Social Security Contributions

1.1.    Insurable employment


Under the Social Security Act any contract of service or apprenticeship, written or oral, whether expressed or implied, by or under the Government of Malta, is insurable employment. The term “gainfully occupied” also refers to a person who is employed in insurable employment or is self occupied.

There can only be one insurable employment at the same time, and in case of more than one concurrent employments, the insurable employment will be that which provides the highest income or earnings.

Insurable employments are classified into 3 categories:

 1.       Employed Persons (employed with a provider of employment or employer);

       2.       Self Occupied Persons; and

       3.       Self Employed Persons.

  

1.2.    Social Security Contributions

All persons who are over the age of sixteen (16) and who have not yet attained retirement age of 65 years, and who are in insurable employment, are liable to pay Social Security Contributions. Social Security contributions are paid in weekly rates, and each year of gainful occupation will carry 52 or 53 social security contributions (depending on the annual number of Mondays) on the payee’s contribution record.

 1.       Employed Persons

Employed Persons who are not excepted under Part II of the First Schedule of the Social Security Act, shall be liable to pay Class 1 Social Security Contributions with applicable contribution rates according to Part I of the Tenth Schedule of the Social Security Act.

All full-time or part-time employees who are employed for less than eight (8) hours in any one calendar week are not considered as being in insurable employment for Social Security Contribution purposes.

Social Security Contributions by Employed persons are called Class 1 Contributions and are paid by direct deductions from the same employees’ wages/salary. In a normal case scenario, an equivalent rate paid or deducted from the employee’s wage/salary, is also paid by the employer.

The Social Security Contribution rate due is based on earning derived from the Basic Weekly Wage. The basic weekly wage does not include allowances, bonuses, and/or overtime earned in a particular week.

Part-time employees who therefore work less than 40 hours per week and who earn less than the National Minimum (weekly) Wage, can opt to have their share on social security contributions, paid at the rate of 10% of their basic weekly wage. This contribution rate is called the Pro-rata rate and does not apply to the employer’s share who has to pay the full applicable weekly rate. One should also consider that when paying social security contributions by 10% pro-rata, these will not be considered as one contribution per week for records purposes, but carry a lesser albeit proportional weight against the applicable full weekly rate.

Both employer and employee’s share of social security contributions are paid to the Commissioner of Inland Revenue in monthly payments by the employer.

For applicable rates due for Class 1 contributions kindly follow the provided Department of inland Revenue link: https://ird.gov.mt/services/sscrates.aspx

  2.       Self Occupied Persons

A  self-occupied person is one who:

·         is not an employed person;

·         is excepted under Part II of the First Schedule of the Social Security Act;

·         is engaged in any activity through which earnings exceeding €910 per annum are being derived.

Social Security Contributions by Self Occupied persons are called Class 2 Social Security Contributions with applicable contribution rates according to Part III of the Tenth Schedule of the Social Security Act.

Full-time or part-time employees who are employed for less than eight (8) hours per week but earn more than €17.50 per week (€910 per annum); are considered as Self Occupied persons for Social Security Contribution purposes.

The Social Security Contribution rate due is based on income derived from the net annual income from trade or profession; earned during the previous calendar year of that of payment.

Part-time Self Occupied Females who earn less than €9,869 per annum (2015 threshold), can opt to have their share on social security contributions, paid at the rate of 15% of their basic weekly income. This contribution rate is called the Pro-rata rate. One should also consider that when paying social security contributions by 15% pro-rata, these will not be considered as one contribution per week for records purposes, but carry a lesser albeit proportional weight against the applicable full weekly rate.

Self occupied persons’ social security contributions are paid to the Commissioner of Inland Revenue every four months; namely in April, August and December respectively.

For applicable rates due for Class 2 contributions kindly follow the provided Department of inland Revenue link: https://ird.gov.mt/services/sscrates.aspx

  3.       Self Employed Persons

A self-employed person means a person who has not yet passed his sixty-fifth birthday, is ordinarily resident in Malta, and is not an employed person or a self-occupied person.

Social Security Contributions by Self Employed persons are also called Class 2 Social Security Contributions with applicable contribution rates according to Part II of the Tenth Schedule of the Social Security Act. The difference in weight between Class 2 Self Occupied contributions and Self Employed contributions, is that Self Employed contributions are valid only for Pension purposes, while Self Occupied contributions are valid for both Pension and Short Term Benefit eligibility purposes.

The Social Security Contribution rate due is based on income derived from the net annual income from rents, bank interest or financial investments; earned during the previous calendar year of that of payment. Rates are similar to those of Self Occupied persons with the exception of the Class 2 SP rate which is applicable only to Single persons.

With effect from 5th January, 2004, a married person who is not legally separated is not considered to be a self-employed person, but is deemed as a self occupied person for Social Security purposes. This condition does not apply to Single persons.

Any married person who is not legally separated and who terminates his employment to partake in an early retirement scheme, as recognised by the Director - DSS, such person shall, if he so elects, be deemed as a self employed person. Thus such person can pay the applicable Class 2 contributions for pension purposes only.

Self employed persons’ social security contributions are paid to the Commissioner of Inland Revenue every four months; namely in April, August and December respectively.

For applicable rates due for Class 2 contributions kindly follow the provided Department of inland Revenue link: https://ird.gov.mt/services/sscrates.aspx

 4.       Persons employed Abroad  

Article 13(i) of the Social Security Act provides for persons employed under a contract of service outside Malta, but who retain their ordinary residence in Malta, may request the Director – DSS to pay Class 1 (Employed person) contributions instead of Class 2 contributions. For this purpose, Article 13(i) provides that no social security contribution shall be payable by or on behalf of the Employer.

Although equivalent to Class 1 contributions, Social security contributions under Article 13(i) are paid in the same manner as Self Occupied Class 2 contributions. That is, to the Commissioner of Inland Revenue every four months; namely in April, August and December respectively, or until the same employment conditions continue to apply.

For applicable rates due for Class 1 contributions kindly follow the provided Department of inland Revenue link: https://ird.gov.mt/services/sscrates.aspx ​​