Skip Navigation
A Tailored Payroll Process for Your Organisation
Managing payroll in Malta involves more than just paying your staff. Employers are responsible for ensuring accurate payments, meeting payroll requirements, and submitting statutory forms to the relevant tax authorities. It can be time consuming and complex, especially without dedicated support.
At A2CO, we provide cost-effective payroll services designed around your business needs. Whether you are a local employer, a start up company, a growing SME, or an international organisation in Malta, we help you outsource your company’s payroll with complete peace of mind.
Our experienced payroll team manages the entire process from employer setup and employment registrations to the issuance of payroll documents, along with all monthly and annual submissions, ensuring full compliance with Maltese legislation at every stage.
How We Support Employers Across Malta’s Payroll Landscape
Payroll is one of the most critical administrative functions in any business. It requires careful coordination of tax and national insurance deductions, timely submissions, and accurate reporting of salaries, bonuses, and leave balances.
Registration of Employer
As an employer, you are required to register with the Malta Tax and Customs Authority (MTCA) to obtain a PE Number. Once this is in place, the company must also be registered with Jobsplus in order to create an employer profile. This profile will enable the company to formally engage and terminate employees.
Our team can assist you throughout the entire process, providing clear guidance on the documents required both for employer registration and for employee onboarding.
For EU employees, registration can be completed using a valid Maltese residence card. For non-EU employees, an employment licence is required before employment can commence. This licence covers both residence and employment, and our team can advise on the appropriate permit to apply for, as well as assist with the preparation and submission of all necessary documentation.
Payroll Submissions
Under the FSS (Final Settlement System), employers in Malta are required to submit the following to the Malta Tax and Customs Authority (MTCA):
-
FS4 Form - To notify the MTCA of the engagement of a new employee or changes in the details of the current FS4
-
FS5 Form - A monthly return showing the amounts withheld from the employee, together with the amounts payable by the employer for each month. This is to be submitted and paid by the end of the following month.
-
FS3 Form - Issued to each employee at year-end or upon termination, showing total annual income, tax, and social security contributions deducted.
-
FS7 Form - The employer’s annual reconciliation of all employees’ FS3s and the total contributions/payments made during the year.
The FS7 and FS3s are to be submitted to the MTCA by 15th February of the following year.
Tax Deduction
In Malta, income tax is deducted from employees’ salaries through the Pay-As-You-Earn (PAYE) system. Employers are responsible for calculating the tax based on each employee’s taxable income, taking into account their residency status, marital status, dependents, and any applicable tax credits or reliefs. Tax is withheld monthly and reported to the Malta Tax and Customs Authority (MTCA) via the FS5 form, alongside social security contributions.
Our team can also assist in analyzing whether tax should be calculated using the residency rates and further assess which rate is most beneficial and applicable, whether the employee should be taxed at non-resident rates, or whether tax obligations arise abroad.
Further tax rates can apply through payroll, such as:
-
Tax on Part-Time Employment: Part-time income in Malta is taxed at a flat rate of 10%, provided certain conditions are met. This rate applies to individuals who are full-time employees, pensioners, or full-time students (including apprentices).
-
Overtime Concession Tax Scheme: Overtime work may be taxed at a reduced rate of 15% under specific conditions. The employee must be employed on a full-time basis, not hold a managerial position, and earn a basic weekly wage of no more than €375, excluding government bonuses. The concession applies to overtime paid at up to twice the normal hourly rate.
Social Security Contribution Deductions
In Malta, Social Security Contributions (SSC) are mandatory payments that fund various social benefits, including pensions, sickness, maternity, and unemployment benefits. Contributions are classified based on the type of employment:
Class 1 Contributions
Class 1 social security contributions apply to employees in Malta and are payable by both the employer and the employee. When an individual has more than one employment, the contribution is calculated based on the job with the highest basic wage or salary. Employers must also pay an additional Maternity Fund Contribution, which allows them to claim a government refund for salaries paid during the 14-week maternity leave period. All Class 1 contributions are deducted from employees’ wages and remitted monthly to the Malta Tax and Customs Authority (MTCA) using the FS5 Form
Class 2 Contributions
Class 2 social security contributions are paid solely by self employed or self occupied individuals, company directors who are not classified as employees, and shareholders holding more than 50 percent of a company’s shares, while those with 50 percent or less fall under Class 1. These contributions are managed directly by the self employed person and are payable three times a year in April, August and December.
