Introduction to Payroll in Malta
Businesses looking to expand to Malta can benefit from the country’s close proximity to both Northern Africa and Mediterranean Europe, which offers a range of profitable opportunities. Making sure that your Maltese talent is recruited and paid correctly, however, requires knowing how payroll processes work in the country.
This comes with its fair share of challenges, including taxes and labor laws that might be very different from those you're used to in your business's home country. You can avoid a future of payroll headaches if you understand the nuances upfront. To keep things even simpler, a trusted, expert payroll company Malta like Skuad can help you handle your payroll services in Malta in the best and most efficient way, while always complying fully with in-country rules and regulations.
Navigating the payroll system in Malta can be complex. A payroll management company like Skuad offers an expert team always ready to support you to process and manage payroll in Malta in a simple, efficient, and cost-effective way.
The pre-payroll phase is a crucial aspect to consider, as it determines how easy and smooth the rest of the payroll process will be.
As a first step, you'll need to establish a business profile in Malta. This is crucial, as it allows you to submit all the forms and documentation to all the authorities that you will need to liaise with.
Malta is divided into 67 different localities, each with its own local council. Even though the country itself is very small, it's still worth checking whether the location where you'll be operating your business has specific policies you must follow in order for your payroll to be fully compliant.
During this phase, it's also important to clarify and establish policies around employees' leave and holidays.
Part-time and full-time work in Malta follows different attendance policies. Remember to put in place specific policies around your employees' attendance, absences, permissions, and other requests.
In Malta, labor and employment laws are rooted in the Employment & Industrial Relations Act (Act 22 of 2002).
Typically, Maltese workers are paid once per month.
Calculating individual salaries and benefits for your business in Malta requires a fair bit of employee paperwork. You'll first gather the necessary information on your employees, and then you'll send that information to the appropriate agencies and authorities.
Payroll Calculation Phase
After the pre-payroll phase has been finalized, you can go ahead with calculating payroll. During this phase, you need to calculate each individual salary, accounting for each employee's unique set of benefits and total hours worked. It's essential to get your calculations right, or you might be in breach of payroll compliance laws in Malta.
The central part of the post-payroll phase is paying out employees' salaries. You will need to interact with your chosen local bank and ensure that all payments have been processed appropriately. It can be easier and quicker to set up automated direct debits, which gives you the reassurance that your employees are paid every month.
You will need to organize an internal accounting department to track the salaries that you pay out to your employees.
Payroll Reporting and Compliance
Similarly, you are also required to liaise with a range of Maltese authorities, to which you will need to submit tax returns, invoices, and other documents.
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Understanding taxes and deductions is another crucial aspect if your business is looking to expand to Malta and remain fully compliant with the country’s rules and regulations. In Malta, the financial year runs from January 1st until December 31st. Employees are mandated to submit an annual tax return by end of June of the following year.
These are the documents that employees must submit every year:
- Tax and social security deductions
- Corporate tax return
- Social insurance tax: The rate varies according to the employee’s age. In general, anyway, employers deduct these contributions from their employees' salaries every month and they pay them to the Commissioner for Revenue.
Employers, on the other hand, must submit their own tax returns by the end of March after the assessment year, or within nine months after the end of the financial year. Companies can deduct both tax and social security contributions from their staff’s salaries every month.
Payroll Processing Company in Malta
There is already a lot to think about when it comes to payroll processing. You don’t need to go it alone, though — teaming up with a professional, knowledgeable partner like Skuad can help. With Skuad, you get all the expertise and in-depth understanding of local labor laws and legislation, coupled with the efficient and effective management of payroll processes.
Managing payroll in Malta requires complying with the country's statutory requirements in terms of payroll — which can become a very confusing and time-consuming task. A payroll processing provider like Skuad can help do all the heavy lifting for you when it comes to payroll management.
The Maltese labor and employment laws are enshrined in a document called the Employment & Industrial Relations Act (Act 22 of 2002). This includes provisions around employment relations and industrial relations, such as the protection of wages, termination of employment, conditions of employment, and more.
Running a successful business in Malta also requires complying with all the regulations outlined in the Act. This can add further complexity to an already difficult and multi-faceted scenario, which is why you should seek the expert help of a partner like Skuad when navigating the Maltese payroll landscape.
In Malta, employees are typically paid once a month, every month, in the country’s national currency — the Euro (€, EUR). In Malta, the minimum wage is established at €792.3 per month.
Working Hours in Malta
Full-time workers are expected to work a standard working-hour schedule of 40 hours a week. Standard working hours for part-time employees are worked out pro-rata based on 40 hours a week.
Overtime Work in Malta
Overall, overtime working hours can exceed eight in total during a specific week, but no more than 48 over a period of four weeks. In some cases, an employee cannot take on any overtime work, and this applies both during pregnancy and in the 12 months following the birth (or adoption) of a child.
Dismissal and Termination of Employment
While individual companies are allowed to establish their own policies around dismissal and severance, the overarching regulations are issued by the Maltese labor code, called the Employment and Industrial Relations Law.
Allowance for sick leave changes depending on the sector where an employee works in. If no sick leave is officially in place, employees still have the right to two weeks per year of leave for medical reasons.
In any case, the employer will require a medical certificate, to be provided by the sick employee.
Malta observes the following national holidays:
- New Year’s Day: January 1
- Feast of St. Paul’s Shipwreck: February 10th
- Saint Joseph’s Day: March 19th
- Freedom Day: March 31
- Good Friday: March/April
- International Workers’ Day: May 1
- Sette Giugno: June 7
- Feast of Saints Peter and Paul: June 2
- Assumption of Mary: August 15
- Victory Day: September 8
- Independence Day: September 21
- Feast of the Immaculate Conception: December 8th
- Republic Day: December 13
- Christmas Day: December 25
Maternity and Paternity Leave
In Malta, pregnant women are entitled to a minimum of 18 weeks of maternity leave. The first 14 weeks are to be paid in full by the employer, according to the Social Security Act, with the remaining four being paid at €181.08.
The Maltese government has established that an employee’s maternity leave should begin four weeks before the child’s due date (or scheduled birth) and last for six weeks after the birth. An employee can then decide to extend their leave for an extra eight weeks.
Women in self-employment — in Malta, these are women who receive passive income from rents, investments, and other sources — are entitled to a flat payment of €99.59 per week during their maternity leave. In order to receive this money, they need to apply for maternity benefits through the Maltese Department of Social Security and attach a medical certificate.
On the other hand, self-occupied women — those women who run their own businesses — are entitled to €181.08 every week of their maternity leave from the government.
Full-time employees currently receive 224 hours a year of annual paid leave. This includes a further 32 hours in case a maximum of four national holidays falls on weekends.
The Organization of Working Time Regulations has established that only 50% of unclaimed and unused annual leave can be carried forward to the next year, and that annual paid leave is adjusted pro-rata for part-time employees as well as employees who have been with a company for less than 12 months.
Payroll in Malta: Build a Team of Exceptional Maltese Talent
If your company’s sights are set on expanding the business to Malta, then you need to know exactly how to manage payroll in Malta in the best, simplest, and most compliant fashion.
Because Maltese labor laws can differ a lot compared to those of your home country, handling payroll by yourself can be costly, complex, and confusing. Consider joining forces with an expert partner like Skuad — a global payroll provider that can take care of everything on your company’s behalf. Get started on your Maltese dream team today — book a FREE demo to watch the Skuad platform in action.