Hiring your first employee is a significant milestone for any self-employed professional in Malta. It means your business is growing, and you need help to keep up with demand. But it also means stepping into the world of employer obligations, payroll, tax deductions, and regulatory compliance.
Getting it right from the start saves you time, money, and potential penalties down the line. Here is what you need to know.
Registration Obligations
Before your new employee starts, you need to register as an employer with several bodies. Skipping any of these steps can lead to fines and complications.
Jobsplus. You must notify Jobsplus of the engagement by filing an engagement form. This must be done before the employee's first day of work. Jobsplus is Malta's public employment service, and all employment relationships must be registered through their system. You will receive an employer registration number if you do not already have one.
Inland Revenue Department (Commissioner for Revenue). You need to register as an employer with the CFR for purposes of the Final Settlement System (FSS). This registration enables you to deduct tax and social security contributions from your employee's wages and remit them to the government.
Social Security. Employer and employee social security contributions are mandatory from day one. You will need your employee's social security number, and you must register for SSC obligations through the CFR.
These registrations are not optional. Failure to register before the employment begins can result in penalties and backdated assessments.
Understanding FSS Deductions
The Final Settlement System is Malta's pay-as-you-earn framework. As an employer, you are responsible for deducting income tax and social security contributions from your employee's gross salary each time you process payroll.
The amount of tax to deduct depends on several factors:
- The employee's marital status and tax computation basis
- Their gross salary for the pay period
- Whether they have provided you with an FS4 form indicating their tax status
- The FSS tax deduction tables published by the CFR
You must apply the correct deduction rates as published in the official FSS tables. These tables are updated periodically, so make sure you are using the current version.
The deducted amounts do not belong to you. They are held in trust and must be remitted to the CFR by the prescribed deadlines.
FS3: Your Monthly Obligation
The FS3 form is at the heart of your payroll obligations. It is the monthly return that reports the tax and social security contributions you have deducted from your employees' wages.
What it covers: The FS3 details each employee's gross pay, tax deducted, and social security contributions (both employee and employer portions) for the month.
When it is due: The FS3 must be submitted and the corresponding payment made by the end of the month following the pay period. So deductions for January must be filed and paid by the end of February.
How to submit: FS3 forms are submitted electronically through the CFR's online portal. You will need your employer tax number and e-ID credentials to access the system.
Late submission or payment of FS3 obligations attracts penalties and interest. This is one deadline you cannot afford to miss.
FS7: Annual Reconciliation
At the end of each calendar year, you must file an FS7 form. This is the annual reconciliation of all FSS deductions made during the year.
The FS7 summarises the total gross emoluments paid to each employee, the total tax deducted, and the total social security contributions for the entire year. It must reconcile with the twelve monthly FS3 returns you filed throughout the year.
The FS7 deadline is typically 15 February of the following year. For example, the FS7 for the 2025 tax year is due by 15 February 2026.
Discrepancies between your monthly FS3 filings and the annual FS7 will be flagged by the CFR and may result in additional assessments or audits. Accuracy throughout the year makes the annual reconciliation straightforward.
Payslip Requirements
Under Maltese law, every employee is entitled to receive a payslip with each salary payment. The payslip must include:
- Employee's name and identification
- Pay period covered
- Gross salary
- Tax deducted (FSS)
- Employee SSC contribution deducted
- Any other deductions (advances, loans, etc.)
- Net pay
Providing proper payslips is not just a legal requirement. It builds trust with your employee and creates a clear paper trail for your records.
Minimum Wage and Statutory Obligations
Malta has a statutory national minimum wage that is updated annually. As an employer, you must ensure your employee's compensation meets or exceeds this minimum. The minimum wage applies to full-time employees, with pro-rata adjustments for part-time workers.
Beyond the minimum wage, you should be aware of other statutory entitlements:
- Annual leave: Full-time employees are entitled to a minimum number of paid leave days per year, plus public holidays
- Sick leave: Employees are entitled to paid sick leave subject to certain conditions and limits
- Weekly rest: At least one rest day per week, typically Sunday
Familiarise yourself with these obligations before making an offer of employment.
Employer SSC Contributions
Social security contributions in Malta are shared between the employer and the employee. As an employer, you pay an amount equal to your employee's contribution on top of their gross salary. This is an additional cost of employment that you need to factor into your budget.
The SSC rate is a percentage of the employee's basic weekly wage, subject to minimum and maximum thresholds that are updated annually. Both the employer and employee contributions are reported and paid through the monthly FS3 process.
Remember: the employer's SSC contribution is a deductible business expense for your own income tax purposes.
Budget for the True Cost
When hiring your first employee, the gross salary figure is not your total cost. Factor in:
- Employer SSC contributions
- Annual leave and public holiday pay
- Potential sick leave costs
- Administrative time for payroll processing
- Professional fees if you outsource payroll
Understanding the true cost of employment helps you make an informed hiring decision and set your pricing or budget accordingly.
Hiring your first employee is exciting. With the right preparation and an understanding of your obligations, you can focus on growing your business while staying fully compliant.
Michael Cutajar, CPA — Founder of Accora.