Hire employees in Malta using an Employer of Record

Malta requires 14-month salaries, mandatory sick leave, and immediate enrollment in social security. Miss these requirements and you'll owe back payments plus penalties when employees find out their rights. The Department of Industrial and Employment Relations doesn't negotiate on compliance.

You've got three ways to hire legally in Malta, and each comes with different costs and headaches.

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-12,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: MFSA registration, tax setup, payroll system, social security enrollment, union notifications
• Makes sense when: Hiring 15+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines (€5,000+), back taxes, mandatory employee reclassification
• Makes sense when: Short projects (under 6 months), specialized consulting
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-20 employees, testing markets, multi-country teams

If you're hiring 1-5 people, entity setup costs more than 4-5 years of EOR fees ($179/month = $2,148/year per employee). An EOR like Hire with Columbus handles employment contracts, the 14-month salary structure, mandatory benefits, tax filings, and keeps you compliant with Malta's frequent labor law updates. Example: Hiring 2 people costs $358/month vs €25,000+ entity setup plus €10,000/year maintenance.

Ready to hire in Malta without the compliance headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three paths to bring someone onboard in Malta, and the costs tell the whole story. Entity setup runs €15,000-25,000 upfront plus ongoing compliance fees. An EOR costs $179/month per employee with zero setup fees. Contractors seem free until you face misclassification penalties of up to €23,000 per violation.

Here's how these options actually compare when you're trying to hire someone next month:

Setting up your own entity in Malta

The incorporation process takes 4-6 months if everything goes smoothly. You'll need €1,165 minimum share capital, plus legal fees, registered office costs, and ongoing compliance requirements.

Annual costs add up fast: accounting fees (€2,400-4,800), audit requirements (€1,500-3,000), and payroll system setup (€5,000-8,000). That's before you hire your first person.

This makes sense if you're planning 20+ employees long-term or need a permanent legal presence in Malta for business reasons beyond hiring.

Hiring contractors and freelancers

Malta's tax authority doesn't mess around with contractor misclassification. If someone works set hours, uses your equipment, or follows your direct supervision, they're legally an employee regardless of what your contract says.

Penalties hit hard: up to €23,000 per misclassified worker, plus back taxes and social security contributions. You'll also face claims for employee benefits they should have received.

Legitimate contractor relationships work for specialized projects under 6 months where you define the outcome but not how they achieve it. For ongoing roles or integrated team members, you need proper employment contracts.

Note: Hire with Columbus also handles compliant contractor agreements and international payments if you need genuine freelancer relationships.

Using an employer of record (recommended)

Here's how it works: Hire with Columbus becomes the legal employer in Malta while you manage the day-to-day work and performance. We handle employment contracts, payroll processing, tax compliance, and mandatory benefits.

Cost breakdown for our EOR service:

• $179/month per employee (USD)
• No setup fees or minimum commitments
• Includes full HR compliance and support
• Hire in 2-3 days instead of months

The math works especially well for smaller teams. Five employees cost $895/month through our EOR versus €25,000+ to set up your own entity plus ongoing monthly costs of €3,500+.

Employment contract types in Malta

Once you've decided on your hiring approach, you need the right employment contract type. Malta recognizes several options, each with specific rules and requirements.

Permanent contracts (indefinite duration)

These are your standard full-time employment agreements with no end date. Most companies use permanent contracts for core team members since they offer maximum flexibility for both parties after the probation period.

Probation periods can last up to 6 months, during which either party can terminate with one week's notice. After probation, notice periods range from 1-12 weeks depending on tenure.

Fixed-term contracts

Maximum duration is 4 years, including renewals. If you renew a fixed-term contract more than twice or extend beyond 4 years total, it automatically converts to permanent employment.

Use these for project-based work, maternity cover, or seasonal needs. The contract must clearly state the end date and reason for fixed duration. You can't use fixed-term contracts to avoid permanent employment obligations for ongoing roles.

