Hire Contractors in Malta

Many businesses hire contractors in Malta to access top talent while maintaining flexibility in their workforce. 

Additionally, the Maltese government actively supports the integration and employment of foreign workers through various initiatives, including career guidance policies and programs like Personal, Social, and Career Development (PSCD).

Whether you manage independent contractors in Malta directly or partner with an Agent of Record (AOR), knowing the right steps can save time and resources for your business.

Let’s explore how you can efficiently hire and manage contractors in Malta.

How to Hire Contractors in Malta

When hiring contractors in Malta, you must be mindful of legal, tax, and administrative regulations. Here is how to get it right:

• Define project deliverables, timelines, and payment terms before engaging a contractor.
• Ensure the contractor is registered with JobsPlus as self-employed. If the company is a VAT registrant, it should have VAT registration.
• Include the contractor agreement's essential terms, such as project scope, duration, payment terms, and intellectual property clauses. 
• Contractors in Malta are responsible for their tax and social security contributions, but you must ensure accurate record-keeping to avoid disputes.
• Verify the contractor's experience, qualifications, and legal documentation to ensure a compliant and productive engagement.

Important considerations when hiring contractors in Malta:

Here are some quick pointers on what you should consider when hiring an independent contractor in Malta: 

• VAT registration: Verify if the contractor is registered on the official JobPlus portal or, if necessary, with a value-added tax identification number.
• Laws of employment: Know the employment legislations applying in Malta regarding the rights and obligations of contractors.
• Terms of payment: Define the terms and conditions of payment, including any possible progress payments.
• Dispute resolution: Provide an effective mechanism for dealing with any possible disputes with the contractor.

How to find contractors in Malta

You can adopt a mix of online and offline strategies to ensure efficient contractor outsourcing in Malta: 

• Use online job platforms like Maltapark Jobs, LinkedIn, Upwork, and Freelancer.com for contractor listings.
• Contact local recruitment agencies like Broadwing, Konnekt, or Castille Resources to source verified contractors.
• Join Facebook or WhatsApp groups like "Malta Business Network" for freelance connections.
• Explore tech forums like Tech.mt or creative hubs such as Valletta Design Cluster for sector-specific talent.
• Ask business contacts for trusted contractor recommendations.

Hiring contractors through Skuad AOR

Skuad is a recognized contractor management software that streamlines onboarding, time tracking, compliance management, and payroll management processes. Using its AOR (Agent of Record) in Malta solution, you can: 

• Ensure your contractors are engaged legally, adhering to Maltese labor and tax laws.
• Provide legally vetted contracts tailored to Malta's regulations, ensuring your contractor agreements are watertight.
• Handles payment processing, social security contributions, and tax compliance, reducing your administrative burden.
• Acts as an intermediary to reduce the risk of misclassification and non-compliance.

How to pay contractors in Malta

To pay the contractors in Malta, clearly define payment terms in the contract, including payment schedule and currency. 

Payments can be made in EUR via bank transfers or international platforms. Contractors handle tax obligations, including full social security contributions (around 15%) and income tax filings.

Ensure that the VAT-compliant invoices are issued if they are registered or exceed the threshold of EUR 20,000. Timely payments and clear documentation can help avoid disputes. Platforms like Skuad AOR can automate payments, ensure compliance, and streamline the process.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here’s a comprehensive comparison table outlining the difference between directly hiring contractors in Malta versus hiring through Skuad AOR:

Cost of Hiring Contractors in Malta

The cost of hiring contractors in Malta can be determined by factors such as the contractor’s role, experience, and industry. Some of the key cost components are:

How to Convert a Contractor into an Employee in Malta

You can convert your loyal contractors in Malta into full-time employees by following nine simple steps: 

1. Assess whether the contractor's responsibilities align better with an employment position, considering long-term needs and compliance with Maltese employment laws.
2. Per Maltese law, prepare a contract detailing the job title, responsibilities, salary, benefits, and notice period.
3. Register with JobsPlus by submitting employment registration forms with the necessary employee and job details.
4. Collect social security contributions, 10% employer and employee share, and income tax—file periodically with the Commissioner for Revenue.
5. Register the employee and ensure timely social security payments.
6. De-register the contractor if necessary and change the tax status to "Employee.”
7. Communicate about changes in status, tax obligations, and new employment benefits.
8. Paid leave, health benefits, and job security, as the company policy deems fit.
9. Ensure that the employment practices are regularly reviewed to avoid misclassification and legal penalties.

