Global recruitment is expanding to countries all over the world, as companies realize they are not limited geographically when seeking professional expertise. Situated in the Mediterranean north of Tunisia, the island nation of Malta may be home to your next remote worker.
Both skilled residents and ex-pats could have the talent you are looking for, with the willingness to work for a foreign client. Because of its natural beauty and warm climate, ex-pats are drawn to Malta and have now been given extra incentives to work there as contractors.
But you might find that residents are looking for the stability and entitlements of full employment, and that is always an option. However, hiring employees in Malta will mean meeting all local labour laws and making a commitment to your new remote worker. For that reason, many companies will look to hire the worker as a contractor, at least initially. If you have a sufficient workload and the contractor performs well, you can always bring them on as an employee at a later date.
Here are some of the benefits of hiring contractors:
- No long-term financial/HR commitment by the company
- Cost-effective when compared to paying employee benefits and entitlements
- Contracting is a B2B relationship, outside of typical labour laws
- A good way to give a recruit a ‘probationary’ period before hiring
- Can hire for short projects or on a repeat basis
- More flexible to scale up or down, or if different skill sets are needed as the company grows
How to hire and pay remote contractors in Malta
Once you have recruited the right contractor for the role, you must decide how to hire and pay them. Because this is a cross-border arrangement, care must be taken to ensure both parties are satisfied.
Hire and pay them as a freelancer
Self-employed contractors are used to working as freelancers, and that is a simple option if a secure payment/performance method is used. Keep in my mind that many freelancers work for multiple clients, which could limit availability. New freelancer relationships should proceed slowly until mutual trust and goodwill are established.
Of special note is that Malta now offers a one-year ‘digital nomad residence visa’ to ex-pat contractors/freelancers who want to work for clients abroad. After a year, the visa is possibly renewed, or the ex-pat will need a formal work permit. The key requirement for contractors is that they “…offer freelance or consulting services to foreign clients with whom the applicant has a contract.”
Pay them through their limited company
Some Maltese contractors may have their own limited company, which is an indication they commit to their business. Clients contract directly with the limited company and the contractor fulfils the service agreement. This is more of a typical B2-B relationship, and you can easily confirm the limited company’s registration in Malta.
Use an umbrella company in Malta
Less experienced freelancers may use an umbrella company, and there is an advantage for foreign clients as well. The umbrella company is an intermediary to the contract, ensuring that the contractor performs as expected. The umbrella company will facilitate payment to the contractor following remittance by you as the client.
As of end client, your company will be protected from any non-performance issues by the contractor. In the case of any disputes, the umbrella company can facilitate them.
Compliance risks when hiring remote workers in Malta
Typically, foreign companies would not have to worry about compliance in a country where they have no business presence. But when you hire remote workers in Malta there are two potential compliance risks.
Misclassification risk: Employee vs contractor
The first is misclassification, where Maltese authorities conclude that your contractor is in reality an employee. They arrive at this by examining the nature of the relationship, and how much control you exert over the contractor. In this case, it could be you managing their work schedule and methods. It could also mean you issuing a fixed salary-like monthly payment which makes the worker look like an employee.
The government is not ‘auditing’ contractor relationships, so this would only come up if the contractor claimed employee status. This underscores the need for a clear contract and invoices that establish the contractor as self-employed.
Permanent establishment risk in Malta
The other risk is a permanent establishment (PE) which results in corporate taxation for your company. PE is triggered by sufficient business activity that results in local revenue. There are many tests for ‘business activity but the primary one is where a worker (contractor or employee) is generating revenue inside of Malta. The most common example is where the worker is concluding regular sales contracts on your behalf with Maltese customers.
Other remote work roles such as IT support, customer service, accounting and marketing would not be enough to trigger PE as there is no direct revenue.
How Contractor Taxation helps you hire remote workers in Malta
Contractor Taxation has a global network of umbrella companies, including in Malta, who are ready to hire the contractor and administer all the tasks related to taxes, payments and contributions. As a company looking to hire Maltese contractors, you can recommend to the new hire that an umbrella company be used to assist with the relationship. There is a fee, but it could be shared as there are benefits for you both.
Most contractors will be open to this, as it reduces the risk of non-payment with a new client and relieves them of the administrative burden of self-employment. The other advantage for the contractor is that the umbrella company fills the role of ‘employer’ in many respects. This gives the contractor an ally and advocates interface with the client. This is because the umbrella company is in a position to see the contract proceed smoothly.
Please contact us if you are interested in hiring a Maltese or ex-pat worker for your company as a contractor, using an umbrella company in Malta.
