Redundancy or dismissal in Malta: why the distinction matters

Who this is for: employees and senior managers whose employment is ending, and employers deciding how to end it. Sections marked “For employees” and “For employers” apply the same law from each side.

Short answer. Under the Employment and Industrial Relations Act, an employer may end an indefinite contract only on grounds of redundancy, or where there is a good and sufficient cause relating to the employee. The two routes have different rules. Redundancy is about the work: the role, or the need for it, has gone or reduced, and selection follows the statutory rule of the person last engaged in the class affected. Dismissal for cause is about the person: their conduct or performance, assessed through a fair process. Using one label for the other, or a mixture of both, is a common source of disputes before the Industrial Tribunal.

This is a best-practice guide. Real terminations rarely fall neatly on one side of the line, and the grey area is where the cost lies.

Best practice, and the reality

The law draws a clear line between the work and the person. The guide explains each side of it as if every case were plainly one or the other.

That is rarely the position. In most terminations, some of the following blur the line:

• A role that is reshaped rather than removed, with most of its duties moving to someone else.
• Mixed reasons: a cost saving that is also a way of moving on someone whose performance has disappointed, but was never formally raised.
• A unique job title that hides work shared with others, so the class of employment, and the person last engaged in it, are not obvious.
• A collective agreement that is silent on the groups that matter, or that does not cover senior staff.
• The person the business most wants to keep being the one the statutory rule would select.
• A probationary period about to expire, or a chain of fixed-term contracts that may already have become indefinite.
• A decision taken at group level and passed to the Maltese employer to carry out, with little local record of the reasons.

Each of these can be worked through, but not by choosing a label and hoping it holds. They call for judgement about which route truly fits the facts and how to show it. Getting it wrong is costly for both sides. For an employer, it can mean compensation, an order to reinstate, re-employment claims and management time spent before the Tribunal. For an employee, it can mean accepting too little, or bringing a claim that was never as strong as it looked.

The sections below set out the standard. Several end with a note on where it tends to break down.

Contents

1. The legal starting point
2. Redundancy: when the work goes
3. Dismissal for a good and sufficient cause
4. Reasons that can never justify a dismissal
5. Probation and fixed-term contracts
6. What is owed, and what is negotiated
7. If the route is wrong: the Industrial Tribunal
8. Two fictional scenarios
9. Practical checks for each side

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1. The legal starting point

A contract of employment for an indefinite time may be ended:

• by the employee, by giving the notice required, without giving any reason; and
• by the employer, saving the rules on good and sufficient cause, only on grounds of redundancy.

The law then allows either side to end the relationship without notice where there is a good and sufficient cause. In practice, therefore, an employer who wants to end an indefinite contract must be able to point either to a genuine redundancy or to a good and sufficient cause.

This is why the label matters. It determines the rules on selection, notice, process and evidence.

2. Redundancy: when the work goes

What it means. The Act does not contain a detailed definition of redundancy. In broad terms it concerns a reduction in the employer’s need for work of a particular kind: a role abolished, functions merged, work automated or moved elsewhere.

Who is selected. Where an employer terminates employment on grounds of redundancy, the Act requires it to terminate the employment of the person who was engaged last in the class of employment affected. A narrow exception concerns employers who are individuals and their relatives.

What “class” means. The “class” is the group or category listed in a collective agreement. Where there is no collective agreement, or it does not define groups, it refers to the work performed or expected to be performed, independently of the title or name given to the post. A unique job title does not, by itself, make a person a class of one.

Re-employment. A person made redundant is entitled to re-employment if the post they occupied becomes available again within one year, on conditions no less favourable than those they would have had if they had not been dismissed.

Collective redundancies and transfers. Larger programmes may trigger duties to inform, consult and notify under the Collective Redundancies (Protection of Employment) Regulations, and changes of employer may be transfers under the Transfer of Business (Protection of Employment) Regulations. See Planning workforce restructuring.

In practice. Few redundancies remove a role completely. Most redistribute the work, and the question becomes whether the need for that kind of work has genuinely reduced. The answer depends on evidence recorded at the time, not on the wording of the letter.

3. Dismissal for a good and sufficient cause

What it means. A good and sufficient cause relates to the employee: for example, serious misconduct, or performance problems that have been raised, investigated and not resolved. The Act does not list what counts as good cause; it lists what can never count (section 4 below).

Process. Whether the cause was good and sufficient is assessed on the facts and on how the employer handled them: what the employee was told, what opportunity they had to respond, whether any internal procedure was followed, and whether the decision was proportionate.

Resignation under pressure. Where an employee resigns because of the employer’s conduct, the question may arise whether the resignation was in substance a dismissal (often called constructive dismissal). The concept is not set out in the legislation, and whether a resignation will be treated as a dismissal depends heavily on the facts. Do not resign on the basis of this guide.

In practice. Performance concerns are often real but undocumented. An employer that has not raised them through a fair process will struggle to rely on them, and may be tempted to describe the decision as a redundancy instead. That is the mixture this guide warns against, and it is where many claims begin.

4. Reasons that can never justify a dismissal

The Act provides that an employer may not set up as a good and sufficient cause that the employee:

• was a member of a trade union, or is seeking office as, or acts or has acted as, an employees’ representative;
• no longer enjoys the employer’s confidence (except for a private domestic employee);
• married;
• is pregnant or absent on maternity leave;
• disclosed information to a designated public regulating body about alleged illegal or corrupt activities by the employer or those acting in its name;
• filed a complaint or is taking part in proceedings against the employer about alleged breaches of law, or is having recourse to the competent authorities; or
• works in a business that has undergone a transfer of ownership, unless the employer proves the termination is necessary for economic, technical or organisational reasons entailing changes in the workforce.