Part-time contracts

Part-time employees (under 30 hours per week) get the same rights as full-time workers on a pro-rata basis. This includes vacation days, sick leave, and public holiday pay calculated proportionally.

Minimum wage applies per hour worked, so part-time employees often cost more per hour than full-time staff when you factor in administrative overhead.

Temporary and casual work

Temporary contracts through agencies can last up to 6 months with possible 6-month extension. After 12 months total, the worker must be offered permanent employment or the assignment ends.

Casual work agreements suit truly irregular needs like event staffing or seasonal peaks. You can't use casual contracts for regular weekly schedules or ongoing business needs.

How Hire with Columbus handles contracts

We draft compliant employment contracts based on your specific needs and Malta's 2025 employment laws. Whether you need permanent, fixed-term, or part-time arrangements, we ensure proper classification and legal protection.

Our legal team stays current with Malta's employment regulations, so your contracts include required clauses for probation periods, termination procedures, and employee rights. You focus on managing performance while we handle the legal framework.

For most international hires, we recommend starting with permanent contracts after a 6-month probation period. This gives you flexibility to assess fit while offering job security that attracts top talent.

How does payroll and taxation work?

Your €60,000 employee actually costs €76,800 per year in Malta. Employer social security contributions add 10% to your payroll costs, while employees face progressive tax rates up to 35% plus their own social contributions.

Malta operates a PAYE (Pay As You Earn) system where you withhold taxes monthly and remit them to the Commissioner for Revenue. Miss the deadline on the 14th of each month, and penalties start at €232.

Tax brackets and rates

Malta's progressive tax system hits different income levels throughout 2025:

Single persons get a tax-free allowance of €9,100. Married couples filing jointly can benefit from additional allowances and potential tax splitting arrangements.

That final tax band jumps pretty hard. Employees earning above €60,000 pay the top rate of 35% on income exceeding that threshold.

Social security contributions breakdown

Both employer and employee contribute to Malta's social security system:

The weekly cap means maximum contributions are €48.68 per person per week, regardless of salary level. High earners don't pay social security on income above approximately €253,000 annually.

Your total employment cost includes these mandatory contributions plus any occupational pension schemes you offer.

Payment schedule and bonuses

Malta follows a monthly payroll cycle with salaries typically paid by the last working day of each month. There's no legal requirement for 13th or 14th month bonuses, unlike some European countries.

However, many employers provide a Christmas bonus equivalent to one week's pay. This isn't mandatory but it's become standard practice in competitive industries.

Vacation leave allowance adds another cost. Employees earn 24 days annually, typically taken during summer months when Malta's tourism season peaks.

Total employment cost example

What a €60,000 annual salary actually costs you:

Base salary: €60,000 Employer social security: €2,530 (capped at weekly maximum) Maternity fund: €15.60 annually Total annual cost: €62,545

Monthly breakdown:

• Gross salary: €5,000
• Employer contributions: €212
• Total monthly cost: €5,212

The employee receives approximately €3,850 net monthly after their own taxes and contributions.

Payroll cycle and deadlines

Malta's tax calendar runs strict deadlines:

Monthly obligations:

• Salary payment: Last working day of month
• PAYE submission: 14th of following month
• Social security: 14th of following month

Annual requirements:

• Form P35 (annual return): January 31st
• Final settlement (FS3/FS7): March 31st for companies

Late submissions trigger automatic penalties starting at €232 for PAYE returns. The Commissioner for Revenue doesn't offer grace periods for missed deadlines.

Common payroll mistakes in Malta

Miscalculating social security caps trips up most new employers. The weekly maximum means you can't just apply 10% to any salary. High earners hit the ceiling quickly.

Missing the 14th deadline for monthly returns costs €232 minimum. Set up automatic reminders because Malta doesn't send courtesy notices.

Forgetting vacation accrual calculations during terminations leads to disputes. Employees accrue 2 days per month worked, paid at termination regardless of reason.

