Setting up a business on the Maltese islands requires not only the capital and necessary tools but also the necessary human resources. Malta’s regulatory framework in terms of industrial relations and employment law is as robust as it is mature, and sets out the parameters of engagement for prospective employers and sub-contractors. Malta’s workforce is generally considered exceptionally skilled and has been one of the major attractions for entities desiring to set up shop in Malta. Despite the fact that salaries payable to the average employee are well below those payable in many of the other EU Member States for a comparable role, this does not compromise on the quality, dedication and professionalism which characterise the Maltese employee. In addition to these attributes, the Maltese are also multilingual and highly educated; in fact the percentage of the population in possession of a university degree is higher than that in many European countries.
Recruitment of employees requires basic knowledge and guidance about relations between employer and employee and how this relationship is regulated at law. Industrial relations and employment law has been evolving for a number of years within the Maltese jurisdiction and is now regulated through a number of legal instruments.
Industrial development and development within the workplace, along with an increase in the workforce and the creation of jobs, in numbers and in their nature, has pushed for regulation of the employment sector. Thus, through the development of the workplace, the law has evolved and is now regularized by a number of acts and European Directives. Employment law sets a number of standards that aid in regulating relations between employer and employee, and even between employer, employee and trade unions..EU labour policy also aims to regulate in favour of both employer and employee and creates, though a number of directives, a clear framework of what rights and obligations are to be set in place, in order to reach sustainable economic growth and to develop a healthy workforce. These objectives are also transposed into Maltese Law, mainly through the Maltese Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta) (“EIRA”), being Malta’s primary source of regulation in this area of law. Matters such as type of contracts, conditions of employment, wages, leave and dismissal, are all regulated, in the case of Malta, through aforementioned act. Additionally, there are other sources of legislation, which regulate gender discrimination, industrial relations and the Industrial Tribunal.
A contract of service or an employment agreement outlines the duration of employment for a person who is to be employed. The contract may have a stipulated time of employment, or may be of an indefinite term. In some cases, the contract may be based on a specific task, work, undertaking or service. Within eight (8) working days, an employer is bound to give a contract of employment, if a person is to work for his employer for more than a month and for a number of hours, exceeding eight (8) hours per week. The agreement may take an oral or a written form, however, even if there is an oral agreement, the employer must still produce a written deed with basic conditions stipulated. There are a number of variations between having a definite and indefinite contract, as detailed in the following paragraphs. A definite contract stipulates the duration of an employment by the employer or company. If after the expiration of the contract, the employee is not released by his employers, but is retained, the employee enters into an indefinite contract, unless a new definite contract of service is given within the first twelve (12) days after the expiration of the definite contract previously employed with. In the event of early termination of a definite contract by the employer or employee, penalties are payable at law by the terminating party to the other party, unless a ‘good and sufficient cause’ for termination exists. The penalties amount to one-half of the full wages that would have been received by the employee for the remainder of the time specifically agreed upon. ‘Full wages’ in this context do not include any remuneration for overtime, any forms of bonus, any allowances, remuneration in kind and commissions. In the case of an indefinite contract, on the other hand, this can be terminated by the employee without having to refund any wages, provided that notice is given as indicated by law. The employer cannot dismiss an employee who is on an indefinite contract unless there is a ‘good and sufficient cause’ for doing so, or the employee’s role is redundant. In either case, these concepts are regulated by the legislation and clarified through case law. Furthermore, if one is bound with an indefinite contract, the employee’s contract cannot be simply changed into a fixed contract, with a date of termination, unless there was a change in the employee’s work or position. It is necessary to know that the first six (6) months of any type of contract are probationary and during this period the contract may be terminated by either party without giving reason; however, a week of notice is required from the employee, if he/she had been in employment for more than one (1) month. In cases of employees who have a technical, administrative, managerial or executive position and earn double the minimum wage, the probationary period is of one (1) year, unless agreed otherwise.
When reviewing conditions of employment, reference is being made to wages, hours, leave and other conditions that have been agreed upon. The EIRA lays down the basic standards for conditions of employment in contracts between employer and employee Those provisions of the contract not meeting the requirements laid down by the EIRA will have are unenforceable and shall have effect as if they were substituted to reach the basic Maltese legal standards. If conditions are to be less favourable as temporary measures against possible redundancies, these conditions are to be presented to the Employment Relations Board, of whom the Director shall review these conditions every four (4) weeks. When referring to conditions of employment, it is essential to notice that the law does not permit a change of conditions for an employee who has his contract changed from definite to indefinite or for an employee who has his position terminated and is then re-employed within one (1) year from the termination date.
When looking at the issue of dismissal, one has to note that both employer and employee have rights and obligations towards each other in terms of employment law and thus reasons for dismissal (or for abandonment of the role without notice by an employee) have to be given and have to be, as mentioned above, of a good and sufficient cause, unless the employment has come to an end or due to a redundancy of the role, or due to the expiry of a definite term. Employment law does not define what amounts to a “good and sufficient cause”. This, therefore, is a matter of circumstances, although case law sheds some light on the matter. The law does, however, provide for a number of reasons that cannot be used as a justifiable excuse for a dismissal, like for example:
- If the employee is a member of a trade union at the time of dismissal.
- If a female employee is pregnant.
- If the employee goes into a contract of marriage.
Furthermore, an injury which leaves the employee unable to work, cannot be used as an excuse for dismissal, unless the employee consents to his termination of employment on this basis. Where sufficient cause for dismissal exists, these may still be deemed as discriminatory in some manner, which could also lead to a claim of unfair dismissal. In cases of alleged unfair dismissals, the employee has the right to refer the case to the Industrial Tribunal. The Tribunal may, in some cases, order the reinstatement of the dismissed employee. When there is no request for reinstatement, compensation of loss and damages can also be awarded by the Tribunal.
The Industrial Tribunal on the Maltese Islands is formed through an appointment of the Prime Minister of Malta after consultation with the Malta Council for Economic and Social Development. The tribunal consists of a maximum of fifteen (15) chairpersons. The Industrial Tribunal is used both by individuals, for cases such as unfair dismissal and also by trade unions. A trade dispute may be referred to the Industrial Tribunal if an attempt at amicable settlement has no results and if the parties to the dispute wish to do so.
Equinox Advisory offers a number of services within the industrial relations and employment sphere and can assist you in;
- Drafting of definite and indefinite Employment Contracts and Contracts of Work;
- Dispute Negotiation and Representation in the Industrial Tribunal;
- General Advice regarding employment law in Malta;
- Advice relating to the protection of employee data under Data Protection Law;
- Applications for residency permits for employees.