Redundancy pay in Malta: what the law gives, and what is negotiated

Who this is for: employees and senior managers in Malta whose role is being made redundant, and employers planning a redundancy. Sections marked “For employees” and “For employers” apply the same law from each side.

Short answer. There is no statutory redundancy payment in Malta. The law gives an employee made redundant notice, or pay for the notice period, plus what they have already earned: wages to the last day, untaken leave and the pro-rata statutory bonuses. Anything beyond that comes from the contract, a collective agreement, a company scheme or a negotiation. Packages therefore vary considerably. What usually sets the figure is not a formula but each side’s view of what would happen if the redundancy were challenged before the Industrial Tribunal.

This is a best-practice guide. Real redundancies rarely follow it neatly, and the gaps are where the money is decided.

Best practice, and the reality

On paper, a redundancy is simple: the work has gone, the person engaged last in that work is selected, notice is given and the final pay is settled.

In practice, some of the following usually complicate it:

• A role that is reshaped rather than removed, with its duties spread across colleagues.
• A unique job title that hides work shared with others, so the person the law would select is not obvious.
• A package offered on the day, with a short deadline and a full-and-final release attached.
• A contract that gives more than the law: longer notice, a severance clause, bonus or share terms that depend on how the employee leaves.
• A decision taken at group level, carried out in Malta with little local record of the reasons.
• More redundancies than first planned, so that the collective rules apply.

Each of these can be worked through, but not by assuming the statutory minimum settles the matter. For an employer, a redundancy that would not hold can cost far more than a fair package agreed at the start. For an employee, accepting too little, or refusing an offer on a weak case, are both expensive mistakes.

Contents

1. What people most often get wrong
2. What the law gives
3. Why packages vary so much
4. When a redundancy can be challenged
5. If it is happening to you
6. For employers

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1. What people most often get wrong

Assuming there is a statutory payment. Many people expect a fixed number of weeks for every year of service, as in the UK. Malta has no such rule, and figures quoted for Malta on some HR and payroll websites are wrong. Both sides then anchor on a number that does not exist.

Assuming that, without one, redundancy costs only notice. That is true only when the redundancy is genuine and properly carried out. Where it is not, the Industrial Tribunal can award compensation, and for a senior role it can be substantial.

Signing on the day. Employees often sign a full-and-final settlement at the meeting where they are told, before anyone has looked at whether the redundancy would hold. A signed release is not always the end of the matter, but it is a hard position to argue from.

Relying on a job title. Employers sometimes treat a person with a unique title as “a class of one”. The law looks at the work people actually do, not what their post is called.

In practice. Most disputes about redundancy pay begin with one of these four assumptions. Each is easier to correct before anything is signed than after.

2. What the law gives

For a contract for an indefinite time, the legal minimum on a redundancy is:

1. Notice, or pay for it. One week after a month’s service, rising to twelve weeks after ten years, or a longer period agreed in the contract for technical, administrative, executive and managerial posts. If the employer does not let you work the notice, it pays your wages for the whole period. See notice periods in Malta, with a calculator, and pay in lieu of notice.
2. Half wages if you would rather stop working. An employee given notice may stop working at any point and ask for half the wages for the rest of the notice period. This option is often overlooked.
3. Wages up to the last day.
4. Untaken annual leave, paid in full. This is the one time leave may be paid out instead of taken.
5. The pro-rata statutory bonus and weekly allowance for the part of the period worked.

All of this must be paid by the next normal pay day.

What “wages” means here. For notice pay, wages means the basic wage only: no overtime, bonus, allowances, benefits in kind or commission. For a senior employee whose pay is largely variable, the statutory floor is smaller than expected. The contract, the bonus scheme and any plan rules matter more than the statute.

Fixed-term contracts. If an employer ends a fixed-term contract early, it must pay half the full wages for the rest of the agreed term. On a long contract ended early, that can be worth more than notice on an indefinite one.

Collective redundancies. Above certain thresholds, for example ten or more redundancies within 30 days in an establishment of 21 to 99 employees, the employer must inform and consult employee representatives and notify the Director of Employment and Industrial Relations. The redundancies cannot take effect until 30 days after notification. The law backs this with a fine for each employee made redundant. It gives employees no extra payment, but a failure in the process strengthens an individual claim (see the case note on consultation information and an individual claim). See collective redundancy and collective redundancies.

In practice. The statutory minimum is the floor, not the answer. In most senior redundancies, the contract and the strength of the redundancy decide far more than the statute does.

3. Why packages vary so much

There is no market norm, and settlements vary considerably. “A month for every year of service” is often quoted, but there is no Maltese evidence that it is standard. The formulas that have become public differ widely between employers, sectors and negotiations, and union-negotiated schemes follow their own course.

What actually moves the figure is the employer’s risk if the redundancy were challenged:

• Is the work really gone? If the duties continue, are handed to a colleague, are outsourced, or come back under a new title, the redundancy is exposed.
• Was the right person selected? The law requires the employer to let go the person engaged last in the class of employment affected. The class is defined by the work done, not the job title. See selection pool.
• Was the process clean? Clear reasons in writing, consultation where required, and alternatives considered.
• What would the employee actually lose? Salary, how long it will realistically take to find a comparable role, age, specialism, and any loss of bonus, shares or benefits.

A senior employee with a strong case, a high salary and a narrow job market has leverage. One with a genuine redundancy and an easy move has very little. Anything in the contract, such as an agreed severance clause, longer notice or good-leaver terms on bonus or shares, is the starting point.

