Navigating Wages In Malta

The Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta) (hereinafter referred to as 'EIRA'), is the main piece of legalisation which regulates all aspects of employment life in Malta. The EIRA, as well as its subsidiary legislations, cover the protection of an employee's wages, universally acknowledged to be the most fundamental labour law right.

An employee's wage is protected by both local and EU legislation. Principle 6 of the European Pillar of Social Rights specifically provides that employees have the right to fair wages which are able to afford them a decent standard of living. Moreover, adequate minimum wages are to be ensured by taking into consideration the satisfaction of the needs of employees and their families in regard to the national economic and social conditions. This takes place however, by also safeguarding one's access to employment and by providing incentives so that one effectively seeks work.

The main aim of Maltese legislation is to regulate the relationship between the employer and the employee whilst also affording protection of wages through a number of principles, as outlined in articles 11 to 25 of the EIRA. Should an employer breach any of the below-mentioned articles of the law, they would be liable to be guilty of a criminal offence under the EIRA.

Historical Context

The Conditions of Employment (Regulations) Act of 1952 (hereinafter referred to as 'CERA'), which served its purpose for half a century, regulated the relationship between the employer and the employee, and amongst others, provided for the protection of wages including their consideration as privileged debts.

CERA provided for the establishment of Wages Councils whose functions were to fix any tailor-made conditions of employment for particular sectors of the industry at the time. These conditions were compiled in subsidiary laws called Wages Council Wage Regulation Orders (hereinafter referred to as 'WROs'), serving to suit specific sectors. The WROs are still in force but are amended from time to time, with the most common amendments being effected to increase all the minimum wages enshrined therein according to the cost of living increase announced by the Government on a yearly basis.

Following the enactment of the EIRA in 2002, which consolidated CERA and the Industrial Relations Act of 1976, the Department of Labour developed into a key institution within the Maltese employment and industrial relations field. The Department, which has been renamed as the Department of Industrial and Employment Relations (hereinafter referred to as the 'DIER'), is no longer merely considered the entity responsible to recover termination benefits of dismissed workers. Rather, the DIER monitors and enforces the protection of wages principles, including in the event of the insolvency of their employer insofar as to guarantee payment of valid outstanding claims of unpaid wages, as will be discussed further on.

What are wages?

The EIRA provides a definition for wages under Article 2, which states that wages are:

"remuneration or earnings, payable by an employer to an employee and includes any bonus payable under Article 23 other than any bonus or allowance related to performance or production".

Thus, for the purposes of EIRA, and any laws referring specifically to EIRA, wages do cover all remuneration and mandatory bonuses and allowances, but do not include performance bonuses or production bonuses, even where the latter are regulated in an individual contract of employment. It must be noted that for the purposes of equality legislation, particularly the Equal Treatment in Employment Regulations (S.L.452.95), the notion of 'pay' is used and not 'wages'. In this case, 'pay' is a broader term, defined as the ordinary basic salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly, in respect of his or her employment from his or her employer. This contrasts with the narrow definition in EIRA.

Payment of Wages as a Right

By virtue of article 11 of EIRA "the entire amount of the wages earned by, or payable to, any employee shall be paid to him in money being legal tender in Malta, and every payment of, or on account of, any such wages made in any other form and any covenant in any contract providing for other form of payment shall be null and void". The provision continues to state that payment of wages by cheque or to a bank account of the employee is considered as payment in legal tender where payment in this manner is customary or necessary or is consented to by the employee concerned.

On 1st October 2025, a new amendment has been affected to article 11(1) EIRA, in relation to Third Country Nationals (hereinafter referred to as 'TCNs') (as defined by the Immigration Act) whose employment commenced on the 1st October 2025 and is governed by Maltese Law. For those employment relationships which commenced after that date, wages earned shall be paid exclusively by means of a bank transfer to an account held in the name of the employee or through an electronic transfer facilitated by an accredited and licensed financial institution. In this way, the legislator aims to afford better protection to wages payable to TCNs working in Malta.

Protection is also afforded by article 12 of the EIRA whereby an employment contract providing a clause or statement which specifically transcribes the manner in which an employee must spend their wages is unwarranted and rendered null and void.

Furthermore, in accordance with article 13, no employer shall be entitled to attach or assign the wages of their employees unless such attachment or assignment is established for the payment of maintenance, which is due either to a spouse, a minor child, a person with a disability or an ascendant of the employee.

Wage Deductions

Article 14 of the EIRA states that any employee cannot incur a wage deduction through means of a discount, interest, or any similar charge, as the only deductions permitted according to law are deductions in the form of taxation and social security contributions due to the Government of Malta. Notwithstanding this provision, Article 15 of the EIRA establishes a number of exceptions too. In terms of this Article of the law, deductions of wages is only possible in the following circumstances;

1. A provision found under the EIRA or any other legislation which allows for a deduction in wages;
2. An order is issued by a competent court providing for a deduction in wages; and
3. A collective agreement permits a deduction; a collective agreement is entered into by a recognized trade union and an employer or an association of employers.

