Know Your Rights | Payment of Wages

Authors: Ann Bugeja, Christine Borg Millo & Sarah Xuereb

The rights of employees regarding the payment of their wages, as governed by Maltese legislation, are considered as safeguarded in relation to:

• what remuneration includes;
• how wages should be paid;
• whether wage deductions are permitted; and
• the payment of bonuses, among others.

The law overall aims to regulate the relationship between the employer and the employee, and affords protection of wages through several remuneration principles, especially by virtue of articles 11 to 25 of the Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta and hereinafter referred to as the “Act”).

In this discussion, it is first important to point out that the Act directly defines wages as being the “remuneration or earnings, payable by an employer to an employee and includes any bonus payable under Article 23 other than any bonus or allowance related to performance or production”.[1]  

Rights of the Employee

Protection of Wages

Primarily, article 11 of the Act states that; “the entire amount of the wages earned by, or payable to, any employee shall be paid to him in money being legal tender in Malta, and every payment of, or on account of, any such wages made in any other form and any covenant in any contract providing for other form of payment shall be null and void”.[2]

Therefore, it is every employee’s right to receive all wages which is due to them in the form of money, as a recognised transfer of payment, in the form of lawful legal tender. Any employment contract which provides for any other form of payment shall be deemed as NOT valid. Moreover, the payment of wages through a cheque on a bank in Malta or transferred to the bank account of the employee shall be a considered as a lawful form of payment.

The law adds further protections through article 12 of the Act whereby an employment contract providing a clause or statement which specifically transcribes the manner in which an employee must spend their wages is unwarranted.

Thirdly, in accordance with article 13, no employer shall be entitled to attach or assign the wages of their employees unless such attachment or assignment is established for the payment of maintenance which is due either to;

• A spouse;
• A minor child;
• A person with a disability; or
• An ascendant of the employee.

Wage Deductions

According to article 14 of the Act, the law does not allow for any employee to incur a wage deduction through the means of a discount, interest, or similar charge, as the only deductions which are permitted in virtue of the law shall be deductions in the form of taxation and social security contributions due to the Government of Malta.

Notwithstanding the established rule in the aforementioned provision, article 15 of the Act provides a number of exceptions. In terms of article 15, the only circumstances which authorize a deduction in wages shall be;

• A provision found under the Act or any other legislation which allow for a deduction;
• An order is issued by a competent court providing for a deduction in wages;
• A contract of employment expressly permits a deduction, only if the contract has been entered into between an employer/s or organisation of employees, whilst a trade union or representatives of a union also appear within the contract on behalf of the employee concerned.

In this regard, the Act specifically provides for the following situations where deductions to wages may be allowed:

1. At the request in writing of an employee, the employer may make deductions from the wages of such employee for the purpose of a superannuation or thrift scheme or for any purpose in the carrying out of which the employer has no beneficial financial interest, direct or indirect[3];
2. Where the terms of any written contract of service signed by the employees or the terms of a written statement signed by an employer specify in detail the fine or fines[4] to which the employee may become liable in respect of an act or omission; and the terms of any such contract have been previously approved by the Director, it shall be lawful for the employer to make such deductions as maybe authorised by such contract or such written statement. This is unless otherwise prescribed in a collective agreement;
3. Unless otherwise prescribed in a collective agreement, when an employer suspends an employee from work and during the period of suspension does not pay him wages or pays him less than the wage to which the employee is entitled, the employer shall be deemed to have made a deduction from the wages of the employee by way of a fine equivalent to the amount underpaid to him in wages.

Holidays and the Payment of Wages

The law in article 16 explicitly emphasises that an employer shall not enter into a subordinate contract of employment in order to reduce the payment which is entitled to employees in respect of holidays, which exceed the minimum holiday entitlement established by the law.[5] Furthermore, by virtue of article 17 of the Act, if any public holiday falls on a weekly day of rest of which an employee is entitled to, such employee shall be entitled to an additional day of vacation leave with pay throughout the calendar year.[6]

Privileged Debts and The Guarantee Fund

In accordance with article 20 of the Act, wages shall be considered as privileged debts. Therefore, employees shall be entitled to a privileged claim against their employer for three (3) months of wages due, as wages hold a ranking position which is above any other privileged or hypothecary debt, and over the assets of the employer. This notwithstanding, the amount being claimed as a privileged debt cannot exceed the national minimum wage[7] payable at the time over a six (6) month period.

Article 21 of the Act continues to establish the Guarantee Fund (hereinafter referred to as the “Fund”), whereby any employees who suffered from termination due to an employer’s proven insolvency, can receive the unpaid wages due to them from such Fund which is regulated accordingly by the responsible Minister. The article further provides for regulations governing the manner in which the Fund is set up and funded, as well as other relevant measures and procedures regarding the administration of the Fund.

Periodicity and Punctuality

The Act affords more protections to the employee regarding the periodicity and punctuality of the payment of wages by the employer. In fact, article 22 of the Act establishes that every employer is responsible for paying their employees at regular intervals and such intervals shall NOT exceed four (4) weeks. The only exception to this is if under a contract of service agreement an employer has agreed an alternative wage payment period. All employment contracts must explicitly state how often wages are to be paid and the time limit which is stated in the contract of employment cannot be circumvented.

Payment of Bonuses

In accordance with the definition of wages provided in the Act, the employer in addition to paying all the wages earned and entitled to their employees, must also pay any statutory bonuses. Although the latter is not explicitly defined under the law, article 23 of the Act provides that; “statutory bonuses [includes] the amount as may either be established by legal notice issued by the Minister of Finance by virtue of this article or as the Government may announce in the General Estimates of any particular year”.[8]

The amount payable as a statutory bonus is of a fixed amount, along with the periods for which such statutory bonuses shall be issued. The first statutory bonus of €135.10 euro shall be paid between the 15^th and the 30^th day of the month of June, whilst the second statutory bonus also of €135.10 euro, shall be paid between the 15^th and 23^rd day of the month of December. Furthermore, employers shall also issue a weekly allowance entitlement of €121.12 euro at the end of March, and a second allowance entitlement also of €121.12 euro at the end of September.

Conclusion

The payment of wages is one of the most important rights inherent to all employees in local employment law, which must certainly be safeguarded and duly respected by every employer. For this reason, local legislation indeed manages to implement a great extent of protection to the concept of remuneration and the payment thereof, not only to ensure that employees receive the full amount of wages due to them for the work they carried out, but also to ensure that such wages are received in an adequate manner.

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[1] Article 2 of the Act;

[2] Article 11 of the Act;

[3] As per article 15 (3) of the Act;

[4] As per article 19 of the Act;

[5] As provided in the National Holidays and Other Public Holidays Act, Chapter 252 of the Laws of Malta;

[6] This is also provided in article 8 of the Organisation of Working Time Regulations, S.L. 452.87;

[7] As established yearly by the National Minimum Wage National Standard Order;

[8] Article 23 of the Employment and Industrial Relations Act, Chapter 452 of the Laws of Malta.