In today’s business world, getting things done quickly and accurately is super important, and payroll is a big part of that. Ensuring your payroll is compliant with Maltese regulations not only keeps your operations running smoothly but also protects your business from potential legal and financial penalties.
This article provides a clear overview of the payroll process in Malta, including the key registrations and obligations every employer should be aware of.
Business Registration
Before starting payroll in Malta, businesses need to sign up with the proper authorities, like the Inland Revenue Department (IRD) and JobsPlus (Malta’s Public Employment Service).
Registering with the IRD gives the company a unique Permission to Employee (PE) number. These registrations are essential to ensure the business is officially recognized as an employer and operates legally.
Managing Employee Registrations and Exits
When hiring new employees, it’s important to register them correctly with the relevant authorities. JobsPlus makes it easy with online registration through the company portal.
For the Inland Revenue Department (IRD), you’ll need to submit a completed FS4 form via email. This form includes the employee’s personal details, their Tax Identification Number (TIN), and Social Security Number.
Anyone starting their first job in Malta must get their own TIN and Social Security Number. Similarly, when an employee leaves, they need to be properly de-registered.
What You Should Know About Taxes
Malta uses a progressive tax system, which means that the higher someone’s income, the higher their tax rate. Employees’ earnings fall into different tax bands, each with its own rate, and these bands can change yearly depending on government policies.
Employers are responsible for calculating and deducting the right amount of income tax from employees’ salaries and sending it to the Maltese tax authorities every month.
For a detailed breakdown of the current tax rates in Malta, visit our website or explore our latest blog post.
Social Security Contributions
In Malta, employers and employees are required by law to contribute to the Social Security Department. These contributions support various social benefits, such as healthcare, sickness benefits, injury benefits, and pensions.
Contributions are based on weekly income and fall under different categories, depending on the employee’s age and employment type. Most full-time employees under 65 fall under Class 1 contributions.
Both the employer and employee pay equal percentages, while the employer is responsible for submitting the total contribution regularly.
Monthly and Yearly Malta’s Payroll Regulations
Each month, employers must prepare detailed payroll reports that show employees’ earnings, deductions, and contributions. This ensures transparency and compliance. Employees should receive a payslip regularly outlining their monthly earnings. Employers are also responsible for submitting FS5 reports to the Inland Revenue Department (IRD) each month, which include tax and contribution payments.
On a yearly basis, employers need to provide a summary of each employee’s annual earnings, taxes, and social security contributions. This includes the Final Settlement System (FSS) submission, which requires an FS7 form as the employer’s annual reconciliation statement. The FS7 ensures all FS3 forms (statements of individual employee earnings) match the payments recorded in the FS5 forms.
Employees must also receive an FS3 form annually, showing their total earnings, taxes, and social security contributions for the year.
Wage Regulation Orders
Wage Regulation Orders are legal guidelines under the Employment and Industrial Relations Act. They set specific rules for employees working in certain industries, covering areas like maximum working hours, minimum wages, overtime rates, sick leave, and special leave.
Having clear employment contracts that detail the terms and conditions of work is essential. It’s equally important to follow proper legal procedures when terminating employment to ensure both the employer’s and employee’s rights are protected.
Note that failing to comply with labour laws can result in fines and legal action.
Need Help with Payroll Compliance?
For further assistance with payroll compliance and labour regulations in Malta, feel free to contact us.
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