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Financial Participation

Besides cooperatives in the public sector the most important forms of employee financial participation are trust funds. These were established in the course of privatization in the 1990’s. The most important trust funds are administered by the Bank of Valetta, a bank in which the state has a majority share, and Maltacom, the formerly state-owned telecom. These funds are open to all employees of the companies.1

Employee share ownership and the trust funds

There is no legal base for employee share ownership programmes in Malta. However, trust funds constitute a legal way of introducing employee share ownership schemes. Since 2004 companies operating in Malta are allowed to establish such funds or to benefit from them.2 There are a number of possible forms. Basically there is a founder who transfers property to a trustee in favour of a beneficiary. The founder can also hold property in favour of a third party. Trust funds are seen as one of the most flexible ways of administering investment capital. The 2004 Trusts Act, on which all trust funds are based, also makes reference to pension schemes, which are classified as “commercial transactions”. This means that a fund’s trustees can also benefit from the fund. This is also used as a way of administering employee shares.3


Following the October 2004 merger of the state-run Malta Drydocks Corporation and Malta Shipbuilding Company into the Malta Shipyards Limited, the government agreed to offer the new company’s 1,761 employees profit-sharing in the form of a bonus. Almost a year earlier, in November 2003, the government and the General Workers Union had agreed on performance-related wages. Employees receive one quarter of any profits achieved through cost reductions. Performance bonuses are coupled to company profits and paid when profits are higher than forecast. When quarterly turnover exceeds target, employees receive a quarter of the difference.4 Terms and conditions on profit-sharing at Malta Shipyards Ltd were included in the collective agreement concluded between the General Workers Union (GWU) and the Maltese government in November 2003, just before Malta’s accession to the EU in 2004. The aim of the scheme is to better motivate employees and thereby to increase productivity. As line with the agreement governing Malta’s accession to the EU, the government was able to keep the company in business via subsidies until 2008. However, the company was declared bankrupt at the end of 2008 and wound up. During the period covered by the collective agreement, employees only once received a bonus.5

In the private sector profit-sharing schemes are mainly used as management incentives. Companies using such schemes are Vodafone, Baxter Ltd. and the International Hotels Island Group. According to the PEPPER IV report, 12% of Maltese companies with more than 200 employees offer comprehensive profit-sharing schemes, with 19.2% of employees in these companies taking part.6


To improve public sector efficiency and productivity and following negotiations with the trade unions, the government introduced a scheme creating cooperatives for public sector employees (MPO Circular No. 35/1996). Cooperatives were foreseen as an alternative to privatization. This scheme allows public sector employees to create a cooperative within their own department. The department manager can then delegate departmental work to this cooperative. The head of a ministry can also participate in tender bids in their name. If, after a tender procedure, a work contract is awarded to a cooperative and/or department, the distribution of income between the cooperative and department must be clarified. The workers shall continue to receive their contractually agreed remuneration but as members of a cooperative they shall also receive a share of the profits with reference to the work contract in which they actively participated.7 According to the Chamber of Cooperatives in 2006 there were 58 cooperatives registered in Malta, with 4,569 members.8

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.