Incorrect tax code applications happen when employees have multiple jobs or previous tax debts. Always verify tax codes with the Commissioner for Revenue before processing first payroll.

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Setting up payroll in Malta yourself:

• Local accounting firm: €800-1,200/month
• Payroll software: €150-300/month
• Compliance risk: Fines up to €2,329 for errors
• HR expertise needed: €45,000+ salary

With Hire with Columbus: $179/month per employee, fully compliant, zero risk. We handle all tax filings, social security submissions, and deadline management so you never face penalties.

What benefits and leave are required?

Malta employees get 24 working days minimum vacation, and it's use-it-or-lose-it unless you pay them out. That's just the start of what you'll need to provide.

Beyond salary, benefits in Malta add roughly 20-25% to your employment costs. What's mandatory and what'll actually keep your employees happy breaks down like this.

Annual vacation leave

Every employee gets 24 working days of paid annual leave after completing one year of service. During their first year, they accrue 2 days per month worked.

Employees can't carry over unused vacation to the next year unless you pay them for those days. Most companies just require people to take their time off rather than deal with the payout calculations.

You'll pay normal salary during vacation days. No getting around this one - it's built into Malta's employment law.

Sick leave entitlements

Employees can take up to 3 days of sick leave without a medical certificate. After that, they need a doctor's note for any additional days.

You pay 100% of salary for the first 2 days. From day 3 onwards, social security covers the cost at roughly 70% of their average weekly wage up to a maximum.

The maximum sick leave is 156 days over any 4-year period. After that, you can start termination procedures if they can't return to work.

Parental leave breakdown

Maternity leave: 18 weeks total - 6 weeks before birth and 12 weeks after. Social security pays 100% of average weekly earnings up to the national maximum wage.

Paternity leave: 10 working days within 2 months of the birth. Social security covers this at 100% of average weekly earnings too.

Parental leave: An additional 4 months of unpaid leave that can be shared between parents. Most companies don't offer paid parental leave beyond the statutory requirements, but some are starting to compete on this.

Public holidays 2025

Malta has 14 public holidays in 2025. If employees work these days, you'll pay double their normal rate.

Mandatory benefits and contributions

Three benefits are non-negotiable in Malta: social security, income tax withholding, and the 13th and 14th salary payments.

Social security contributions:

• Employer: 10% of gross salary
• Employee: 10% of gross salary
• Maximum weekly contribution: €48.68 per person

13th and 14th salary payments: You'll pay salary 14 times per year, not 12. The extra payments come in June and December - it's a mandatory bonus system.

Income tax withholding: You'll withhold income tax from employee salaries based on Malta's progressive tax system. Rates range from 0% to 35% depending on income levels.

Optional competitive benefits

Most companies competing for talent offer:

• Private health insurance (around €800-1,200 annually per employee)
• Flexible working arrangements
• Professional development budgets
• Additional vacation days beyond the 24-day minimum
• Performance bonuses
• Company cars or transport allowances

Private health insurance is becoming standard for professional roles, even though Malta's public healthcare is decent.

Common benefit administration mistakes

Missing the 13th/14th salary payments: Some companies forget these aren't optional bonuses - they're mandatory. Budget for 14 months of salary, not 12.

Incorrect vacation accrual: During the first year, employees accrue 2 days per month. Don't give them the full 24 days upfront.

Social security calculation errors: The 10% contribution has a weekly maximum. Don't overcalculate for high earners.

Public holiday pay mistakes: Double pay for working holidays, not time-and-a-half. Get this wrong and you'll hear about it quickly.

Administering these benefits correctly requires local HR expertise that costs €45,000+ annually, plus benefits software and legal review. Hire with Columbus handles all benefit administration and compliance for $179/month per employee, including the 13th/14th salary calculations and social security filings that trip up most companies.

What are the compliance requirements?

