Employee benefits in Malta: All you need to know

Malta is fast-becoming one of the world’s prime remote-work destinations. The country incentivises foreign investment and actively encourages international workers to relocate to Malta to work. Besides the temperate climate and chill lifestyle, Malta has a thriving economy populated by highly skilled professionals with low costs of living, favorable tax structures, and a high quality of life.

Indeed, Valletta (Malta’s capital) ranked in the top 15 global cities in Remote’s recent Best Destinations for Remote Work research report. Malta offers a digital nomad visa that allows an entrepreneur or remote worker to reside and work in Malta from six months to a year. Malta also offers a global residency program with an attractively low flat tax of 15% on remitted income. Employee benefits in Malta include strong social security entitlements. The social security system is a pillar of the welfare system which covers every person living in Malta.

Growth-focused employers open to building a globally-distributed team will find a small haven of quality talent in Malta. However, before you expand your hiring horizons to this European island paradise, you must understand the local legal requirements, especially those relating to regulatory compliance and employee benefits.

We want to make it easy to understand your obligations as an employer of Maltese talent. As an experienced employer of record with entities all over the world (including our own entity in Malta), we know that managing a competitive and compliant benefits package across multiple countries (including Austria) can be simple, inexpensive, and scalable.

In this guide to benefits for Maltese workers, we’ll cover the following key areas:

• How to determine who is entitled to benefits in Malta

• Statutory benefits you must provide to Maltese employees

• Additional benefits to consider to make your local offers competitive

• How to set up and manage benefits for a globally distributed team

Who is entitled to benefits in Malta?

There's a difference between contractors or self-employed people and full-time employees in Malta. Misclassification can result in serious complications and punitive action from the country’s Commissioner for Revenue (CFR).

Full-time employees or those who work for 40 hours each week should get benefits. By law, if a person works temporarily for more than four years, they should become reclassified as full-time or permanent employee that will be entitled to statutory benefits.

What differentiates employees or workers from independent contractors is primarily based on personal dependence — or how much of the way the employees perform their tasks is controlled by the employer.

It’s important to understand this delineation. If you inadvertently misclassify employees as independent contractors and subsequently mismanage your mandatory obligations, you will be liable to pay back everything you missed (at the very least). The CFR will likely impose additional associated fines and penalties – not to mention the legal costs and reputational damage.

Regardless of whether you view an individual as an employee or a contractor, legislators will make the only determination that matters. If you’re found to have an employee relationship and you’ve neglected to provide statutory benefits, you’ll open your company up to the serious risks of misclassification.

(For more detailed information about understanding this concept, be sure to read our dedicated guide to misclassification.)

Benefits for Maltese contractors

We strongly urge employers to consider offering a benefits package to contractors. Just because these entitlements aren’t mandated, doesn’t mean you shouldn’t still provide equitable compensation to contractors because of their employment status alone.

If you value your contractors, benefits can build strong trust and connection with your business, especially in a remote context. You do still need to be careful of triggering permanent establishment or misclassification dangers with the type of benefits you provide.

Value-based benefits like paid time off, flexible working hours, and parental leave provisions can often keep you on the safe side of this legislation (more on this in our guide to offering benefits to international contractors).

An employer of record (EOR) like Remote should be able to give you more specific advice to minimize associated risks according to the employment legislation of Portugal (or any other nation).

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Statutory employee benefits in Malta

Statutory benefits, also known as mandatory benefits, are entitlements that employers are obligated by law to provide to their employees. Common examples include benefits like paid annual leave, parental leave, worker's compensation insurance, and paid sick leave.

In Malta, the guidelines that govern employee benefits and entitlements come from the European Union (EU) directives, the Employment and Industrial Relations Act (the Labor Code), and other specific Maltese laws and statutes.

Foreign companies that hire employees in Malta must abide by these guidelines. If you don’t meet these minimum obligations, you leave your company open to the risk of serious penalties and sanctions. We’ve outlined the entitlements you must provide to Maltese employees below.

Annual leave entitlements in Malta

Currently, employees working 40 hours every week should have a paid leave allocation of 28 working days or 224 hours. This includes three public holidays that fall on weekends. Employees can only carry forward a maximum of 50% of their annual paid leave to the following year (unless otherwise agreed with the employer).

In cases where a person is on maternity leave, annual vacation time still accumulates. If they cannot take the vacation when they begin their maternity leave, they can carry it forward to the following year.

Maternity and Parental Leave in Malta

In Malta, maternity leave is 18 weeks long, eight weeks pre-natal, and six weeks post-natal. It’s mandatory for the break to start not later than four weeks to the due date and not earlier than six weeks after the birth. Employers have to pay pregnant women the total salary for the first 14 weeks of their leave, plus a weekly maternity benefit of €97.84. The government offers €179.33 for the other four weeks.

The employee can choose when to take the remaining time off. Before leaving, the employee should give at least four weeks' notice.

For paternity leave, the only statutory provision is a one-day paid leave after the birth. Parents can also take unpaid parental leave of up to four months before the child reaches eight years old.

