In today’s dynamic business landscape, where efficiency and accuracy hold the key to success, payroll processing emerges as a critical function for any organization. Compliance with Maltese law ensures smooth operation and avoids any potential legal issues.
In this article we will explore the key aspects of payroll and necessary registrations in Malta.
Registration with Relevant Authorities
Before commencing payroll operations, businesses in Malta are required to register with the relevant authorities, including the Inland Revenue Department (IRD) and JobsPlus Department (Malta’s Public Employment Service)
Registration with the IRD provides a company unique personal employer number (PE).
The registrations ensure that the company is recognized as an employer and can operate within the legal framework.
Employee Registration/De-registration
Upon hiring new employees, it’s crucial to ensure their proper registration with the necessary authorities.
JobsPlus allows online registration – direct on the company portal , while IRD shall be informed by email , sending a completed FS4 report ( report includes personal employee details , together with TIN (tax identification number )and social security number .
Every individual when starting first employment in Malta , is obligated to obtain a personal TIN and Social security number.
Similarly, when employees leave the company, they must be de-registered. This ensures accurate records and compliance with reporting requirements.
Tax Requirements
Malta operates a progressive tax system, which means that the rate of taxation increases as an individual’s income rises. Employees’ income is categorized into different tax bands, each with its corresponding tax rate. The tax bands may change from year to year based on government policies. Employers are responsible for deducting the appropriate amount of income tax from their employees’ salaries and remitting it to the Maltese tax authorities on their behalf each month.
Social Security Contributions
Maltese Law mandates employers and employees to make contributions to the Social security department.
These contributions fund various social benefits, including healthcare , sickness benefit ,injury benefit , pensions … Employers are responsible for withholding the employee’s portion from their salary and remitting both the employer and employee contributions to the authorities .
Monthly/Yearly Payroll Process and Reports
The monthly payroll process involves preparing detailed reports that outline each employee’s earnings, deductions, and contributions. This documentation is essential for maintaining transparency and demonstrating compliance. Payslip – statement of monthly earning must be provided to each employee regularly .Such contributions / tax payments are remitted submitting FS5 reports to IRD each month .
Yearly reports summarizing annual earnings, tax contributions, and social security.
FSS submission: FS7 report is the payer’s (Employer’s) annual reconciliation statement .A reconciliation between total amounts on all the FS3 reports (employee’s statement of earnings )and the payments affected (FS5).
This ensures ongoing compliance and transparency.
Wage regulation orders
A Wage Regulation Order is subsidiary legislation kept in force under the Employment and Industrial Relations Act that regulates certain conditions of employment of employees working in a specific sector of the industry. The conditions specified in these Orders include – maximum hours of work, minimum wages, overtime rates, sick leave, special leave, etc.
Creating proper employment contracts that outline terms and conditions of employment is crucial. Similarly, adhering to legal procedures for terminating employees protects both parties’ rights.
Non-compliance with Labor laws can lead to financial penalties and even legal consequences.
Conclusion
From registering with authorities to accurate calculations and compliance with working hours, each step contributes to the fair treatment of employees and the sustainability of businesses. The consequences of non-compliance, both financially and reputationally, underscore the importance of prioritizing adherence to Labor laws. The ever-evolving nature of payroll regulations in Malta underscores the importance of staying informed about changes to ensure smooth business operations and legal compliance. Whether through in-house management or outsourcing to professionals, managing payroll effectively is key to the success of businesses .
Disclaimer: The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partners and cannot constitute any form of legal advice. If you would like to meet with up with any of our representatives to seek further information, please contact us for an appointment.
