Employee retention beyond fixed-term contracts in Malta
Last updated
June 15, 2026
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Fixed-term contracts have a role in Maltese employment, but they shouldn’t be used to retain staff. Under the Employment and Industrial Relations Act, if an employee leaves early, they may owe up to 50% of their remaining salary.
Some companies use fixed-term contracts as a retention tool; however, this breeds resentment, not loyalty. To improve retention employers should focus on real reasons people leave: management quality, career growth, fair pay, and flexible working.
When does a fixed-term contract make sense in Malta?
Fixed-term contracts are useful in three situations:
- Covering temporary workload increases
- Filling a role for a specific project
- Managing maternity or parental leave.
According to Chapter 452 of the Laws of Malta, both parties agree to a set period. Either can exit early, but this may have financial consequences. This commitment makes sense only for genuinely temporary roles, protecting both sides.
Problems emerge when employers use fixed-term contracts for permanent positions. A finance analyst on a series of 12-month contracts isn’t temporary. A compliance officer in iGaming with yearly renewals isn’t either. This practice creates legal confusion and shows that the employee isn’t seen as a long-term investment.
Candidates in various sectors now prefer indefinite contracts. Offering a fixed-term contract for a permanent role can raise red flags even before an applicant joins.
Why fixed-term contracts tend to backfire as a retention strategy
Fixed-term contracts may keep employees in their roles, but they don’t keep them engaged. Under Chapter 452, an employee who resigns early could owe half their remaining salary. This clause is legal but can make workers feel trapped rather than committed. At Konnekt, we observe that employees who wish to leave but can’t often disengage long before they actually go. Their productivity drops, and frustration spreads.
The main issue is that contracts don’t address the real reasons people leave. Exit interviews often reveal surface reasons like “better opportunities” or “salary.” The true drivers are often deeper: a lack of feedback from managers, delayed pay reviews, or ignored suggestions. No penalty clause can solve these problems.
Relying on fixed-term contracts can also backfire for employers managing salaries. When market rates change, employees with fixed salaries see the gap between their pay and the market. This can hurt morale.
Fixed-term vs. indefinite contracts: which is right for your situation?
| Scenario | Fixed-term contract | Indefinite contract |
| Seasonal demand (e.g. hospitality peak) | ✅ Appropriate – defined end date | ⚠️ Overkill for genuinely temporary work |
| Maternity / parental leave cover | ✅ Standard practice | ⚠️ Creates confusion for the cover role |
| Project-based work (defined scope and timeline) | ✅ Legitimate use | ⚠️ Only if the project truly ends |
| Retaining a key employee in a permanent role | ❌ Counterproductive – creates resentment | ✅ Standard and expected |
| Managing a probationary period | ⚠️ Probation clause within indefinite is cleaner | ✅ Standard probation clause handles this |
What retention tools actually work instead?
Better retention comes from tackling the real reasons people leave, not from making it costly to exit.
Visible career progression. This is the single most underinvested retention lever in Malta. The Konnekt Candidate Survey 2025 shows 46% of movers are primarily motivated by career advancement. Employees need a clear view of their potential paths and support to achieve them. Progression conversations should happen formally, at least annually. When they do not happen, employees start having them with other employers instead.
Management quality. Managers account for up to 70% of team engagement, according to the Gallup State of the Global Workplace 2026 Report. The decision to leave a job is rarely about the organisation, but about the immediate experience of working for a specific person. Investing in management development is essential for retention.
Fair and transparent pay. Locking salaries into fixed schedules while the market changes can be risky. A structured pay review process shows the organisation is attentive to both the market and individual needs. Salary benchmarking data, which Konnekt uses when advising clients on compensation strategy, consistently shows the gap that accumulates when internal bands are not refreshed.
Flexible and remote working options. 73.8% of candidates say that flexible working hours is the perk they appreciate most. Offering hybrid or flexible arrangements costs little and builds trust. Trust, in turn, contributes to the kind of psychological safety that keeps people engaged past the first-year mark.
Acting on feedback. A simple, visible process for acknowledging, responding to, and where possible acting on employee feedback is one of the highest-value retention investments an organisation can make. The investment is almost entirely time.
How a Konnekt recruiter can help with retention challenges
Retention issues often go unnoticed until it’s too late. By the time employers notice high turnover, the underlying problems may have been present for months or years.
At Konnekt, we help employers by creating a strong proposition that attracts and retains the right talent. Speak to our recruiters today to find out what works and what doesn’t in your sector.
Frequently asked questions
It is permitted under Chapter 452 of the Laws of Malta, but repeated renewals without genuine justification carry legal risk. After four consecutive years on fixed-term contracts with the same employer, Maltese employment law may treat the arrangement as an indefinite contract by operation of law. If the role is ongoing and there is no genuine temporary purpose, an indefinite contract is both the legally safer and practically more effective approach.
Under Chapter 452, an employee who leaves before the contract end date may be required to pay the employer up to 50% of the remuneration that would have been due until expiry. In practice, enforcement is complex and this provision is rarely pursued through formal channels. However, the existence of the clause, and whether the employee is aware of it, significantly affects morale and trust, regardless of whether it is ever enforced.
Exit interviews rarely capture the full picture. Based on Konnekt’s patterns across hundreds of placements and client conversations, the most common actual drivers are: poor management quality, lack of a visible career path, pay that has not kept pace with the market, and feedback that was consistently ignored. Salary is often cited but is frequently the trigger rather than the root cause.
About the author: Emma joined Konnekt in 2021 and has been working in recruitment ever since. She began her career as a Recruitment Specialist within the Finance & Legal Recruitment Team before expanding her expertise across other sectors, including Tech. Over the years, she progressed in her role and now oversees all recruitment teams in her current position as Recruitment Operations Manager.
