Law to ban cash wages welcomed, but MEA DG Kevin J. Borg cautions it may not prevent abuse

The Malta Employers Association fully agrees with the Government’s latest measure that legally prohibits employers from paying their workers in cash, in a bid to curb abuse, but MEA Director General Kevin J. Borg believes the measure will not be fully effective in this regard.

During an interview on Sunday, Prime Minister Robert Abela announced that the cabinet had signed off on the reform via a legal notice that will come into force in the coming days.

Now, all employers are expected to pay their workers through direct bank payment and, in exceptional circumstances, via cheques.

Asked to react to the latest measure, Mr Borg said the MEA is in support, but cautioned “the measure will not be so effective in curbing abuse as it intends to”.

Mr Borg shared that the association was not surprised by the announcement, and noted that so long as cash remains in circulation, there will always be room for abuse.

“If an employer is not allowed to pay in salaries in cash – like the MEA agrees it should be – people who want to abuse can still do so, but it is up to the competent authorities to enforce and make sure it does not happen,” he comments.

Mr Borg adds that abuse in this regard creates “unfair competition” between employers who abide by the law and others who do not.

“So, we support the Government on this announced measure and the authorities in applying the law in the most equitable manner possible,” he says.

Asked how many employers still pay their workers in cash, Mr Borg replies that in general, direct-debit payments are now the standard, offering significant administrative simplification and cost efficiency.

He notes that, nowadays, both small and large companies today rely on digital payroll systems or outsource the service to specialised provides.

“Cash payments, if used at all, might still be employed by legitimate employers in rare cases where an employee is unable to open an account with a local bank or fintech provider,” he concludes.

Why was this reform introduced? 

Explaining the reasoning behind the new reform, Dr Abela stated that the Government, after analysing the workforce, observed that not all employees were receiving their wages, to which they were rightfully entitled.

This reform, he adds, is designed to correct such discrepancies and ensure that workers, particularly those in vulnerable positions, are adequately protected.

Cash-based payment of wages can foster different types of abuse. For instance, foreign workers might be less likely to report abuse for fear of being fired or facing deportation. Additionally, wages paid in cash can sometimes lead to undocumented work, money laundering and/or tax evasion, which subsequently trigger a number of illegalities.