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29 August 2018

Malta: the functioning of the Community Work Scheme

The transfer of the management of the so-called Community Work Scheme to the union GWU, as a result of a public tender, has not been without criticism, both in- and outside the parliament. However, after the transfer the payment below the minimum wage disappeared.

As of the end of May 2018, the so-called Community Work Scheme administered by the General Workers’ Union (GWU) employed 839 people (503 in Malta and 336 in Gozo). The scheme was transferred to the union in 2016, which took over from a programme run until then by the Employment and Training Corporation. Workers in the scheme are no longer categorised as in the public register – the National Statistics Office registers them as being in private sector employment because they are on the books of a private foundation owned by the GWU.

The transfer was based on a contract through a government concession awarded after a public tender which attracted three bids. The union came up with the most competitive bid. In the contract, it was stipulated that for five consecutive years, a new non-profit foundation was to be set up by the GWU. The foundation’s aim, according to the tender, should be to take over the management and to employ persons that were enrolled in the existing Community Work Scheme - in practice some 600 long-term unemployed.

The foundation gets an ‘operational fee’ of €980 a month per employee, from which it has to pay full-timers the standard minimum wage. This fee covers not only the minimum wage of the worker and the management, but also operational and training cost of the individuals. In 2009, the government had launched this Community Work Scheme in a bid to help individuals get some working experience and position themselves better when looking for a job. The initiative proved to be successful in helping individuals find work throughout the years. Between 2009 and 2016, the scheme operated by paying 75% of the minimum wage and social benefits. Workers were being paid below the minimum wage and were still dependant on benefits. After 2016, the payment changed into the full rate of the minimum wage.

There has been some controversy, with some observers suggesting that the union is making a considerable profit from the deal, and that encouraging this, and similar, job schemes could lead to the creation of more precarious work. According to the OECD in a recent publication the scheme has encountered a number of problems and criticisms over the years, including the difficulty in finding enough placements to accommodate the targeted numbers of participants. However, official statements by the government reject suggestions of high profits. Calculations reveal that, on top of the minimum wage, the supplier must pay 10% social security contributions (approximately €1,000 per worker a year) and statutory bonuses (€512 per worker a year). From the remaining €1,500 there are other costs to be included - mainly operational, management and training costs. In addition, any cost of living increase must be absorbed by the supplier.

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