Moreover, EIRA particularly provides for the following scenarios in which deductions of wages may be allowed;

1. At the request in writing of an employee, the employer may make deductions from the wages of such employee for the purposes of a superannuation or thrift scheme or for any purpose in the carrying out of which the employer has no beneficial financial interest, direct or indirect.
2. Where the terms of any written contract of service signed by the employees or the terms of a written statement signed by an employer specify in detail the fine or fines to which the employee may become liable in respect of an act or omission; and the terms of any such contract have been previously approved by the Director General for Industrial and Employment Relations, it shall be lawful for the employer to make such deductions as maybe authorised by such contract or such written statement. A collective agreement may however set fines having the effect of a wage deduction.

In a case before the Court of Criminal Appeal, Police versus Frank Portelli (Case Number 122/2011) decided on the 20^th June 2012, the worker filed a police report for non-payment of her wages for three months. The Court of Appeal went over the facts of the case and found that the appellant (Dr. Portelli) sought to set off amounts owed to him by his employee, including notice money, against the wages. The court stated that according to Article 15 of Chapter 452, there cannot be any reductions in pay except where this is specifically allowed by law. Although the obligation of giving notice is regulated by law, when faced with a case of non-payment of notice on the part of the employee, the employer still does not have a right to set off the money due to him against the wages. The Court concluded that the reduction on the terms above was illegal and found the appellant guilty of reducing wages. The employer was sentenced to a three-month probation.

In a decision dated 17^th September 2009 and delivered by the Small Claims Tribunal, in the names Attard Alfred Charles Vs Sciberras De Giovanni Doris, it was found that the employer did not want to pay the entire amount due to an employee since the employee abandoned her employment without giving the required notice. The Tribunal considered that the employee requested payment for salaries up to her last day, unused annual leave, December bonus, March bonus, commissions, and diesel allowance. The employer did not pay the amounts due on the basis that he was owed compensation for the employee's abandonment without a notice period. The Court noted that according to Chapter 452, all the wages which are owed to the employee must be paid upon the termination of the contract. The employer is duty bound to pay all the wages due irrespective of any employee liability in his regard. The employer was ordered to pay the requested amounts to the employee.

Privileged Debts and the Guarantee Fund

Under Article 20 of the EIRA, wages are classified as privileged debts. Accordingly, employees are entitled to a preferential claim against their employer for up to three (3) months of unpaid wages, which shall rank above any other privileged or hypothecary debts over the employer's assets. However, the amount recoverable as a privileged debt is capped at the equivalent of the national minimum wage payable over a six-month period.

Article 21 further establishes the Guarantee Fund (hereinafter referred to as the "Fund"), through which employees whose employment has been terminated as a result of the employer's proven insolvency may recover unpaid wages. The Fund is specifically regulated by the Guarantee Fund Regulations (S.L.452.84) which govern the Fund's establishment, financing, administration, and the procedures applicable to claims made thereunder.

Periodicity and Punctuality of Wage Payments

The EIRA provides additional safeguards for employees concerning the regularity and timeliness of wage payments. In particular, article 22 stipulates that employers are obliged to pay wages at regular intervals, which must not exceed four (4) weeks in arrears. An exception applies only where an alternative payment period is expressly agreed upon in a collective agreement at the enterprise level. All contracts of employment must clearly specify the frequency of wage payments, and the stipulated time limits may not be circumvented.

Statutory Bonuses

Article 23 of the EIRA holds that every employer shall pay, or cause to be paid, to each full-time employee the statutory bonuses in such amounts as may be determined either by a legal notice issued by the Minister of Finance pursuant to this article, or as announced by the Government in the General Estimates for any particular year.

Such statutory bonuses shall be paid between the 15th and 30th of June and between the 15th and 23rd of December of each year, and shall be paid in monetary form. In each instance, the amount paid shall not be less than one-half of the amount announced in the General Estimates as payable by the Government to its employees for that year.

Employers shall also pay, or cause to be paid, to each employee, fully or on a pro rata basis, any income supplements in the amounts and at the times prescribed by legal notice issued by the Minister of Finance.

Concluding Remarks

An employment contract is based on two fundamental elements, the provision of work by the employee to his employer and 'in return for wages'. This basic employment right is as old as time itself. There is no employment without actual work and payment. The concept of wages and the protection afforded to wages have undergone many changes throughout the years, and such changes were not merely legal, considering the new needs of the employees as aided by trade unions, but also a matter of mentality. From a wage being merely regarded as compensation for work and a means to get by, the notion evolved into a tool to achieve other ends, such as one's well-being, security, status, and means for a dignified life. It has also evolved into a key business tool for attracting talent and boosting productivity. Wages also enhance worker motivation and commitment, benefiting both workers and businesses, as well as society at large.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.