Ireland, Cyprus, Spain, and Portugal are becoming more attractive for foreign workers than Malta as businesses struggle to fill vacancies, according to a survey in Business Dialogue, a publication issued by the Central Bank.

The bank reported that the fast-recovering post-pandemic business environment has raised demand for labour. However, most company representatives surveyed said that current labour market tightness is worse than before the pandemic.

During 2022, 43% of interviewed firms said that they were finding it very difficult to recruit new workers. This figure rose to 56% in the first quarter of 2023.

In addition, skills shortages were also mentioned as a significant challenge. This is particularly the case in roles related to information technology, compliance, and finance. Skill shortages were considered most prevalent in the services sector, followed by the manufacturing sector.

Economists Warren Deguara, Erica Maria Brincat and Aleandra Muscat, said that "many" company representatives had expressed concern regarding the relatively short length of stay of foreign workers in Malta.

Companies also were concerned about the country's "attractiveness as an employer of choice", with Ireland, Cyprus, Spain, and Portugal "reportedly becoming more attractive".

Relocating

Among the survey replies, a services company explained how it had to relocate part of its operations to another country to meet the lack of labour supply. 

“Every resignation we get in Malta is replaced in one of our foreign offices," one services company said. 

Another said that vacancies were "not being filled" and that "Maltese workers do not want to work under certain conditions such as night shifts and overtime.” 

Due to the severe lack of local labour supply, most firms sought foreign labour, mostly third-country nationals, including UK workers.

However, several companies were concerned about the lengthy process to obtain work permits for third-country nationals. As a result, companies were resorting more to overtime work or engaging sub-contracted workers, which is more costly.

The application process for foreign labour is taking between three to six months depending on various factors such as the validity of the applicant’s documents, the applicant’s criminal record, the country’s need for the applicant’s profession and whether this could be filled by a Maltese or a European citizen first, and most importantly, the need of a working visa.

Rising wage costs

In view of the labour market tightness as well as inflation, companies reported higher wage pressures.

"The record high cost of living adjustment (COLA) increment awarded for 2023 has increased firms’ labour costs and several companies emphasised that in many cases, they had to give additional significant increments above the COLA in view of the labour market tightness," the Central Bank reported.

And wage pressures have also been recently increasing among the foreign labour force. In particular, the rising cost of living had markedly affected both persons coming from other EU member states, but also those from third countries.

“While before, foreign workers would accept a relatively lower salary, they are now dictating the salary during the interview,” the bank reported a services company as saying.

“Wage demands by third-country nationals have increased.”