Social Security Contribution Rates
Employees working for a Maltese-registered employer are generally required to pay social security contributions in Malta. However, in certain cases, employees may be exempt from making contributions in Malta. To obtain such an exemption, an application must be submitted and approved. Our team can assist in determining the correct social security deduction, submitting any forms required.
Other Deductions and Payroll Adjustments
Apart from tax and social security contributions, only certain deductions are permitted through payroll, such as salary advances or deductions specifically allowed by law or mandated by a competent court order.
Payroll adjustments can include items such as bonuses as agreed in the employment contract, government bonuses payable by the employer, cost of living adjustments, reimbursements of expenses if agreed in advance, and fringe benefits.
Fringe benefits in Malta are divided into three main categories:
-
Category 1 – Car Benefits: Includes the use of a company car and car cash allowances. Car cash allowances may be tax-free up to 50% of the allowance or a maximum of €1,170, provided certain conditions are met.
-
Category 2 – Use of Assets: Covers benefits such as employer-provided accommodation and other assets made available to the employee.
-
Category 3 – Other Benefits: Includes items such as share option schemes, the transfer of assets at subsidized prices, and other reimbursable expenses or perks.
At A2CO, in addition to assisting with the correct classification of deductions and adjustments to ensure compliance, we can also support the drafting of employment contracts for your employees.
Leave
In Malta, employees are entitled to several types of leave under employment law. The most common is annual leave, which provides employees with a statutory entitlement for full-time employees. Public holidays are separate from annual leave; if a public holiday falls on a weekend, it is typically added to the employee’s leave entitlement.
Sick leave is available to employees who are unable to work due to illness or injury. Employees must provide medical certification for absences exceeding two days, and employers are required to maintain records of sick leave taken.
Additionally, employees are entitled to maternity leave, paternity leave, and parental leave. Our team can assist employers and employees in the application for benefits and grants, ensuring that all statutory entitlements are properly claimed.
Our team can assist in managing leave and entitlements, ensuring this does not become a burden on the employer, particularly where varying job schedules and agreements may complicate entitlements. We can tailor solutions to the company’s specific needs and also provide direct access to leave bookkeeping through the payroll system, making monitoring and reporting straightforward and efficient.
Notice Period
In Malta, both employers and employees are required to give notice of termination of employment, unless termination is for a just cause. The length of the notice period depends on the employee’s length of service with the employer. For indefinite contracts, the statutory minimum notice periods are as follows:
-
Up to 1 month of service → 1 week
-
More than 1 month and up to 6 months → 2 weeks
-
More than 6 months and up to 2 years → 4 weeks
-
More than 2 years and up to 4 years → 8 weeks
-
More than 4 years and up to 7 years → 9 weeks
-
More than 7 years and up to 8 years → 10 weeks
-
More than 8 years and up to 9 years → 11 weeks
-
More than 9 years → 12 weeks
If an employee or employer fails to observe the notice period, compensation must be paid to the other party. If the employee does not work the notice period, they are required to pay the employer an amount equivalent to half of the wages due for the unserved period. If the employer does not allow the employee to work the notice period, they must pay the employee an amount equivalent to the full wages for the unserved period.
Notice periods may also be varied by mutual agreement or by specific terms in the employment contract.
Our payroll outsourcing services are designed to simplify this process for employers. We manage your payroll with precision and confidentiality, helping you stay compliant and up to date with all statutory obligations.
We also offer comprehensive support to HR teams by aligning your payroll system with employment registrations, work permit processing, and ongoing compliance requirements. Additionally, we provide tailored advice on a case-by-case basis, allowing us to deliver a fully integrated solution that supports the mobility and growth of your organisation.
Registration of Employer
As an employer, you are required to register with the Malta Tax and Customs Authority (MTCA) to obtain a PE Number. Once this is in place, the company must also be registered with Jobsplus in order to create an employer profile. This profile will enable the company to formally engage and terminate employees.
Our team can assist you throughout the entire process, providing clear guidance on the documents required both for employer registration and for employee onboarding.
For EU employees, registration can be completed using a valid Maltese residence card. For non-EU employees, an employment licence is required before employment can commence. This licence covers both residence and employment, and our team can advise on the appropriate permit to apply for, as well as assist with the preparation and submission of all necessary documentation.
