EMCC European Monitoring Centre on Change

Tackling the recession: Malta

  • Observatory: EMCC
  • Topic:
  • Published on: 12 July 2009

Manwel Debono and Anna Borg

Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

The two sectors which are bearing the brunt of the global financial crisis in Malta are the manufacturing and tourism sectors. A task-force was set up by government to develop tailor-made solutions to companies experiencing difficulties. A number of MNCs and SMEs have received financial aid. The present financial crisis is leaving little room for manoeuvring and unions in Malta have had to make compromises in order to safeguard jobs.

1. Measures taken by government to assist businesses and protect jobs

Support to businesses

What formal or legal arrangements (such as job subsidies, bank guarantees, loans or special credit facilities) are in place in your country for supporting firms which are at risk of having to reduce employment? (Please include only measures which are aimed principally at maintaining employment as opposed to those which are aimed, for example, at increasing competitiveness or supporting investment.)

Are the arrangements or measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession? Please give an indication of the number of firms receiving support of this kind and the number of jobs protected as well as the source of funding.

Do the measures apply generally across the economy or are they specific to particular sectors or regions? Please indicate the sectors and/or regions concerned.

Is there government support available for companies which introduce short-time working arrangements, give a temporary period of leave to workers or implement similar measures to enable workers to retain their jobs where there is insufficient work for them to do? If so, please give an indication of the extent of the support concerned and the number of companies, and the workers they employ, receiving support.

Are there are plans or proposals to introduce measures of the various kinds indicated above in order to assist businesses and protect jobs? If so, please describe them briefly.

The two sectors which are bearing the brunt of the global financial crisis are manufacturing and tourism. The stimulus package announced by government in November as part of the 2009 Budget and the “wide-ranging capital investment programme” mentioned by the Prime Minister at a press conference in January might be viewed as principally aimed at increasing competitiveness and supporting investment rather than maintaining employment. The government’s interventions in the tourism sector, namely increasing the marketing efforts, improving accessibility to Malta and further product development are examples of supporting investment.

In February 2009, an agreement was reached by the government and representatives of the commercial banks through which the latter offered hotels a one-year moratorium on capital loan repayments. The measure, aimed at mitigating cash flow problems within the hospitality industry, was hailed by the Malta Hotels and Restaurants Association (MHRA).

In the manufacturing sector, rather than focusing on the macro level and adopting blanket aid programmes, the government preferred to focus on the micro level and help specific companies. This approach, made possible due to the small number of enterprises in Malta, was meant to reduce costs and enhance the impact of the actions. A task force chaired by the Minster of Finance was thus set up to develop tailor-made solutions for companies in danger. The task force is working with the major companies, assisting them in identifying new investment opportunities. Financial aid, in particular in the form of training for new business lines and the conversion of tax credits into investment aid is being delivered. These actions are being carried out to secure jobs in the present circumstances and strengthen the companies' position to ensure a sustainable growth in the medium- to long-term.

The measures listed above are not permanent features in Malta’s legal and economic framework, but have been introduced ad hoc to combat the effects of the present recession. As in March 2009, three companies in the manufacturing sector were receiving the above-mentioned support, namely Methode Electronics Malta Limited, Trelleborg Sealing Solutions and Stainless Steel Products Limited. These companies employ around 1,300 workers.

While, as indicated above, the task force appears to have been set up specifically to deal with problems in the manufacturing industry, it has started looking at the tourism sector as well. The Minister of Finance was reported as stating that the task force and the Parliamentary Secretariat for Tourism were “in detailed discussions to find ways of also encouraging some hotels, particularly in the three-star category, to make an investment in this period to prepare for the eventuality of the downturn passing and more tourists coming to Malta”.

Apart from the above mentioned support, there is no other support available for companies which introduce specific working arrangements to enable workers to retain their jobs where there is insufficient work for them to do.

The task force is in discussion with a number of other companies, including ST Micro Electronics, Malta’s largest private company, which employs over 1,900 workers, Carlo Gavazzi Ltd. which employs around 200 persons, and Pamargan (Malta) Ltd. which operates from the smaller island of Gozo and employs around 150 workers.

Support to workers

What formal or legal measures (such as partial unemployment benefit or similar kinds of social transfer) are in place in your country to support workers who have been put on to short-time working by employers or who have been given temporary leave with reduced rates of pay (i.e. who still formally have jobs but who are either not working or working reduced hours)? Please describe the measures concerned and indicate the scale of support provided. Please also give any figures available for the number of workers receiving payments of this kind as well as the source of funding.

Are the measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession?