Written contracts are mandatory in Malta within the first month of employment. Skip this step and you're looking at potential fines plus the employee can claim the relationship is permanent from day one.

The good news? Malta's employment law is pretty straightforward once you know the rules. The bad news? Get the termination process wrong and you could face reinstatement orders plus hefty compensation payments.

Employment contract requirements

Every employment contract in Malta must be in writing and signed within 30 days of the employee starting work. Verbal agreements don't cut it here – they're considered invalid and leave you exposed to claims.

Your contract needs these mandatory clauses or it can be deemed void:

• Job title and detailed description of duties
• Start date and workplace location
• Salary amount and payment frequency
• Working hours and overtime arrangements
• Annual leave entitlement (minimum 24 working days)
• Notice periods for both parties
• Probation period terms (if applicable)
• Disciplinary and grievance procedures

Contracts must be in Maltese or English. If your employee doesn't speak English well, you'll need a Maltese version. Registration with the Department of Industrial and Employment Relations isn't required, but keeping signed copies is mandatory.

Probation periods

Standard probation in Malta runs 6 months for most roles. You can extend this to 12 months for senior positions, but anything beyond that needs special justification and employee agreement.

During probation, either party can terminate with just one week's notice. After probation ends, full employment protections kick in and termination becomes much more complex and expensive.

Here's the catch: if you don't clearly define probation terms in the contract or extend someone beyond 12 months without proper documentation, they're considered a permanent employee from day one.

Working time regulations

Maximum working hours in Malta are 48 hours per week, averaged over 4 months. Daily limit is 10 hours unless you have a collective agreement allowing more.

Overtime kicks in after 40 hours per week and must be paid at 150% of regular hourly rate. Weekend work gets 200% premium unless it's part of normal rotating shifts.

Required breaks and rest periods:

• 30-minute break for shifts over 6 hours
• 11 consecutive hours of daily rest
• 24 consecutive hours of weekly rest
• Maximum 6 consecutive working days

You must keep detailed records of all working hours, breaks, and overtime. Labor inspectors can request these anytime, and missing records result in €1,200-€2,400 fines per violation.

Notice periods

Notice periods in Malta depend on length of service and who's initiating the termination:

Notice must be given in writing. You can pay in lieu of notice, but the employee still accrues benefits during the notice period. Dismissing someone without proper notice? You'll pay full salary plus benefits for the notice period anyway.

Termination process

You can't just fire someone in Malta without following proper procedures. For dismissals with cause, you need documented evidence of misconduct or poor performance plus a formal disciplinary process.

The process requires:

1. Written warning with specific improvement targets
2. Opportunity for employee to respond
3. Investigation period (usually 2-4 weeks)
4. Final disciplinary hearing
5. Written termination notice with reasons

For redundancies, you need genuine business reasons and must follow consultation procedures. This includes exploring alternatives, selection criteria, and potentially involving employee representatives.

Instant dismissal is only allowed for serious misconduct like theft, violence, or breach of confidentiality. Even then, you need solid evidence and proper investigation.

Severance pay

Severance isn't automatically required for all terminations, but here's when you'll pay:

Severance calculations use gross weekly salary including regular overtime and bonuses. Payment is due within 7 days of termination or you'll face additional penalties.

Data protection

Malta follows GDPR rules strictly. Employee data handling violations can result in fines up to €20 million or 4% of annual revenue – whichever is higher.

You must have legal basis for processing employee data (usually employment contract), implement appropriate security measures, and respect employee rights to access, correct, or delete their data.

Common requirements:

• Data processing agreements with payroll providers
• Employee privacy notices explaining data use
• Secure storage and limited access to personnel files
• Right to be forgotten procedures for former employees
• Breach notification within 72 hours

Background checks require explicit employee consent and must be proportionate to the role. Criminal record checks are only allowed for specific positions like financial services or childcare.

Common compliance mistakes

Most companies mess up these basic requirements:

Invalid employment contracts: Missing mandatory clauses, unsigned documents, or verbal agreements. Result: Contract deemed void, employee can claim permanent status immediately.

