How to hire and pay remote workers in Malta

Remote work makes it easy for businesses to access top talent, regardless of where in the world they come from. Thanks to developments in communications and technology, employers can recruit beyond geographical boundaries and tap into foreign markets without setting up an office abroad.

However, to hire remote employees in Malta, you'll need an extensive understanding of the country’s employment laws and keep up with changes in legislation. You also have to have a grasp of tax and compliance practices and set up a payroll system to pay your remote workers on time.

The process can be complex, but you don’t have to worry. In this article, we’ll take you through the key things you need to know about hiring and paying remote employees in Malta.

How do foreign businesses pay remote workers in Malta?

Foreign businesses can pay remote workers in Malta using one of the following methods.

Open a legal entity in Malta

Creating a legal entity in Malta will allow you to hire and pay remote workers in the country. This method allows you to pay your remote workers by bank transfer or direct deposit into their local accounts, which is very convenient for employees.

This option, however, can be costly and time-consuming. You need to meet several requirements, such as finding a designated office space, hiring a skilled team on the ground, and opening a bank account for business transactions. You’ll also need to consult a local accounting firm to help you understand your business’s legal requirements.

Work with a global employment partner

Foreign businesses also have the option to work with a global employment partner, like Remote, to manage the entire process of hiring and paying remote workers in Malta. Remote can provide a full range of services to help you hire remote workers easily — finding the right talent for your needs, onboarding workers, managing tax and compliance requirements, and handling global payroll. This option is a hassle-free approach because it minimizes risks and offers you full compliance with Maltese employment laws.

Pay Malta workers as contractors

Another option you can consider is to hire workers as independent contractors rather than direct employees. Contractors are self-employed individuals who provide services for your company contractually and receive payments accordingly. This means that they will pay their taxes, and won’t have any tax obligations linked to your business. Contractors in Malta are also not entitled to employee benefits.

However, keep in mind that if you intentionally hire a worker as a contractor to avoid paying taxes or offering benefits, it could land your company in trouble. Misclassifying your workers can have serious consequences, including fines, penalties, and legal disputes.

In what currency do companies pay remote workers in Malta?

Foreign businesses must pay their remote workers in the local currency, which is the Euro (€). If your remote worker wants to be paid in a different currency, they can ask for payment in another currency, but it will be processed in Euros. 

What are the tax rates for tax brackets in Malta?

Where a remote worker pays taxes depends on several factors, including their salary and the type of employment contract they have with your company. Malta has progressive tax rates tied to income levels. The tax rate depends on family status, such as whether an individual is single, married, or has children. The following tax rates apply for single individuals in 2023:

• 0% — €0 and €9,100

• 15% — €9,101 to €14,500

• 25% — €14,501 to €19,500

• 25% — €19,501 to €60,000

• 35% — Over €60,001

Which parts of salary in Malta are taxable?

Under Maltese law, not every component in a salary is fully taxable. While some allowances are fully taxable, others are only partially taxed. 

Components of Malta salary that incur full taxes

• Basic salary

• Gains or profits from employment income

Components of Malta salary that incur partial taxes

• Use of motor vehicles

• Use of other assets, including accommodation

• Other fringe benefits, including beneficial loan arrangements, reimbursement of private expenses, discounted goods and services, free or subsidized meals, and gifts

Is per diem taxable in Malta?

A per diem payment is a travel allowance that employers give to their employees for meals and other related expenses on a business trip. It can include a flat rate or a per-day amount. Here, business trips refer to any short-term work assignments that take place outside an employee’s regular office. In Malta, as long as the per diem payment is reasonable (less than 140 Euros per day), it will be tax-free.

Is there a difference between allowance and reimbursement in Malta?

Typically, an allowance is a pre-determined amount that an employer gives to an employee at a certain interval — monthly or annually — to cover work-related expenses. On the other hand, reimbursement is the act of re-paying an employee for a work-related expense that has already been incurred.

Certain allowances for the use of motor vehicles, living, and housing paid to employees are taxable, however, there are exceptions. Under Maltese law, employee expenses that are wholly related to income production are deductible under Maltese law. Employee reimbursements are not taxed unless the employee profits from the arrangement.

What payroll deductions are employers required to make in Malta?

Under Maltese law, employers may not make any deductions from the wages of their employees unless there is a permitted deduction or an order of a competent court. The law also states that if the employer does not allow the employee to work the full weekly hours, they must be paid their agreed salary for the entire week. If an employee cannot work out all agreed hours in a week, the employer may only deduct hours lost.

Note that employers and employees in Malta have to make weekly social security contributions equivalent to 10% of the employee’s salary, at a fixed rate of €51.60 per week for salaries over €26,831. Self-employed individuals have to pay 15% of the annual net income from the previous year towards social security contributions.

Want to see a full breakdown of employment costs for new hires in Malta? Check out our free Employee Cost Calculator tool.