Has the coverage of the social benefit system which provides income support to workers who lose their jobs been widened in the present recession in order to ensure that those concerned are protected (such as, for example, through a relaxation of the rules and regulations governing the payment of unemployment benefits or other forms of social transfer or through an extension to workers not previously entitled to support)?

Are there any plans or proposals to provide income support for those working short-time or on temporary leave? If so, please describe them briefly.

Apart from the ad hoc measures being implemented by the task force listed above, there are no particular formal or legal measures in place to support workers who have been put onto short-time working by employers or who have been given temporary leave with reduced rates of pay.

The coverage of the social benefit system was not widened to ensure that those hit by the present recession are protected.

No such plans to propose income support for those working short-time or on temporary leave has been announced to date. On the other hand, the government’s efforts to help persons who are being made redundant are increasing, through, among others, a new scheme funded through ESF meant to retrain and reintegrate them into the labour market.

2. Action taken by companies to maintain workers in employment

What action, if any, has been taken by companies during the present downturn to keep workers in jobs in situations where the work for them has declined? Please describe briefly cases where companies have introduced short-time working (such as fewer hours per days or fewer days per week), temporary periods of leave or other means of maintaining people in jobs.

How extensive has such action been in terms of the number of companies and workers concerned and the sectors in which it has occurred?

Have particular types of company (e.g. multinationals or domestically-owned firms) or firms in particular sectors been more prepared to take this kind of action than others?

Has the action in question typically entailed a reduction in pay? If so, please give an indication of the typical extent of this.

To what extent has this kind of action been accompanied by the provision of training or education to the workers concerned – i.e. how far have companies taken advantage of the lack of work to improve the skills of their work force?

In March 2009, there were about ten companies in the manufacturing sector which were on a four-day week in a bid to avoid redundancies despite a decline in the demand of their products. The following are brief descriptions of the largest four of them, three of which started to be given help by the government of Malta.

1. Trelleborg Sealing Solutions Limited

The company, which forms part of Trelleborg Group based in Sweden, produces O rings for the car industry and exports mainly to Germany and the USA. The company which currently employs about 450 workers was hard hit by the global crisis due to reduction in the selling of cars and a consequent decline in order. As a first reaction to the crises, it stopped overtime and changed its three shift system into two. Then it switched to a four-day week in October and laid off several employees in subsequent months. More recently, the company was reportedly planning to go to a three-day week, make redundant over 100 employees and invest in Poland. An intervention by the government of an undisclosed amount of funds announced in March, led the company to decide to invest two million Euro in its Maltese plant which will serve to prepare the plant to start creating parts for new generation gearboxes that will be brought over from competing markets. It was announced that this should lead to the creation of 85 new jobs by the end of 2010. Thanks to the government’s help, the company announced that it would reinstate the five-day week with the fifth day being dedicated to training employees. The training programme, financed by government, will be spread over a period of 17 weeks and aims to increase their skills to be able to work on the new lines of production. The government said that it helped Trelleborg to find new markets for its products. The government is also converting the company’s tax credits into investment aids.

2. Method Electronics Malta Limited

The company which produces switches has two plants in Malta employing 750 workers in the automotive and non automotive sectors. While the workers in the automotive sector were put on a four-day week in November, the remaining workers were put on a 3.5 day week. It was reported that due to a further lowering in the demand the company was planning to shed about 100 jobs in 2009. In February 2009, the government agreed with the company to finance employee training and give it investment aid. Following such agreement, Methode is to invest 6.5 million Euro in new lines producing parts for the non-automotive sector. Automotive workers were expected to return to a five-day week in April while the other workers were expected to work on a 4.5 day week. Besides, it was announced that the company may be investing a further 6 million Euro on new production lines in 2010, a situation which would lead to the engagement of another 100 workers.

It was reported that the stimulus package announced for Methode was expected to have into a spillover effect on other smaller companies (such as Hetronic and Bavarian Technology Systems) which also produce specialised parts for the automotive industry.

3. Stainless Steel Products Ltd

The 107 workers at this company, which manufactures sinks for the British market, went on four-day week in January 2009. The company reportedly suffered from a substantial decline in sales in November 2008, resulting in its production being reduced to about 55% of its normal capacity. The company was planning to make redundant an undisclosed number of employees. As a result of an intervention by the government the company decided to invest 300,000 Euro in new equipment and tools and take over a production line from China. The Finance Minister said that “since Stainless Steel products were intended for the British market, higher shipping costs could balance out whatever would have been saved in wages. Moreover, quality was still a challenge in the China region whereas Malta earned higher customer satisfaction”. The workers returned to a five-day week after the agreement with the government, which includes a plan to give a training programme to all workers meant to increase their long-term employability.

