The new Payroll system in Malta was implemented from the first day of January 2011. Therefore, all the patrol calculations are now being undertaken by the new system.

In effect to the implementation of the payroll system, there are several changes made to accommodate digital transformation in the payroll system. The motive here is to improve the functioning and achieve positive results pertaining to the payroll. The overall digitization has caused the introduction of the new electronic payslips to feature in place of the printed payslip and payroll-related reports that are to be sent digitally. While the amendments are made in line with the departments, it has also caused organizations to streamline the overall payroll processes in general.

This calls for the reason why there is a necessity to improve the competence of taxation, payroll, pension, and employment-related matters in companies.

Provisions relating to the current pension schemes

The current pension scheme in Malta is based on the Social Security Act, Chapter 318 of the Laws of Malta. The Act that was passed in the year 2006 provides for two basic schemes, the Contributory Scheme, and the Non-Contributory Scheme.

The Contributory Scheme comprises the basic requirement for entitlement of the contribution conditions that are to be satisfied. The Non-Contributory Scheme, on the other hand, has the basic requirement that the conditions of the means test are satisfied.

Essentials of the contributions

The contributions are payable by all gainfully employed persons between the age of 16 and their pension age. The scheme also allows for several kinds of contributions to extend coverage to all types of persons in employment.

While the employed persons pay Class One contributions, the self-occupied persons will be required to pay Class two contributions. Class One contributions comprise that the class of people employed under a contract of service in Malta is in insurable employment and are, therefore, subject to the payment of these contributions. Typically, a tripartite contribution is payable that includes, the contribution made by the employer and the state, where each has to pay a contribution of 10 percent of the basic salary of the employer, the employed person,

The rate at which the Class Two contributions are made is to be shared equally by the state and the self-occupied persons, wherein the self-employed pays 15% and the state pays 7.5 percent of their annual income.

Categories of people exempted from the payment of Class Two Contribution:

 a) Persons in receipt of full-time education or training.

 b) Non-gainfully occupied married person

c) Persons in receipt of a pension in respect of widowhood, invalidity, or retirement or persons in receipt of a Parent’s Pension.

d) Persons in receipt of non-contributory Social Assistance or a Non-Contributory pension.

Retirement age and benefits

The 2006 reform included a gradual increase in the retirement age from 61 years for men and 60 years for women to 65 years by 2027. The pension age currently stands at 62 years. The pension scheme that consequently raised the age limit to 65 years, also brought along with it the intention to lengthen the careers and defer early retirement among the people.  

The comprehensive payroll system in Malta provides benefits both for the employers and the employees. Digitization has caused the streamlining of the payroll processes to the great extent. Expert advice and assistance for payroll solutions may be sought to ensure prompt processes and paperwork.

Accutor AG is a global payroll assistance provider for corporations, individuals, and recruitment agencies across the world. From prompt processing to efficient advice, the payroll professionals provide quick and equitable assistance to all.