Establishing clear and compliant employment agreements is fundamental when hiring employees in Malta. These contracts serve as the legal foundation of the employment relationship, outlining the rights, obligations, and terms of engagement for both the employer and the employee. Ensuring that agreements adhere to Maltese labour law is crucial for avoiding disputes and maintaining a legally sound workforce.
Maltese law provides a framework for employment contracts, specifying minimum requirements and protections for employees. Understanding these regulations is essential for businesses operating or expanding into Malta, ensuring that all employment relationships are established on a solid and lawful basis from the outset.
Types of Employment Agreements
In Malta, employment agreements primarily fall into two main categories based on their duration: indefinite contracts and fixed-term contracts. The type of contract used depends on the nature of the work and the intended duration of the employment relationship.
- Indefinite Contracts: These are the standard form of employment agreement in Malta. They do not have a predetermined end date and continue until terminated by either party in accordance with legal requirements (e.g., resignation, redundancy, dismissal for cause). Indefinite contracts provide greater job security for the employee.
- Fixed-Term Contracts: These contracts are for a specific period or for the completion of a specific task. They automatically terminate upon the expiry of the term or completion of the task. Maltese law regulates the use of fixed-term contracts, particularly concerning renewals and the maximum cumulative duration to prevent their misuse as a way to avoid providing the security of indefinite employment. A fixed-term contract cannot exceed four years in duration, including any renewals, after which the employment is deemed to be of indefinite duration unless there is an objective reason justifying further fixed-term engagement.
| Contract Type | Duration | Termination | Standard Form? |
|---|---|---|---|
| Indefinite Term | No predetermined end date | Requires notice or just cause, governed by law | Yes |
| Fixed Term | Specific period or task completion | Automatically ends on expiry/completion; subject to renewal limits and rules | No |
Essential Clauses
Maltese law mandates that certain information must be included in the written employment agreement or a separate written statement provided to the employee within a specified timeframe (typically within eight working days of the commencement of employment). These essential clauses ensure transparency regarding the key terms of employment.
Mandatory information to be included typically covers:
- Names and addresses of the employer and employee.
- Place of work.
- Job title, grade, nature, or category of the work.
- Date of commencement of employment.
- Expected duration of employment (for fixed-term contracts).
- Duration of the probationary period.
- Remuneration (wage or salary), including the rate of pay, frequency of payment, and any allowances.
- Normal hours of work per day and per week.
- Paid leave entitlement (e.g., annual leave, sick leave).
- Notice periods for termination of employment by either party.
- Reference to collective agreements, if applicable.
- Details of any training entitlement provided by the employer.
- Details of any social security contributions payable by the employer.
- Details of any pension schemes.
Probationary Period
A probationary period is a standard feature of employment contracts in Malta, allowing both the employer and the employee to assess the suitability of the employment relationship. During this period, either party can terminate the employment without assigning a reason, provided that the termination is not discriminatory.
- Standard Duration: For employees engaged under an indefinite contract, the standard probationary period is six months.
- Exceptions:
- For employees in managerial, administrative, or executive positions whose annual salary exceeds a certain threshold (as defined by law, currently €37,271.03 as of 2024, subject to change), the probationary period can be extended up to twelve months, provided this is agreed upon in writing.
- For fixed-term contracts of less than six months, the probationary period is half the duration of the contract.
- Termination during Probation: During the probationary period, either party can terminate the employment by giving one week's notice if the employment has lasted for more than one month. If the employment has lasted for one month or less, no notice is required.
Confidentiality and Non-Compete Clauses
Confidentiality and non-compete clauses are restrictive covenants often included in employment agreements to protect the employer's business interests.
- Confidentiality Clauses: These clauses are generally enforceable in Malta as long as they are reasonable and protect legitimate business interests, such as trade secrets or sensitive company information. They typically prohibit the employee from disclosing confidential information during and after the employment relationship.
- Non-Compete Clauses: These clauses restrict an employee's ability to work for a competitor or set up a competing business after leaving the employer. The enforceability of non-compete clauses in Malta is subject to strict scrutiny by the courts. For a non-compete clause to be enforceable, it must be:
- Necessary to protect a legitimate business interest (e.g., trade secrets, client relationships).
- Reasonable in scope, duration, and geographical area.
- Not against public policy.
- The courts will assess the reasonableness on a case-by-case basis, often finding overly broad or lengthy restrictions unenforceable.
Contract Modification and Termination Requirements
Modifying or terminating an employment contract in Malta must adhere to specific legal requirements.
- Modification: Any changes to the essential terms of the employment contract (such as salary, hours, or duties) generally require the mutual agreement of both the employer and the employee. Unilateral changes by the employer may be considered a breach of contract. Significant changes could potentially lead to a claim of constructive dismissal by the employee.
- Termination: Employment contracts can be terminated for various reasons, each with specific procedures:
- Resignation: An employee can terminate the contract by giving the required notice period as specified in the contract or by law.
- Termination by Employer (with notice): For indefinite contracts, an employer can terminate employment by giving notice based on the employee's length of service, provided there is a valid reason (e.g., redundancy, employee's capability or conduct). Notice periods increase with the length of service.
- Termination for Just Cause: An employer can dismiss an employee without notice for serious misconduct (just cause). Maltese law provides examples of what constitutes just cause, such as theft, fraud, or serious insubordination.
- Redundancy: Termination due to redundancy must follow specific legal procedures, including selection criteria and potential obligations regarding alternative employment or redundancy payments.
- Expiry of Fixed Term: Fixed-term contracts automatically terminate upon their agreed end date.
- Termination during Probation: As mentioned, termination during probation is subject to shorter notice periods or no notice depending on the duration of employment within the probationary period.
All terminations, except for the expiry of a fixed term or termination during the first month of probation, should ideally be communicated in writing.
