Payroll Implications – COVID wage supplement

The Commissioner for Revenue (CFR) has published a notice which identifies the procedure to be followed by employers in receipt of COVID-19 wage supplements, when calculating the monthly payroll and annual reporting thereof.

​​The wage supplement is to be considered as the Government’s contribution to the employer to support the wages of its employees.  This income thus replaces the normal wages of the employee and is taxable in the hands of the employees.

For Payroll purposes this income will be added to any income received by the employee during the pay period and tax and social security contributions (including Maternity Fund contributions) will be calculated in the standard method.

The employer must record receiving the wage supplement (e.g. €800) and paying this gross to employee so payroll requires no changes. The payslip will thus include the gross paid (i.e. €800 or the amount eligible).

It is important to note that the wage supplement paid to employers will not be treated as income or grant to the employer for Income Tax purposes.  Therefore, the wage supplement is not deemed to be taxable nor tax deductible income/grant from an employer’s perspective.

SSC and Maternity Contributions

Government will give €800 (or less according to eligibility) to the employers for each employee, though it will retain 10% social security contributions (SSC) as prepaid employees’ share of SSC.

The employer is required to calculate what is due in totality (the employers’ and employees’ share, Maternity Fund Contribution and taxes) and deduct therefrom the amount of SSC prepaid to CFR.

FS7/FS3 Reporting

Malta Enterprise will provide the full details of the applications to the CFR.  Thus, employers will report the wages supplement paid to employees in the normal FS3 forms.

The FS7 form will be modified to show the amounts paid to employers and the SSC withheld from the wage supplement.