Private sector to shell out an extra €113 million in COLA next year

Malta’s private companies will see their wage bill increase by around €113 million next year due to the unprecedented increase in the Cost of Living Adjustment (COLA), which during the presentation of the Government Budget for 2023 was announced to be €9.90 per worker per week.

Each employee will cost businesses €514.80 more in direct wages and another €51.48 for the employer’s contribution to social security, bringing the total up to €566.28 per year. This does not include the maternity fund contribution, which is relatively negligible.

Data provided by the National Statistics Office for 2021 shows that the vast majority of local businesses are micro enterprises with between zero and nine employees. Over 52,667 businesses will therefore see their wage bill increase by up to €5,096 (for nine employees).

There are 2,686 small enterprises, classified as those between 10 and 49 employees. For a company with 20 employees, this means an additional annual salary expense of €11,325, while a company of 49 employees will see an increase of €27,747.

Medium enterprises having between 50 and 249 employees number around 500. A company with 100 employees will need to shell out €56,628 in additional annual salaries, while one with 249 employees will see this increase rise to €141,003.

The roughly 100 large enterprises in Malta, meaning those with 250 employees or more, will need to pay more, but the difference in size here can be significant.

A company with 300 employees will see its wage bill increase by €169,884, but Farsons, with around 800 employees, will see this rise to €453,024.

Vassallo Group, involved in construction, care home management, and catering, among others, has around 2,000 employees, which means it will need to pay an extra €1.13 million due to the COLA increase.

OZO Malta, the largest private employer on the islands with over 3,000 workers, will meanwhile see its yearly salary bill rise by €1.7 million.

Apart from the employer’s social security contribution, an equivalent amount is paid from the salary itself. When also factoring in income tax, the average worker will take home an extra €334 a year. Government is expected to bring in over €25 million in additional tax revenue.

Businesses’ inflating wage bills are a major concern for private enterprises, which prior to the announcement called for the increase to only be given to the most vulnerable workers or those who had not already received a raise to keep up with spiralling prices during 2022.

A study commissioned by the Malta Employers Association found that around a quarter of all companies will pass on these increases to their customers in full, while around 20 per cent said they would absorb the increase in costs themselves. The remainder, over half, said they would partially pass on these additional expenses.