Payroll Submissions
Under the FSS (Final Settlement System), employers in Malta are required to submit the following to the Malta Tax and Customs Authority (MTCA):
-
FS4 Form - To notify the MTCA of the engagement of a new employee or changes in the details of the current FS4
-
FS5 Form - A monthly return showing the amounts withheld from the employee, together with the amounts payable by the employer for each month. This is to be submitted and paid by the end of the following month.
-
FS3 Form - Issued to each employee at year-end or upon termination, showing total annual income, tax, and social security contributions deducted.
-
FS7 Form - The employer’s annual reconciliation of all employees’ FS3s and the total contributions/payments made during the year.
The FS7 and FS3s are to be submitted to the MTCA by 15th February of the following year.
Tax Deduction
In Malta, income tax is deducted from employees’ salaries through the Pay-As-You-Earn (PAYE) system. Employers are responsible for calculating the tax based on each employee’s taxable income, taking into account their residency status, marital status, dependents, and any applicable tax credits or reliefs. Tax is withheld monthly and reported to the Malta Tax and Customs Authority (MTCA) via the FS5 form, alongside social security contributions.
Our team can also assist in analyzing whether tax should be calculated using the residency rates and further assess which rate is most beneficial and applicable, whether the employee should be taxed at non-resident rates, or whether tax obligations arise abroad.
Further tax rates can apply through payroll, such as:
-
Tax on Part-Time Employment: Part-time income in Malta is taxed at a flat rate of 10%, provided certain conditions are met. This rate applies to individuals who are full-time employees, pensioners, or full-time students (including apprentices).
-
Overtime Concession Tax Scheme: Overtime work may be taxed at a reduced rate of 15% under specific conditions. The employee must be employed on a full-time basis, not hold a managerial position, and earn a basic weekly wage of no more than €375, excluding government bonuses. The concession applies to overtime paid at up to twice the normal hourly rate.
Social Security Contribution Deductions
In Malta, Social Security Contributions (SSC) are mandatory payments that fund various social benefits, including pensions, sickness, maternity, and unemployment benefits. Contributions are classified based on the type of employment:
Class 1 Contributions
Class 1 social security contributions apply to employees in Malta and are payable by both the employer and the employee. When an individual has more than one employment, the contribution is calculated based on the job with the highest basic wage or salary. Employers must also pay an additional Maternity Fund Contribution, which allows them to claim a government refund for salaries paid during the 14-week maternity leave period. All Class 1 contributions are deducted from employees’ wages and remitted monthly to the Malta Tax and Customs Authority (MTCA) using the FS5 Form
Class 2 Contributions
Class 2 social security contributions are paid solely by self employed or self occupied individuals, company directors who are not classified as employees, and shareholders holding more than 50 percent of a company’s shares, while those with 50 percent or less fall under Class 1. These contributions are managed directly by the self employed person and are payable three times a year in April, August and December.
Social Security Contribution Rates
Employees working for a Maltese-registered employer are generally required to pay social security contributions in Malta. However, in certain cases, employees may be exempt from making contributions in Malta. To obtain such an exemption, an application must be submitted and approved. Our team can assist in determining the correct social security deduction, submitting any forms required.
Other Deductions and Payroll Adjustments
Apart from tax and social security contributions, only certain deductions are permitted through payroll, such as salary advances or deductions specifically allowed by law or mandated by a competent court order.
Payroll adjustments can include items such as bonuses as agreed in the employment contract, government bonuses payable by the employer, cost of living adjustments, reimbursements of expenses if agreed in advance, and fringe benefits.
Fringe benefits in Malta are divided into three main categories:
-
Category 1 – Car Benefits: Includes the use of a company car and car cash allowances. Car cash allowances may be tax-free up to 50% of the allowance or a maximum of €1,170, provided certain conditions are met.
-
Category 2 – Use of Assets: Covers benefits such as employer-provided accommodation and other assets made available to the employee.
-
Category 3 – Other Benefits: Includes items such as share option schemes, the transfer of assets at subsidized prices, and other reimbursable expenses or perks.
At A2CO, in addition to assisting with the correct classification of deductions and adjustments to ensure compliance, we can also support the drafting of employment contracts for your employees.
Leave
In Malta, employees are entitled to several types of leave under employment law. The most common is annual leave, which provides employees with a statutory entitlement for full-time employees. Public holidays are separate from annual leave; if a public holiday falls on a weekend, it is typically added to the employee’s leave entitlement.
Sick leave is available to employees who are unable to work due to illness or injury. Employees must provide medical certification for absences exceeding two days, and employers are required to maintain records of sick leave taken.
