Redundancy is an important aspect of employment law, particularly in an evolving economic environment where businesses may find themselves restructuring their operations, reducing costs or adapting to changing commercial and social circumstances. Although employers are generally entitled to reorganise their businesses in response to operational requirements, the termination of employment on grounds of redundancy is subject to specific legal safeguards.
Under Maltese law, redundancy is regulated by the Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta), which seeks to balance the legitimate commercial interests of employers with the protection of employees against unjust termination.
More specifically, Chapter 452 states that “unfair dismissal”, in relation to a worker, means the termination by the employer in respect of that worker of a contract of employment for an indefinite time being a termination which is not made solely on the grounds of redundancy or for a good and sufficient cause.
What is a Redundancy?
Redundancy generally arises where an employer no longer requires an employee to perform particular work, whether as a result of restructuring, financial difficulties, technological developments, or a reduction in business activity.
In any case, the redundancy must be genuine. The mere description of a termination as a redundancy does not necessarily render it lawful. An employer must be able to demonstrate that the termination arises from legitimate operational circumstances which would therefore no longer require that role from being carried out rather than reasons relating to the particular employee.
What is the Last in First Out Principle?
One of the distinguishing features of Maltese redundancy law is the application of the Last In, First Out (LIFO) principle.
Article 36(4) of the Employment and Industrial Relations Act provides that where an employer terminates employment on grounds of redundancy, the employee who was engaged last in the affected class of employment must be selected for termination.
The concept of a class of employment is particularly important. The assessment does not necessarily depend on an employee’s job title but rather on the nature of the work performed or expected to be performed.
Consequently, employers contemplating redundancies should carefully identify the affected class of employment and establish the order in which employees were engaged within that class.
Failure to apply the relevant selection rules correctly may expose an employer to proceedings for unfair dismissal.
What are the Employee’s Rights when made Redundant?
- Notice Period
Employees whose employment is terminated on grounds of redundancy are generally entitled to statutory notice, calculated according to their continuous length of service. The applicable notice period ranges from one week to a maximum of twelve weeks, although longer periods may be agreed in certain technical, administrative, executive or managerial positions.
Additionally, any accrued but unused leave must be paid to the employee upon termination.
- Right to be Re-Engaged
An important safeguard afforded to employees under Maltese law is the right to re-employment following redundancy.
Where the position previously occupied by a redundant employee becomes available again within one year from the date of termination, the employer is subject to a statutory obligation to re-engage that employee in accordance with the applicable legal provisions.
This requirement is particularly relevant where businesses experience a temporary reduction in activity but subsequently resume recruitment. Employers should therefore exercise caution before recruiting new personnel into positions previously occupied by employees who were made redundant.
Will the Employee be entitled to Unemployment Benefits?
Employees whose employment is terminated on grounds of redundancy may be entitled to unemployment benefits, provided that the applicable eligibility criteria are satisfied. In particular, employees must register for employment under Part I of the Unemployment Register maintained by Jobsplus and satisfy the relevant social security contribution requirements.
Generally, this requires a minimum of 50 social security contributions, including at least 20 paid or credited contributions during the preceding two consecutive calendar years. Eligible employees may receive unemployment benefits for a maximum period of 156 days, depending on their contribution history.
As from January 2026, the benefit is calculated by reference to previous earnings, subject to statutory minimum and maximum rates. Registration under Part I automatically initiates the claim process with the Department of Social Security, although entitlement remains subject to the Department’s assessment.
What if many Employees are made Redundant?
Additional obligations arise where an employer proposes to terminate the employment of a significant number of employees within a relatively short period. Collective redundancies are regulated by the Collective Redundancies (Protection of Employment) Regulations (Subsidiary Legislation 452.80). These are the thresholds to keep in mind:
- 10 or more employees in establishments with 20–99 employees
- 10% or more in establishments with 100–299 employees
- 30 or more employees in establishments with over 300 employees
If the above thresholds are met, employers must comply with specific information and consultation requirements involving employees’ representatives and the Department of Industrial and Employment Relations.
The employees’ representative must be notified of the proposed redundancies. The consultation process (which should begin within seven working days from notice) serves to explore other route to avoid the proposed redundancies, reducing the number of employees affected or mitigating the consequences of termination. The DIER must be notified about the details of the redundancies in writing by the employer.
These obligations are separate from, and additional to, the requirements applicable to individual redundancies.
What if a Redundancy is not Genuine?
Employees who believe that their employment has been terminated unfairly under the guise of redundancy may challenge the dismissal before the Industrial Tribunal. In considering such disputes, the Tribunal may examine whether a genuine redundancy situation existed, whether the correct class of employment was identified and whether the applicable selection rules were respected. The circumstances surrounding the termination, including the employer’s operational decisions and any subsequent recruitment, may also be relevant.
Redundancy is a legitimate mechanism through which employers may respond to changing business circumstances. However, it should not be treated as an unrestricted managerial prerogative.
For employers, careful planning, appropriate documentation and compliance with the relevant procedures are essential to minimise the risk of employment disputes.
For employees, understanding the legal protections surrounding redundancy is equally important, particularly where questions arise regarding the genuine nature of the termination or the fairness of the selection process.