4. Carlo Gavazzi Ltd

The company which designs and manufactures electro-mechanical control components for the industrial automation market employs 200 persons. In March, most of the company’s workforce was put on a four-day week due to a significant reduction in orders related to the international economic problems. The Product Development and the R&D departments were the only ones not to go on a four-day week in a bid to continue generating new products and launch new business. The government announced that it was in talks with the company to see how it could help it.

During the last quarter of 2008 and the first quarter of 2009, about 10 companies of varying sizes were affected by this action. While the number of workers affected varied over time, an estimated 1,400 were estimated to be affected at one point in time. All the companies affected formed part of the manufacturing sector. Most of the companies form part of multinationals and several produce products for the automotive industry.

The four-day week system being adopted by several companies and other similar measures entail a proportional reduction in pay.

As was seen above, the Maltese companies being helped by government are investing in the training of their workers during this period of time. However, it appears that they would not have done this without the government’s financial help. Indeed, while no statistics exist, the other companies suffering from a slump in their work are likely not to be investing in the training and education of their workers.

3. Joint action taken by companies and trade unions to maintain jobs

How far has the kind of action described in Section 2 above been the subject of collective agreements between companies and trade unions? Please give summary details of the content of some of the most important collective agreements.

To what extent has other action been taken under collective agreements to reduce business operating costs so as to avoid job losses? Has there been an increase in instances of trade unions, or worker representatives, agreeing to accept cuts in pay, or to work longer hours without additional pay, in order to maintain employment levels? If so, please give an indication of the extent of such agreements and describe briefly typical cases.

Are such agreements more prevalent in some sectors than others?

What other forms of action have trade unions taken, apart from strikes and other action designed to put pressure on employers, in order to try to prevent job losses and maintain employment levels? How effective has such action been?

Most of the initiatives meant to reduce job losses in Malta were taken by the government rather than through collective agreements. The government is claiming that through its interventions, 2,000 jobs were saved. However, trade unions in Malta, especially the General Workers’ Union (GWU) which represents many of the workers in the manufacturing sector that are experiencing difficulties, mounted a lot of pressure on government during the last months to take action and to help the companies facing difficulties.

The present financial crisis is leaving little room for manoeuvring and unions have to make some compromises in order to safeguard jobs. Rather than taking a confrontational approach, unions have had to find solutions that work in the given difficult circumstances. There were cases for example, where the union managed to avoid dismissals by agreeing to a four-day week. In some cases, employees working on a shorter four-day week agreed to attend training on the fifth day and get paid at minimum wage level for it. In a particular case, the company eventually agreed to top up the workers’ salary for the training day to 95% of their pay. Naturally, unions insist that workers’ rights should not be tampered with, but in this new economic scenario, trade unions are more aware of their diminishing bargaining power especially when dealing with multinationals and foreign companies operating in the manufacturing sector.

4. Measures to provide income support

To what extent do collective agreements include provision for higher rates of compensation in the event of workers being made redundant than they are entitled to under national legislation? How far do collective agreements providing more generous compensation than the statutory amount vary between sectors?

Has there been an increase in the number of collective agreements which include such provision during the present downturn?

To what extent are redundancies being concentrated on older workers, i.e. taking the form of early retirement, in the present downturn? Is there any evidence that the use of early retirement as a means of effecting reductions in employment has increased in importance during the present downturn?

The majority of collective agreements signed during 2008 did not have provisions for higher rates of compensation in case of redundancy. Indeed, an examination of the collective agreements of the larger companies reveals that only a fourth of them had such provisions. Those which offered better compensations were more likely to be operating in the financial sector (DIER, personal communication). Early retirement has been used on a number of occasions in Malta to reduce employment, the most obvious being that of Malta Shipyards Ltd. wherein in late 2008, 1,567 out of 1,637 workers (96%) opted to take early retirement for a substantial pay-off.

5. Lessons from research studies

Have any studies been undertaken in the past in your country on the effectiveness of attempts made in previous periods of recession to maintain employment levels similar to those covered here? If so, please outline the studies concerned and their main findings.

If partial unemployment benefit, short-time working or similar schemes which provide income support to those working short hours are a permanent part of the social security system in your country, please briefly describe any studies which been undertaken on their effects and the main conclusions to emerge from them.

No studies are available for Malta on the effectiveness of attempts made in previous periods of recession to maintain employment levels.

The social security system in Malta does not provide income support to those working shorter working weeks, and hence, no studies are available on this either.

Manwel Debono and Anna Borg, Centre for Labour Studies

Useful? Interesting? Tell us what you think. Hide comments

Add new comment