Employment Law Risks In Cross-Border Remote Work: Key Considerations For Malta-Based Employers

Cross-border remote work has evolved from an exceptional arrangement to an operational reality. While commercially attractive, it introduces a range of legal exposures that are frequently underestimated. Once an employee performs their duties from another jurisdiction even temporarily the legal landscape can shift in ways that affect employment rights, social security, tax, health and safety obligations, and corporate risk. 

For Malta-based employers, the issue is not whether remote work is permissible. The question is whether it is structured in a way that preserves compliance and mitigates unintended consequences. 

1. Governing Law and Mandatory Employment Protections.  

Employment contracts commonly include a clause stating that Maltese law governs the relationship. However, within the EU/EEA context, the principle established under the Rome I Regulation is that an employee may not be deprived of the protection of mandatory rules of the country where they habitually carry out their work. 

This means that even where Maltese law is contractually chosen, mandatory employment protections of the country in which the employee physically works may apply. Over time, if remote work becomes regular and sustained, that country may be considered the “habitual place of work,” potentially exposing the employer to foreign statutory protections concerning termination, working time, leave, or employee representation. 

This is one of the most significant and frequently overlooked risks in cross-border remote arrangements. 

2. Maltese Telework and Flexible Working Framework  

Under Maltese law, telework is addressed in the Telework National Standard Order (S.L. 452.104), which establishes the principle that teleworkers continue to enjoy the same rights as comparable employees working at the employer’s premises. 

In addition, the Work-Life Balance for Parents and Carers Regulations (S.L. 452.125) grant eligible employees the right to request flexible working arrangements, which may include remote working. 

While these instruments provide a domestic framework for remote work, they do not eliminate cross-border complexity. When work is performed outside Malta, employers must consider whether foreign mandatory rules intersect with Maltese employment protections. 

A structured internal policy and documented approval process are therefore essential. 

3. Social Security Coordination and Contribution Risk  

Within the EU/EEA, social security is governed by coordination regulations rather than contractual agreement. The general rule is that an employee is subject to the social security system of the country in which they work. 

Where an employee performs a substantial part of their activity in their country of residence, social security affiliation may shift to that state. 

Since 1 July 2023, Malta has been a signatory to the Framework Agreement on cross-border telework, which permits subject to conditions and application employees who telework in their state of residence for less than 50% of their working time to remain subject to the employer’s state social security system. 

Failure to assess and document the correct position can result in incorrect contributions, exposure to penalties, and gaps in employee coverage. This is particularly relevant where remote arrangements become long-term or informal. 

4. Immigration and Right-to-Work Considerations.  

Remote work does not automatically equate to lawful residence or work authorisation in another jurisdiction. Where an employee relocates to another EU Member State or to a third country, immigration and right-to-work rules must be considered. 

In Malta, for example, the Nomad Residence Permit framework provides a lawful route for certain third-country nationals working remotely while residing in Malta. Equivalent considerations may arise where Maltese employees relocate abroad. 

Employers should avoid informal or unverified relocation arrangements. 

5. Tax Spillover Risks  

Although primarily an employment matter, cross-border remote work may intersect with tax exposure. In certain circumstances, the sustained presence of an employee performing core revenue-generating or decision-making functions from another jurisdiction may contribute to a permanent establishment analysis. 

Conclusion 

Cross-border remote work is not inherently problematic but unmanaged remote work can create layered legal exposure across jurisdictions. With appropriate structuring and documentation, employers can retain flexibility while maintaining compliance. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.