Kurt Farrugia, the former Prime Minister’s spokesman, who was appointed chief executive officer of Malta Enterprise last July, will be paid a lump tax-free sum of over €130,000 if he resigns from his job on his own initiative after just two years in office, according to his contract.
Industrial relations and human resources experts who were given access to Mr Farrugia’s contract by Times of Malta described the terms included in the contract as “one-sided, not necessarily in the public interest and highly unique”.
“I have never encountered such a one-sided contract in my long years of experience, not even in the private sector,” said one of the experts with decades of experience in drafting similar top-tier employee contracts.
“From a good governance point of view, the contract leaves much to be desired and verges on impropriety on whoever drafted and approved it.”
A clause in the contract, which experts described as “highly unconventional”, refers to Mr Farrugia’s expectations in the event he decides to move on from his job. While, under normal industrial relations rules, an employee, whatever his grade, can leave his job but cannot expect anything in return, except his salary until the time in office, this will not be the case for Mr Farrugia.
Malta Enterprise, the publicly-funded state entity, agreed that in case Mr Farrugia decides to leave after only two years, for whatever reason, he will still be entitled to a full one year gross salary, tax free.
I have never encountered such a one-sided contract in my long years of experience, not even in the private sector
The full clause states: “In the event that the employee (Mr Farrugia) chooses to terminate this agreement after the expiration of two years of the original term (first three years) or at any time during the extension thereto, the Employee (Mr Farrugia) shall be entitled to receive from the Employer (Malta Enterprise) by way of compensation for the services rendered by him with a sum equivalent to one year’s gross salary, based on the salary in force at the time of termination.”
Although according to industrial relations rules, a CEO who has his contract terminated by an employer for no particular reason, is normally paid the full salary for the remaining term of the contract, this is not the case when he leaves on his own stead.
“In serious companies, such an eventuality would leave the CEO having to pay penalties. In Malta Enterprise’s case, Mr Farrugia will not only be liable to any costs, but instead will be awarded if he leaves prematurely.”
Mr Farrugia’s contract is for a definite period of three years but a clause stipulates that the agreement can be renewed for up to two further terms of three years each unless one of the parties notifies the other at least six months prior to the expiry of the three-year contract.
Also, according to his termination clauses, in case Mr Farrugia’s contract is terminated by Malta Enterprise, he will not only be entitled for the payments related to the rest of his term, but also given an additional two years remuneration, meaning a sum of over €250,000, depending on the timing. With regards to his performance bonus – an additional 20 per cent a year on his €100,000 plus basic salary – Mr Farrugia’s annual appraisal is not to be made by a structured team of officials or the whole board of directors, as is the norm in both the public and private sector.
In Mr Farrugia’s case, this job has been reserved solely at the discretion of the non-executive chairman, also a political appointee.
According to his contract’s terms, Mr Farrugia will have a starting remuneration package of over €130,000 this year, reaching a staggering €180,000 if he stays on for nine years.
This makes him one of the highest paid public officials.
Dr Muscat’s financial remuneration as Prime Minister in 2018 stood at €62,669, including salary and allowances.
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