It’s worth noting these parental leave provisions are comparatively low, especially when considering the more progressive legislation in nearby European countries.

We strongly recommend providing additional parental leave to Maltese employees to maintain a globally consistent parental leave provision. This benefit will be met with loyalty and commitment in return.

In Maltese culture, family connections are strong and as a result, any additional provisions aimed at assisting with parental care are so highly valued in the minds of employees.

Retirement and social security pension contributions

The Maltese social security system has two significant schemes; the Contributory Scheme and the Non-Contributory Scheme.

• The Non-Contributory Scheme has several provisions that complement each other. They assist unemployed households, job seekers, people with critical illnesses or disabilities, and low-income earners.

• The Contributory Scheme is comprehensive and universal. It covers the employed and self-employed people who earn above € 930, people under the age of 65 who have no salary, and those who get income from alternative sources such as investments.

Contributions are weekly or under a ‘pay as you go’ system. The goal is to make contributions when there's income to cover the hard times such as unemployment, sickness, or retirement. The compulsory contributions cover occupational risks such as industrial injuries, death, occupational diseases, and invalidity.

Note that many local Maltese employers offer deferred annuity plans in addition to this statutory benefit that offer their employees voluntary retirement benefits. You could consider adding your own additional pension plan entitlement to your program, but this is not an expected benefit in the local market.

Deductions are in two classes; class 1 and class 2 contributions. These contributions vary based on age (over or under 18 years) and whether the employee’s date of birth is before December 31, 1961, or after January 1, 1962.

Class 1 Contributions

Employees who earn from €181.09 (US$207.57) to €372.35 (US$426.81) per week should contribute 10% of their wages if they were born before December 31, 1961. Employers also contribute 10%.

Employees born on or after January 1, 1962, with a weekly income between €181.09 and €485.74 (US$556.78) also pay 10%. For salaries above €25,258 (US$28,921), employees spend a constant rate of €48.57 (US$55.61).

After employers deduct the contributions, they submit them to the Commissioner for Revenue every month.

Class 2 Contributions

Class 2 contributions are for the self-employed and those who have alternative sources of income. They contribute 15% of the net profit generated from the previous year, with payments after every four months. Individuals whose birthday is on or after January 1, 1962, can only contribute a maximum of €72.68 (US$83.22).

Minimum wage

Currently, the national minimum wage for full-time workers 18 years and above is €181.08 (€724.32) monthly. Employees aged 17 years should get a monthly minimum of €174.30 (€697.2), and €171.46 (€685.84) for those under 17.

If an employee works for the same employer at the minimum wage for one year, they should get a raise of €3 per week. After two years, they should get a €6 raise. After two or three years, this pay rise also applies to other employees who earn more than the minimum wage.

However, the various sectors' Wage Regulation Orders (WROs) supersede national rates. For part-time employees, the minimum wage should match the hourly rates of full-time employees.

International employees relocating to Malta pay higher taxes during the initial 183 days. After that, the taxes depend on the income, but they shouldn't exceed 35% of the gross annual income.

Overtime and working hours

In Malta, full-time employees work for 8 hours a day, or 40 hours every week according to the Wage Regulation Orders. They shouldn’t work for more than 48 hours per week over 17 weeks unless this is voluntary. Any work time above the standard duration counts as overtime.

All employees should have a break for working days longer than six hours. They should rest for eleven consecutive hours after every 24 hours and at least 24 hours uninterrupted rest every week.

The Wage Regulation Order (WRO) defines the overtime rules in various industries. If the employee is not under the WRO, overtime should be paid at 150% of the standard hourly rates.

There’s a particular stipulation regarding mothers; the Protection of Maternity (Employment) Regulations. It states that pregnant mothers or those with less than 12 months since the birth or adoption of a child should not work overtime. The stipulation supersedes any other laws, contracts, or collective agreements on the same.

Health insurance

The national insurance contributions from employers and employees finance the National Health Service that covers healthcare issues.

Citizens of the European Economic Area (EEA) and European Union (EU) are also covered. They’ll need to provide additional documentation such as an SI Certificate of Entitlement to Healthcare from their country or a European Health Insurance Card. They can also opt to pay for Maltese national insurance.

Employees from non-EEA or EU countries can use the National Health Service after paying for the national insurance privately or via their employer.

Unemployment benefits

Unemployment benefits are available to individuals who have contributions amounting to 50 weeks in the last two years. If unemployment is voluntary, the benefits don’t apply.

Single parents and married spouses with no full-time jobs receive special unemployment benefits for 156 days, and they only qualify for future benefits after 13 weeks of employment.

Additional benefits to consider for Maltese employees

Note that Maltese employment laws provide a strong baseline of benefits, so employers must offer more advanced benefits packages to have the best chance of competing to attract and retain exceptional talent in the country.

Remote cares passionately about providing perks and benefits to enable your global team to enjoy security, stability, and work-life balance. Our team of internal HR specialists and global benefits experts are constantly working with our customers to create customized and competitive benefits packages to attract top talent.

