Message to Malta employers: Employee voluntary salary reduction plan
Your Malta business has been or will shortly become affected by the COVID-19. Here at Fairwinds Management Limited, we believe this situation can be contained and eventually the economy will get back on its feet. This is not something that affects only Malta and Malta companies but also the rest of the world. We believe that the psychological shock that has created on society will have long-term repercussions. But society will adapt to the new way of doing things to eventually survive and come out stronger. It is a known fact that after a ‘recessionary’ period economies tend to regroup, learn from the mistakes and spend a number of years becoming very efficient and more productive in work. Lost output can be regained in a few years and we have witnessed this in the 2008 financial crisis.
As an employer, your primary concern is how to survive with little or no turnover, loss of contracts, loss of future revenues. This creates a lot of instability in Malta going forward, whilst you wish to keep your business going, it does not make sense for you to make a total staff redundancy for the risk that you lose valuable staff which will be difficult to replace and re-hire in the future. Yet your new business levels are not sustainable to keep operating as you cannot cover your variable costs.
COVID-19 Malta Support Company: There are solutions to this, and we are here to assist you. These are some suggestions to consider for your business during the coronavirus:
- Rental contract – check for force majeur clauses, ask your landlord to give you complimentary months, or to renegotiate contract. If you are a good tenant, he will be concerned for you too, as good tenants can be hard to find. Remember that landlords are preoccupied as much as tenants.
- Reduce staff – those employees who are on probation can be made redundant without specifying a reason.
- Opening hours of your business – analyse the flow of business and adjust to open for less hours, that way you reduce various costs such as water and electricity bills.
- Stock – Strict stock ordering, make offers on items you cannot sell, put items that are paid but unsold on heavy sale to generate cash – this will give you cash flows. Return items that are slow moving or on consignment or you cannot sell to suppliers, in return for a credit note or a reduction of balance due to the supplier.
- Government aid – Avail yourself from the government measures for the deferral of tax payments if you are in a liquidity crunch. Contact your account manager at Accounting Services for more info or email firstname.lastname@example.org.
Salaries: The biggest cost
When your salaries are one of your biggest costs and you wish to reduce them, you can do this without actually making employees redundant. Here are some tips:
- Reduce working time (e.g. three-day/four-day week) and pro-rate the salary accordingly.
- Postpone any commissions by deferring the payments for three to six months time.
- Postpone any performance bonuses (whether due for a previous year or upcoming) by deferring payment or staggering it over time by doing stage payments.
- Ask employees to make use of their annual leave. This is not a cash flow measure but in case of redundancy it will reduce the termination cost impact.
These are extraordinary times. A reasonable employee will understand these measures and will accept the proposed situation. These measures can give immediate boost to cash flows needed for your business to survive.
Here at Fairwinds Management, we can help you during this time of coronavirus Malta support for business. Call on +356 79890072 or email us on email@example.com for more info.
Please write a short email to write down your industry, the number of employees and a summary of your situation.
For only €350*, our legal department can provide you with the relevant Contracts for Voluntary Reduction in Salaries to be annexed to the current employee contract.
Furthermore, our partner, Accounting Services can provide assistance in recalculating payroll to achieve savings in your payroll bill. Our rates start at €30 per employee**.
Coronavirus Malta support for business: We can also offer Business Advisory Services to support your business undertaking and help you identify the fixed and variable costs and recalculate and bring down your breakeven levels.
* The fee is excluding VAT and is required to be paid prior start of works. The service consists in providing you with a one hour consultation and the contract template needed for your specific case. It does not specify any minimum number of employees. If a different or specific service is required over and above the one-hour consultation, this is charged at €100 per hour excluding VAT. Our team of experienced lawyers will be able to service you.
** Minimum fee of €100 apply per company/business if less than 3 employees. If a different or specific service is required, this is charged at €50 per hour excluding VAT. Our team of qualified accountants will be able to service you.
Click here for more details about fiscal measures related to COVID-19.