Payment of Social Security of Seafarers | Malta Corporate Services Provider | CSB Group

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Payment of Social Security of Seafarers

It is quite the norm to think of seafarers as a vulnerable group as they have a higher risk to be exploited, abused and ill-treated or to suffer from any injustice. The seafaring sector covers a wide range of activities, starting from short ferry trips to long distance voyages on tankers that carry dangerous cargo.  They operate within and across different national jurisdictions and are subject to different international and national laws. Some doubts that arise are related to what law, if any, is applicable or even enforceable, in particular when it comes to the payment of social security contributions.

In Malta, employment is regulated by the Employment and Industrial Relations Act (EIRA) and by its subsidiary legislation. However, employment of seafarers is regulated by other legal sources other than EIRA. According to Article 39 of the EIRA, seafarers’ employment is regulated by the Merchant Shipping Act (MSA). Upon Malta’s accession into the European Union, the European legislation superseded the national one. Hence, EU Regulation 882/2004 which came into force in 2010 is the applicable law when it comes to the regulation of social security contributions for mariners who are employed on a vessel that is flagged in an EU Member State. In terms of the said Regulation, seafarers can only be subject to a social security system of one Member State.

Prior to the introduction of the new regulation EU 882/2004, mariners used to pay contributions in the vessel’s flag state subject to certain exceptions. This position remained somehow the same, even after the inception of the EU Regulation 882/2004. In fact, social security contributions for seafarers are paid in the Member State in which the vessel, upon which the mariners are employed, is flagged. The only difference that arose between the old and the new regulation is with respect to the exception to the rule, as these have been simplified under the new regulation. As a matter of fact, the exception regards the contributions that involve seafarers who are remunerated by an ‘undertaking’ in a Member State where they reside. In such a case, the legislation of the Member State of residence shall apply. So, for instance, if a seafarer that is resident in Germany and is working on a Maltese flagged vessel and is remunerated by a German resident agent of the shipping company, then the said seafarer shall be subject to German national insurance and the undertaking or the person paying the remuneration shall be treated as his employer for national insurance purposes. Employment relationships of seafarers are quite fragmented, meaning that an individual may hold nationality of one state, be employed through an agency of another state and work on a vessel that is registered in yet another state.

In Malta, seafarers who are not resident in an EU or EEA state or in Switzerland have the liberty to apply for a social security system in their country of residence. Prior to the implementation of the Regulation EC/883/2004, in order to be part of Malta’s social security system, a seafarer that worked on a Maltese flagged vessel was also required to reside in Malta. This is no longer the case once the Regulation was implemented. When a seafarer is insured in Malta, he shall benefit from a European Health Insurance Card (EHIC) and also has the possibility to claim unemployment benefits. The amount of contributions paid shall be calculated on a percentage of the weekly salary as long as the latter does not exceed the amount of €428.54. If the said threshold is exceeded, then a fixed sum of contributions is to be paid.

If one looks closely to the French social security legislation, one shall note that there are quite some differences compared to Malta. In March 2017, the French Government published the Decree no. 2017-307 which relates to social security schemes with regard to seafarers that reside in France and work on vessels that are not French flagged.  Firstly, one has to be aware that in France there is an agency; the French Mariners Social Security Agency (ENIM) to which a seafarer that is resident or domiciled in France shall have to make social security contributions to. Hence nationality is not important but rather domicile and residence. In situations when a seafarer is already paying social security contributions to an agency of another country other than France – which country is an EU Member State and has a bilateral social security convention with France – the seafarer shall refrain from making contributions to ENIM. However, the ENIM may ask for evidence to be provided so as to ensure that contributions are actually being effected. If a seafarer’s employer is not resident in France, then the employer shall be required to provide a bank guarantee in order to cover social security contributions in France. Moreover such a non-resident employer has an option to appoint a French based agent that would act on his behalf in order to make contributions to ENIM.  If contributions are effected accordingly, a penalty which amounts to 0.5% for each day of delay calculated on the amount of contributions owed is to be paid. If one still fails to pay the contributions, this would amount to a criminal offence and it could possibly lead to the yacht’s arrest.  Once the contributions are paid, ENIM shall provide seafarers with health care and retirement benefits. With regard to the latter, ENIM shall provide a full retirement pension once a seafarer has completed 25 years of contributed service and would have to be at least 50 years of age. On the demise of a seafarer, ENIM provides for the possibility to pay the said retirement benefits to the deceased’s family.  On the other hand, according to the new Regulation EU 882/2004, if a person has worked for years in different states, then each state has to pay a rate of benefit which would be proportionate to the period that that seafarer would have worked in such state.

Due to Malta’s strategically placed geographic position and to its natural harbours, Malta has always had an important role in the Mediterranean’s commercial activity so much so that it is considered a point of convergence for trade between Europe and the African continent. Through the years, Malta developed a strong maritime tradition, more so that it evolved into an international centre for the maritime and shipping industries. In fact, Malta boasts of a reputation as one of the world’s most reliable and effective centre for maritime services.  Our laws, influenced by international and regional frameworks are the perfect instrument with which Malta carved itself a strong reputation within the maritime industry. Malta has been recognised internationally as a quality flag offering a top product.  In Malta, the owners of the vessels have the opportunity to regularise and register the seafarers that work under the Maltese flag in order to bring them in line with Regulation 882/2004. As stated earlier on, seafarers that are insured in Malta can benefit from a European Health Insurance Card (EHIC) and they can also claim unemployment benefits in their country of residence.

Even though a social security protection is considered as an indispensable element of employment, it is also one of the most complex issues to implement especially in the maritime industry. The idea of having a standard social security at international level to include all the seafarers including the fishermen is quite an ambitious goal.

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