Offering the bare minimum won’t cut it with the best candidates in almost any international talent market and Malta is no different. Workers are starting to seek out certain perks now that remote work is readily available with businesses across the world (we explain in more detail in our values-based benefits guide).

Most employers offer benefits such as travel allowances, accommodation or housing allowances, and required relocation expenses for employees moving to Malta. Attracting and retaining exceptional talent calls for more than just the bare minimum. We’ve pulled together a collection of supplementary benefits you could consider to give yourself the best change of attracting top-shelf Malteste talent.

Competitive compensation packages

The average monthly salary is 4,620 EUR in Malta, but the average range is between 1,170 EUR and 20,600 EUR. The differences depend on the specific industry, experience level, and education.

Besides the salary, employees also tend to receive quarterly bonuses and ongoing salary adjustments for national changes in cost of living over time.

Before creating a benefits package, it's essential to research your specific industry or sector. Candidates with more experience and a longer duration of service have higher expectations.

Learn how to develop packages with the best benefits to attract top talent with this dedicated guide.

Private health insurance

Forward-thinking employers can bolster the provisions of Malta’s mandatory social insurance programs with a strong private health insurance plan. You should strongly consider this benefit to give your employees access to more premium coverage.

Private insurance inclusions can range from dental to optical coverage as well as other specialized private insurance that the public sector may be too limited to comprehensively include. This will help employees pay for additional medical care such as emergency room visits, hospital stays, outpatient surgery, and other potential extra costs.

Indeed, offering health cover, or other additional insurance benefits (like dental insurance, vision insurance, and life insurance), can be such an effective way to build trust with new hires and separate your offer from the competition.

Value-based benefits to attract remote workers

As more employees moved toward remote or hybrid working solutions over the past couple of years, the demand for employer-provided support for telecommuting has increased.

Home office stipends and personal development programs are now highly preferred benefits alongside the more traditional provisions of supplemental insurance. Allowances to compensate for the likely increased cost of internet, electricity and phone contracts will also help to provide specific support for Maltese nationals working from home.

Additional perks can also act as powerful motivators for star candidates to join and stay with a given company and we’ve gathered a short list below for you to consider:

• personal learning budget

• therapy or coaching allowances

• mentorship programs

• volunteering days

• birthday leave

• meal and travel expenses

• gym or health club membership

The size of your business shouldn’t prevent you from sourcing international talent either. If you’re a smaller business looking to employ Austrians (or any other international workers), you can still develop a competitive AND affordable benefits plan. This small business guide to affordable global benefits will help you find inexpensive perks that international employees will love.

Flexibility in work hours

Remote work has also shown that the regular nine-to-five grind can be replaced by a bit more flexibility. This indeed reflects in national law in Austria, where overtime may be extended by an additional two hours per day for specific job functions with a lot of standby duty.

The provision of flexible work hours in a contract adds value towards work-life balance, which again is continuously changing alongside remote and hybrid work environments.

Providing cost-effective benefits packages to remote workers

Bundling supplementary and value-based benefits into a job offer always comes with key considerations in terms of cost-effectiveness. This is especially true for businesses of smaller scale that want to work with remote employees in Austria but may struggle to remain competitive in the job market and thus lose out on providing benefits.

Home office support stipends and supplementary insurance coverage notwithstanding, you can tweak your benefits package to suit the nature of the work required from your remote workers to include benefits such as more paid time off, or even, assistance with basic needs such as groceries and food.

There are also more traditional approaches like stock options or profit-sharing, which lend themselves well to responsibilities with high ownership and impact.

The key is to spend less on vanity perks and actually focus on benefits that let employees live the lives they want — which is made possible by their situation as remote professionals. You can read our guide to affordable perks small businesses can offer remote teams to learn more.

How to set up and manage benefits for international employees

Complex international hiring as well as managing payment and benefits for global workers is a challenging task because the processes involved are incredibly difficult to manage internally.

You need a solution that allows you to stay compliant with all of the local labor laws in each country of operation.

Instead of building a fully-owned local legal entity with a specialist HR function in each new market, an employer of record (EOR) provides a cost-effective, fast, and secure alternative to help you grow your team across borders.

When should you use an employer of record?

If you don’t have an established process to manage the complicated parts of scaling global hiring In Malta, in Europe, or in any other part of the world – an EOR like Remote will give you immediate relief.

Remote’s EOR service gives you the advantage of dedicated local employment experts that can offer the insight you need to create a strong benefits package, a compliant employment contract, and a competitive offer to your candidate.

Remote manages the complicated parts of international employment. The combination of Remote’s simple software hub, and our team of global HR experts combine to organize all the tiny details of managing a distributed team.

Our team of global employment experts handles the complexities of running your global HR operations in the backend and our software puts everything in one dashboard where you can:

• Manage payroll and time off

• Handle local employment taxes

• Stay compliant with statutory benefits

• Offer competitive and equitable global compensation packages

• Scale your global team faster

You can learn more about how Remote simplifies international hiring so you can scale your distributed team faster or jump to our Malta country hiring guide for more specific employment information.

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