least 20-25% of your minimum share capital: the minimum rates are €1164.69 (approx. £1000, $1260) for a private company, and €46,587.47 (approx. £39,800, $50,500) for a public company. All your relevant documents can then be filed online through the Malta Business Registry, for which there is a fee of between €100 and €2250, depending on the amount of share capital involved.

Up to ten days later, registration certificates are issued, after which you can obtain the relevant business licenses, gain a Permission to Employee number, and register for VAT.

Employment Considerations

Employee rights are typically outlined in their contracts, which are mandatory and must be done in writing. Employment contracts state the details of what both the employee and employer can expect from each other. Collective bargaining and Wage Regulation Orders can have an influence in this area across many industries.

The standard working week in Malta is 40 hours across five eight-hour shifts. Anything above this counts as overtime, unless defined otherwise in a Wage Regulation Order, where the standard working week may be a maximum of 48 hours, averaged over 17 weeks. Overtime is paid at 150% of normal salary and, interestingly, the first €10,000 (approx. £8500, $10,800) earned per year through overtime is only taxed at 15%.

Notice periods start at zero for employees in their first month, after which one week should be given, rising to two weeks after six months’ service and four weeks after two years’ service. These statutory notice periods continue to lengthen according to experience, reaching a maximum of 12 weeks for employees with at least ten years of service. 

Probationary periods are at least six months, and should be a full year for technical or management staff earning more than double the national minimum wage.

Compensation, Bonuses and Severance

The national minimum wage rate in Malta was bumped up by more than 10% at the start of 2024. It now stands at €213.54 per week (approx. £185, $230) for employees aged 18 or over; slightly lower rates apply for younger employees. The Wage Regulation Orders involved in collective bargaining often mean that these rates are increased on an industry-specific basis.

Employees in Malta are entitled to a statutory bonus of €135.10 (approx. £115, $145) paid every six months. Other discretionary bonus structures can be agreed upon in employment contracts. There is, however, no statutory requirement for severance pay.

Tax and Social Security

Malta is unusual in its income tax in that it has an American-style system where thresholds vary according to whether a taxpayer is single, married, or a parent. A certain amount is exempt, varying between €9100 per year (approx. £7800, $9900) for a single person, to €12,700 per year (approx. £10,900, $13,800) for a married person. After this, rates of 15% and then 25% apply. For all types of taxpayers, the highest rate of 35% is applied on all earnings over and above €60,000 per year (approx. £51,300, $65,000).

Corporation tax in Malta is relatively high at 35%, but a refund system means large amounts of this tax can often be claimed back by shareholders. VAT is 18%, with a number of reductions, notably including a 7% rate on renting licensed tourist accommodation.

The social security system in Malta is one of the simplest around. If an employee earns more than €26,831 per year (approx. £22,900, $29,100), then employers and employees each contribute a flat rate of €51.60 per week (approx. £45, $55). If they earn less than this, then each party contributes 10%.

Holidays and Leave

Malta has a total of 14 days of public holidays per year, which is high by European standards. A law change in 2020 means that employees now get days off in lieu for any holidays that fall on Saturdays and Sundays. Paid leave entitlement for full-time employees is 24 working days per year.

Maternity leave entitlement is 18 weeks, starting four weeks prior to the due date. Mothers can return to work early if they wish, but they must take the six weeks after the birth off. Employers cover full salary for the first 14 weeks of maternity leave, and social security covers the last four weeks, if they’re taken. There is no specific paternity leave in Malta, but all parents are entitled to four months of paid parental leave, which can be taken at any time before a child turns eight.

Sick leave entitlement varies according to collective bargaining and Wage Regulation Orders. In cases where this doesn’t apply, the standard entitlement for medically certified sick leave is ten days per year.

In Summary

Malta can be a gateway to Europe for many businesses, and is a very welcoming place for overseas investment. However, there are some complexities to understand about doing business there, in particular the role of the Wage Regulation Orders. It’s for this reason, among others, that we would always recommend partnering with a global payroll expert, who can keep you on the right track thanks to their Malta-specific expertise.

This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.

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