Pension schemes

Under Maltese law, the state pension provision comprises a mandatory earning-related pension scheme, financed on a pay-as-you-go basis, which provides old-age pensions, survivor’s benefits, and invalidity pensions. Contributory retirement pensions are divided into two schemes: “flat-rate pensions” and “two-thirds pensions.”

Insurance schemes

Malta has extensive welfare benefits and a public health care system provided through taxation and national insurance contributions from employers, employees, and self-employed individuals. The social security system distinguishes between two classes of contributions: class one for those employed and class two for those self-employed. 

Under the class one system, the rate payable by employees and employers represents 10% of the basic weekly wage, subject to a minimum amount of €16.80 to €42.57 per week.

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What is the minimum wage in Malta?

Under Maltese law, there is a mandatory minimum weekly wage for employees. It also mandates statutory increases that employers offer as an employee’s tenure increases. Here’s a breakdown of the minimum weekly wage according to age:

• 18 years and above — €192.73 per week

• 17 years — €185.95 per week

• Under 17 years — €183.11 per week 

If a minimum wage employee works with an employer for more than a year, the minimum wage will increase by €3 per week, which is added to the base pay. After the second year, this increases to €6 per week or a €24 bonus on the employee’s monthly paycheck.

If an employee is earning more than the minimum wage, they are entitled to similar increases, starting in the second and third years of their continued employment with the same employer.

How much is overtime pay in Malta?

In Malta, regulations on overtime differ by sector. These rules are governed by the Wage Regulation Order (WRO) that applies to the particular activities you are conducting.

If the WRO does not cover your job or sector, the default overtime rate is 1.5 times your ordinary pay and applies to any hours worked that exceed 40 hours per week. However, this is averaged over a four-week shift cycle or period. If you work less than 40 hours in one week, it may affect your entitlement to overtime the next week.

What are the local labor laws in Malta?

The Employment and Industrial Relations Act governs employment in Malta under the Laws of Malta Chapter 452 and a series of 118 subsidiary regulations. These labor laws cover employment conditions including hours of work, termination, minimum wages, rights, working conditions, termination, overtime, and other relevant topics. Many EU directives and regulations that concern work conditions in Malta form subsidiary laws. Maltese labor laws also cover health, safety along with disability, equal treatment, and data protection.

How to pay contractors in Malta?

There are a few options for paying contractors in Malta, including bank transfers, direct deposits, paper checks, money orders, virtual wallets, or via an online payment provider like Wise or PayPal. To avoid poor exchange rates or money transfer fees, you could alternatively use Remote’s contractor management platform to pay your contractors quickly and compliantly. 

You and your contractor can discuss and agree on when and how to make payments to contractors in Malta — at certain milestones, hourly, or at the end of the project after they submit an invoice to you.

However, you need to be careful about contractor misclassification. Maltese authorities can impose a penalty for treating a worker as an employee when they should have been treated as a contractor. So, it’s better to regularly review your worker’s employment status to ensure you remain compliant with labor laws.

However, if you find that your workers are being misclassified or worried that they are, then it’s a good idea to convert your contractors to employees. Remote can help you make the switch easily, so you don’t have to be worried about being in non-compliance with Maltese laws.

How to pay remote employees in Malta?

You can pay your remote employees in the country once you’ve established a legal entity in Malta. This means you’ll have to pay your employees in line with Malta’s labor and tax laws. Crucially, working with remote employees in Malta involves understanding the risk of permanent establishment. 

Permanent establishment is a tax term that implies that a business has an ongoing presence in the country. Many businesses try to avoid permanent establishment while hiring remote employees because this means that they could be subject to paying taxes in Malta.

To minimize these risks, it’s a good idea to use an employer of record (EOR) to manage your global hiring process. An EOR allows you to hire and pay remote employees in Malta without establishing a permanent presence in the country. Remote's global employment services can process taxes and payroll, automate the payments process, and help you pay your remote employees in Malta efficiently.

Read our expert guide for more information on how an EOR can help you grow your global team.

Pay remote workers in Malta with Remote

With technology, it’s now possible to efficiently hire, manage, and pay remote employees around the world. Global boundaries have disappeared, allowing employers to find talent in any corner of the world. 

But international hiring is a tedious task. Companies who want to find remote workers in Malta must classify workers correctly, understand labor laws, and remain compliant with tax and payroll regulations. It can sound like a lot of work, but with Remote, the hiring process is simple! 

Remote can handle the onboarding process, automate payments, handle taxes, and help you stay compliant with Maltese labor laws and regulations. Our global HR services for remote teams give you a centralized platform to manage your employees and contractors all over the world with ease! Remote takes care of everything so that you can focus on growing your business.

Download our in-depth guide on hiring remote employees for practical advice on how you can get started with global employment. Ready to start onboarding workers in Malta? Sign up for Remote and start expanding your team globally in minutes!