Wrong termination process: Skipping disciplinary procedures, insufficient notice, or no documentation. Cost: Full reinstatement plus back pay, or 4-20 weeks compensation.

Overtime violations: Not tracking hours properly, wrong overtime rates, or exceeding maximum limits. Penalty: €1,200-€2,400 per violation plus back payments.

Probation errors: Extending beyond 12 months without agreement or unclear probation terms. Result: Employee gains full protection from day one.

Penalties for violations

Malta's Department for Industrial and Employment Relations doesn't mess around with employment law violations. Here are the actual costs:

• Invalid employment contract: €600-€1,200 fine plus contract becomes permanent
• Improper dismissal: €2,400-€4,800 fine plus reinstatement or 4-20 weeks compensation
• Working time violations: €1,200-€2,400 per employee affected
• Unpaid wages/overtime: 200% of amount owed plus €600-€2,400 penalty
• Missing employment records: €600-€1,200 per missing document
• GDPR violations: Up to €20 million or 4% of revenue

Repeat violations get doubled penalties, and serious cases can result in criminal charges against company directors.

Hire with Columbus handles all compliance requirements automatically. We ensure every contract includes mandatory clauses, manage proper termination procedures, and maintain all required documentation. Our legal team stays current with Malta employment law changes, so you don't have to worry about penalties or violations.

What has changed recently?

Malta's been busy updating its employment rules this year, and some of these changes will definitely affect how you hire and manage employees there.

The biggest shift? Malta introduced new flexible working regulations in March 2025 that give employees the legal right to request remote or hybrid work arrangements. Employers can only refuse these requests for specific business reasons, and they need to provide written justification within 14 days. This isn't just a suggestion anymore – it's legally enforceable, and companies that ignore these requests face fines starting at €2,500.

Updated minimum wage and social security rates

Malta bumped its minimum wage to €213.31 per week (about €924 monthly) as of January 2025, up from €208.97 in 2024. That's roughly a 2% increase, which might seem small but adds up across your workforce.

Social security contribution rates also shifted slightly. Employee contributions now range from 10% to 10.5% depending on income brackets, while employer contributions increased to 10.8% across all salary levels. The ceiling for contributions rose to €52,000 annually, meaning higher earners will see bigger deductions.

New parental leave extensions

Malta got generous with parental leave in 2025. Fathers now get 8 weeks of paid paternity leave (up from 5 weeks), and both parents can take an additional 4 months of unpaid parental leave until the child turns 8 years old.

The catch? Employers need to maintain the same job position during unpaid leave, which can create some real headaches for workforce planning. Companies with fewer than 20 employees can apply for government subsidies to cover temporary replacement costs, but the paperwork is extensive.

Digital nomad visa complications

Malta launched its Digital Nomad Residence Permit in February 2025, but it's created some unexpected tax complications for employers. If you hire someone on this visa, you might still have tax obligations even if they're technically "visiting" Malta while working remotely for your company.

The Malta Tax Authority clarified that companies need to determine if these arrangements create a "permanent establishment" for tax purposes. Get this wrong, and you could face corporate tax obligations you didn't expect.

Enhanced data protection requirements

Malta implemented stricter GDPR enforcement in 2025, with the Data Protection Commissioner issuing new guidelines for employee monitoring and HR data processing. Companies now need explicit consent for any employee monitoring software, and the penalties start at €10,000 for first-time violations.

This affects everything from time-tracking apps to email monitoring. You'll need updated employment contracts that clearly outline what data you collect and how you use it.

When you're juggling these regulatory changes alongside actually running your business, an EOR like Hire with Columbus handles all the compliance updates automatically. We track these changes, update contracts, and adjust payroll calculations so you don't have to become an expert in Maltese employment law overnight. Starting from $179/month per employee, it's often cheaper than the penalties for getting these new rules wrong.