Additionally, employees are entitled to maternity leave, paternity leave, and parental leave. Our team can assist employers and employees in the application for benefits and grants, ensuring that all statutory entitlements are properly claimed.
Our team can assist in managing leave and entitlements, ensuring this does not become a burden on the employer, particularly where varying job schedules and agreements may complicate entitlements. We can tailor solutions to the company’s specific needs and also provide direct access to leave bookkeeping through the payroll system, making monitoring and reporting straightforward and efficient.
Notice Period
In Malta, both employers and employees are required to give notice of termination of employment, unless termination is for a just cause. The length of the notice period depends on the employee’s length of service with the employer. For indefinite contracts, the statutory minimum notice periods are as follows:
-
Up to 1 month of service → 1 week
-
More than 1 month and up to 6 months → 2 weeks
-
More than 6 months and up to 2 years → 4 weeks
-
More than 2 years and up to 4 years → 8 weeks
-
More than 4 years and up to 7 years → 9 weeks
-
More than 7 years and up to 8 years → 10 weeks
-
More than 8 years and up to 9 years → 11 weeks
-
More than 9 years → 12 weeks
If an employee or employer fails to observe the notice period, compensation must be paid to the other party. If the employee does not work the notice period, they are required to pay the employer an amount equivalent to half of the wages due for the unserved period. If the employer does not allow the employee to work the notice period, they must pay the employee an amount equivalent to the full wages for the unserved period.
Notice periods may also be varied by mutual agreement or by specific terms in the employment contract.
Our payroll outsourcing services are designed to simplify this process for employers. We manage your payroll with precision and confidentiality, helping you stay compliant and up to date with all statutory obligations.
We also offer comprehensive support to HR teams by aligning your payroll system with employment registrations, work permit processing, and ongoing compliance requirements. Additionally, we provide tailored advice on a case-by-case basis, allowing us to deliver a fully integrated solution that supports the mobility and growth of your organisation.
Our Services
We provide a full payroll solution tailored to your company’s needs:
-
Preparation and submission of statutory forms (FS5, FS3, FS7, FS4)
-
Payslip generation with tailored and secure employee distribution
-
Accurate calculations of income tax and social security contributions
-
Leave tracking and absence management
-
Employee registrations and terminations with the relevant authorities
-
Statutory bonuses, cost of living adjustments, and maternity contributions
-
Integration with HR and accounting systems
-
Reporting customised to your internal payroll management system
-
Bank transfer files and net salary summaries
-
Processing of payroll payments
-
Posting of payroll entries on the accounting system
-
Ongoing support from a dedicated payroll team
-
Assistance with applications for government grants and benefits available to both employees and employers.
-
Employer registration, including the setup of the Jobsplus portal.
Why Choose A2CO
To establish a company in Malta, you’ll need:
-
Local experts in Maltese payroll law and employer requirements
-
Customisable support for startups, medium sized firms, and established companies
-
Timely submissions of all payroll documentation
-
Seamless integration with internal HR and finance teams
-
Trusted by clients across Malta’s key industries
-
Focused on accuracy, confidentiality, and compliance
Common Payroll Challenges and How We Help You Overcome Them
Many employers face challenges when managing payroll in-house. These include keeping up with legislation, managing complex leave and entitlement rules, deductions and submitting monthly and annual forms correctly.
At A2CO, we help you overcome these obstacles by providing a structured and reliable payroll process. Our services ensure accurate payments, reduce administrative burden, and improve overall payroll compliance within your organisation.
FAQs
Frequently Asked Questions
Costs vary depending on your company size and specific payroll needs. We offer clear pricing that reflects the support required.
The employer is responsible for ensuring compliance, but many outsource payroll to a reputable service provider for efficiency and peace of mind.
A payroll provider manages employee registration and termination, salaries, payslips, tax deductions, social security, and statutory submissions for employers.
Yes. Outsourcing is often more efficient, reduces the risk of fines, and ensures full compliance with Maltese payroll legislation
Couldn't find your answer?
LET'S BUILD YOUR SUCCESS—TOGETHER.
Get Free Consultation
Reliable and compliant payroll services in Malta designed to streamline your payroll process, ensure accuracy, and support your business with expert outsourcing and local expertise.
Clinton Cutajar
Partner
Antoinette Scerri
Partner
"*" indicates required fields
RELATED SERVICES