The second item deserves emphasis for senior roles: a bare “loss of confidence” in an employee is not, under the Act, a good and sufficient cause. Separately, dismissal must not be discriminatory on any ground protected by the Act and by the Equal Treatment in Employment Regulations.

In practice. At senior level, the real reason is often a breakdown in the working relationship. The Act does not accept that on its own as a good and sufficient cause. Where that is the true position, a negotiated exit is usually a better route than a dismissal that has to be defended later.

5. Probation and fixed-term contracts

Probation. The standard probationary period is six months. For workers in technical, executive, administrative or managerial positions whose wages are at least double the national minimum wage for that year, it is twelve months. The parties may agree a shorter period. During probation either party may end the employment without giving a reason, with one week’s notice once the employee has been employed for more than a month.

Fixed-term contracts. If an employer ends a fixed-term contract before its expiry without good and sufficient cause, it must pay the employee half the full wages that would have accrued for the remainder of the term. Claims for these sums are heard by the Industrial Tribunal. Collective redundancy rules do not normally apply to the expiry of fixed-term contracts, but do apply where they are ended early because of redundancy.

In practice. Probation is often treated as a free exit, and it is not always one. The period may have been shortened by agreement, may already have expired, or may not apply to the role at all. Dates and contract wording decide the point, so they should be checked before relying on it.

6. What is owed, and what is negotiated

On termination, the Act sets out notice periods that rise with continuous service from one week to a maximum of twelve weeks, with longer periods allowed by agreement for technical, administrative, executive or managerial posts. If the employer does not give the notice due, it must pay the wages for that period. When an employer gives notice, the employee may choose to stop working and receive half the wages for the unexpired notice.

For these statutory payments, “wages” excludes overtime, bonuses, allowances, remuneration in kind and commissions.

The Act does not provide a general statutory redundancy payment. Any payment beyond notice and sums already earned comes from a contract, a policy, a collective agreement, or negotiation.

In practice. Because there is no statutory redundancy payment, the amount of any settlement reflects each side’s view of the risk. A realistic assessment of a claim, rather than the statutory minimum, is what usually sets the figure.

7. If the route is wrong: the Industrial Tribunal

• Jurisdiction. The Industrial Tribunal has exclusive jurisdiction over complaints of unfair dismissal.
• Time limit. A complaint must be presented within four months of the effective date of the alleged breach. Discrimination, victimisation and harassment complaints under the Act also have a four-month limit.
• Remedies. If the complaint is well founded, the Tribunal may order reinstatement or re-engagement where the employee asks for it and the Tribunal considers it practicable and equitable, but not for a managerial or executive post requiring special trust. Otherwise it awards compensation, taking into account the real damages and losses suffered and circumstances such as the worker’s age and skills.
• Appeal. An appeal lies to the Court of Appeal on a point of law only, by application filed within twelve days of the decision.

In practice. Most disputes about the route end in settlement before a decision. The strength of each side’s position at the outset, and the quality of its records, largely decide the terms.

8. Two fictional scenarios

Invented to illustrate the questions each side should ask. They do not predict outcomes and do not describe real people or employers.

Scenario A: the role that “disappeared”. A finance company announces that its head of payments role is abolished and the duties are spread across two existing managers. The head of payments joined two years ago; one of the two managers joined six months ago. Questions: what is the class of employment affected, given that the Act looks at work performed rather than titles; is the head of payments the person last engaged in that class; and if a similar post is created within a year, does the re-employment right apply?

Scenario B: performance described as redundancy. A gaming operator is unhappy with a senior marketing manager’s results but has never raised them formally. It tells the manager their role is redundant, and three weeks later advertises a “growth marketing lead” with similar duties. Questions: is the real reason the work or the person; was there a reduced need for the work; how does the advertisement relate to the re-employment right; and what does the chronology show?

9. Practical checks for each side

For employees

• Ask what route the employer is relying on, in writing.
• Compare your actual work with that of colleagues, not just job titles.
• Note when you joined compared with others in similar work.
• Watch for the same or a similar post being filled within a year.
• Note the four-month time limit.
• Do not resign without advice.

For employers

• Record the business reason and the evidence before deciding.
• Identify the class of employment by reference to the collective agreement or the actual work.
• Apply the last-engaged rule and document how.
• Do not mix performance concerns into a redundancy.
• Check the collective and transfer regulations.
• Track vacancies in former posts for a year.

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How I can help

A guide can set out the line the law draws. It cannot tell you on which side of it your case falls, or what that is worth. That is the work of an adviser who has seen the question from both sides.

For employers, I advise before a decision is made and while it is carried out:

• testing whether the reason is redundancy, cause, or a case for a negotiated exit;
• identifying the class of employment and applying the selection rule;
• checking probation, fixed-term and collective redundancy points;
• preparing the letters and the record the decision will rest on;
• negotiating senior exits where a dismissal would be hard to defend.

For executives and senior employees, I advise when a role is ending:

• assessing whether the route the employer has chosen fits the facts;
• valuing any claim realistically, including the time limits;
• negotiating terms, or reviewing an agreement before you sign.

The aim, on either side, is a result that holds: a decision that can be defended, or a settlement that reflects the real strength of the case, without the cost and delay of a dispute. The earlier I am involved, the more options remain open.

This guide is general information about Maltese law, not advice on any particular termination.

Next step: Send an enquiry. Read also: Executive exits · Workforce restructuring · Planning workforce restructuring.