In practice. Two people made redundant on the same day by the same employer can leave with very different terms. The difference usually lies in the facts of each redundancy and in how early each side took advice.

4. When a redundancy can be challenged

Leverage comes from a redundancy that would not survive the Industrial Tribunal. The patterns that recur in its decisions are:

• The work carries on. A colleague takes over the duties, the function is outsourced, or someone is hired for the same work soon after. A role described as abolished whose work is still being done is the clearest sign.
• The wrong person was selected. Someone engaged later, doing the same work under a different title, was kept.
• The post comes back within a year. The person made redundant is entitled to be offered it, on terms no less favourable. Giving the work to a contractor instead does not avoid this. See right to re-employment.
• Reasons and process. No written reason, no evidence of the restructuring, selection criteria nobody can explain, or collective consultation skipped.
• The timing tells a story. A redundancy that follows a dispute, a complaint, a pregnancy or a transfer of the business will be examined closely.

How compensation is assessed. There is no formula. The law tells the Tribunal to consider the real damages and losses, and circumstances such as the person’s age and skills, but sets no method. In practice, awards are inconsistent: similar facts have produced very different amounts, chairpersons approach the calculation in different ways, and on appeal awards have repeatedly been sent back because they did not explain how they were reached. That uncertainty cuts both ways, and it is one reason most cases settle.

There is ongoing discussion between the social partners about codifying how compensation is calculated. Nothing has been agreed and it is not in the law yet, so for now each case turns on its own facts and on the Tribunal that hears it.

Two limits. A claim must be filed within four months of the termination. For managerial and executive posts that require special trust, the Tribunal will not order reinstatement, so compensation is the only remedy.

In practice. The line between a genuine redundancy and an unfair dismissal is examined at length in redundancy or dismissal in Malta. Where the redundancy is genuine and properly handled, the Tribunal may award nothing beyond notice.

5. If it is happening to you

For employees:

1. Don’t sign anything on the day. Ask for the reasons in writing and take the paperwork away. A full-and-final settlement usually waives every claim you have. Once signed, it is very hard to undo.
2. Write down what you know now. Who else does the same work, who joined after you, and what is happening to your duties. This is the evidence that decides whether you have leverage, and it is easiest to gather while you are still there.
3. Read your contract and plan rules before you negotiate. Look at the notice period, any severance clause, leaver terms on bonus and shares, and restrictive covenants. The statutory minimum is only the floor.
4. Mind the four months. That is the time limit for an unfair dismissal claim. Negotiations do not stop it running.
5. Check how the termination is recorded. The employer must notify Jobsplus within four days. Unemployment benefit requires registration on the part of the register for people made redundant, so a termination recorded as a resignation or a dismissal for cause can affect it. Pay in lieu of notice may also delay the start of benefit for the days it covers.
6. Ask a tax adviser how the payments are described. Notice pay is taxed as employment income. For ex gratia payments and compensation awarded by the Industrial Tribunal, the accepted prevailing practice is that they are not taxable. That is a practice, not a rule written into the law: the tax authorities retain the discretion to take a different view, and how a payment is described and structured matters. Take tax advice before the terms are fixed. I do not give tax advice, but I make sure the question is asked.
7. Watch the role for a year. If your post becomes available again within twelve months, you are entitled to be re-employed in it.
8. Weigh the offer against the risk, both ways. A refused offer is not always followed by a better one. Where the redundancy is genuine, the Tribunal may award nothing beyond your notice, and the offer on the table may be the best outcome.

If the employer is insolvent, a state guarantee fund covers part of what is unpaid, including wages, leave and notice money, up to a cap. A claim must be made within two months of the insolvency.

Before agreeing terms, see reviewing a proposed exit agreement.

In practice. The first week decides more than the following months. What you sign, what you record and when you take advice set the limits of every later negotiation.

6. For employers

The cheapest redundancy is one that would survive a challenge. A package priced against a weak case usually costs more in the end than getting the selection and the record right first.

• Record the business reason, and the evidence for it, before anyone is named.
• Define the class by the work done, apply the last-engaged rule, and keep the record of how.
• Check the contract of each person affected for longer notice, severance clauses and leaver terms.
• Count the numbers over 30 days, and check whether the collective rules apply.
• Give reasons in writing, and allow time to consider an offer.
• Keep a record of redundant posts for a year, and check it before recruiting.

For a full programme, see planning workforce restructuring.

In practice. Most of the cost of a failed redundancy comes from decisions taken in the first days, before anyone thought a challenge was likely.

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How I can help

A guide can set out what the law gives. It cannot tell you whether a particular redundancy would hold, or what a fair figure is on your facts. That is the work of an adviser who has seen the question from both sides.

For executives and senior employees, I advise when a role is being made redundant:

• assessing whether the redundancy is genuine and properly carried out;
• valuing the position realistically, including the time limits;
• negotiating the package, or reviewing an agreement before you sign.

For employers, I advise before and during a redundancy:

• testing the reason and the selection before the decision is made;
• checking contracts, fixed-term and collective redundancy points;
• preparing the letters and the record the decision will rest on;
• negotiating senior exits where the redundancy may be challenged.

The aim, on either side, is a result that holds: a redundancy that can be defended, or terms that reflect 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 redundancy or on tax.

Next step: Send an enquiry. Read also: Restructuring advisory · Negotiation and settlement · Notice and exit terms.