Modern businesses have switched to employer-of-record (EOR) solutions to manage their global teams, covering converted employees.

Challenges of Hiring Contractors in Malta

You may face the following challenges when hiring independent contractors in Malta: 

1. Misclassification concerns 

Be cautious about classifying workers as either employees or independent contractors. Authorities will scrutinize the extent to which you exert control over the contractor in Malta, including working hours, and the extent to which they remain independent. 

Under the Employment Status National Standard Order, if five or more out of eight criteria for a contractor relationship are met, the relationship will be presumed under Maltese law to constitute employment. Those criteria are the following:

• A contractor earns more than 75% of their income from you.
• You determine what, where, and how the work is done.
• You provide tools and/or materials.
• You prescribe and ask the contractor to follow time schedules.
• You do not allow the contractor to delegate work to others
• The contractor is part of the company's hierarchy or production structure.
• The contractor's work is central to your business operations
• The contractor performs tasks similar to those of employees.

Furthermore, freelance arrangements often meet three or four criteria, creating ambiguity and risks for businesses.  

If the contractor role is considered to be employment afterward, you are liable for the following:

• Social security contributions
• Income tax withholding
• Employment Rights and Protection Compliance

This reclassification may turn a basic contractor agreement into a costly legal and financial one.

2. VAT implications when hiring contractors 

You will face more complexities with contractor tax in Malta—VAT and administrative differences with traditional employment. While Malta payroll requirements for contractors do not involve social security contributions and tax deductions, you must ensure their registration with the official JobsPlus portal as "Self-Employed." 

Further, you also need to address VAT implications. If the contractor earns more than EUR 20,000 annually or opts for standard registration, they must charge 18% VAT on their services and file periodic VAT returns. This adds administrative complexity that could affect your engagement terms.

3. Hiring issues

Hiring independent contractors in Malta has several issues that a few HR report highlights:

• Worker salaries in Malta may not be commensurate with their skills. To ensure sustainability, compensation packages must be critically reviewed.
• Finding the right resource for contractor outsourcing in Malta is challenging because of the competitive market. You may have to upgrade your recruitment strategy to attract the best freelance professionals.
• Contractor outsourcing in Malta and retaining them is a tough task since they often search for other opportunities. Creating retention strategies would help keep good contractors working for you.

Fortunately, modern contractor management software has recently automated the key aspects of contractor hiring and management.

Hire Contractors in Malta with Skuad

Finding, hiring, and managing Malta contractors doesn't have to be complicated. Skuad offers a streamlined solution, empowering businesses to hire top talent, manage payroll, and ensure legal compliance effortlessly. 

By leveraging Skuad's expertise in AOR and EOR solutions, you can eliminate the complexities of contractor misclassification, tax deductions, social security contributions, and administrative burdens and convert contingent contractors in Malta into full-time employees.

Whether you're expanding into Malta or managing global operations, Skuad ensures compliance with local labor laws in more than 160 countries, all without needing a local entity. Book a demo to understand its efficacy for your business use case.

FAQs

How do I legally hire an independent contractor?

You can hire an independent contractor legally through well-drafted contracts. You can onboard and manage their progress and avoid misclassification risks using Agent of Record solutions like Skuad. 

Is it expensive to hire a contractor?

Hiring contractors is cost-effective in the shorter term for highly specialized projects. Typically, companies convert them into full-time employees using employer-of-record solutions depending on their performance for long-term benefits. 

Can I hire a foreign independent contractor?

Yes, you can hire a foreign independent contractor. A recent report showed how one-fourth of Maltese businesses surveyed employ workers from outside the EU. To mitigate compliance risks, you can draft clear contract terms and set up an automated payroll process when managing multiple contractors. The government runs various career guidance policies and programs to actively support the integration and employment of foreign workers.

What are the taxes for freelancers in Malta?

Malta freelance workers are taxed progressively from 0% to 35%, depending upon the income earned. They pay social security contributions at about 15% of their net income, capped at €69.79 weekly. 

VAT registration is compulsory when the annual income is more than €20,000. There is an 18% standard rate. Provisional tax payments are also made in three installments throughout the year (March, August, and December). 

Even though freelancers are responsible for managing their tax filings independently, employers must ensure their compliance.