Minimum Wage

As of 2023, the minimum wage in Gibraltar is set at £9.50 per hour. This applies to all employees, ensuring that workers receive a basic level of compensation for their labor. Employers must adhere to this regulation to avoid penalties.

Minimum Wage Type	Amount (£)
Hourly Minimum Wage	9.50
Monthly Minimum Wage (based on 40 hours/week)	1,653.33 (approx.)

Income Tax

Gibraltar employs a progressive income tax system with two main options: the Gross Income Based System (GIBS) and the Allowance Based System (ABS). Employees can choose the system that results in a lower tax liability.

• GIBS: Taxed on gross income without allowances.
• ABS: Allows for various deductions and credits.

The income tax rates are as follows:

Income Range (£)	Tax Rate
Up to 11,000	0%
11,001 to 25,000	10%
25,001 to 35,000	20%
Above 35,000	25%

Payroll Cost

When calculating payroll costs in Gibraltar, employers must consider both direct salary payments and additional contributions. The main components include:

• Gross Salary: The agreed-upon salary before deductions.
• Employer Contributions: Employers contribute 18% towards social insurance.
• Employee Contributions: Employees contribute 10% of their gross earnings.

For example, if an employee’s gross salary is £2,000:

• Gross Salary: £2,000
• Employer Contribution (18%): £360
• Employee Contribution (10%): £200
• Total Payroll Cost: £2,360

Cost Component	Amount (£)
Gross Salary	2,000
Employer Contribution	360
Employee Contribution	-200
Total Payroll Cost	2,360

Overtime Pay

In Gibraltar, employees are entitled to overtime pay for hours worked beyond the standard workweek of 40 hours. Overtime is typically compensated at a rate of 1.5 times the regular hourly wage for the first few hours and may increase for additional hours worked.For example, if an employee’s regular hourly rate is £9.50:

• Overtime Rate (first hour): £14.25
• Overtime Rate (additional hours): £19.00

Overtime Type	Rate (£)
First hour of overtime	14.25
Additional hours	19.00

Understanding these components—minimum wage, income tax rates, payroll costs, and overtime pay—is essential for employers operating in Gibraltar to ensure compliance with local labor laws and effectively manage workforce expenses.

Regular & Maximum Working Hours

In Gibraltar, the regulation of working hours is governed by the Working Time Act, 1999. The maximum average working time is set at 48 hours per week, calculated over a 17-week reference period. Employees can agree to opt out of this limit in writing. However, for workers aged between 15 and 18, the maximum working hours are capped at 40 hours per week.

Working Hours Type	Maximum Hours	Notes
Standard Workweek	48	Average over 17 weeks
Workers aged 15-18	40	Strict limit
Overtime	Beyond standard hours	Must be compensated at a higher rate

Leave

Employees in Gibraltar are entitled to a minimum of 15 days of paid leave each year. This entitlement increases with length of service. In addition to annual leave, there are specific provisions for maternity leave and other types of leave.

Types of Leave

• Annual Leave: Minimum of 15 days paid leave per year.
• Maternity Leave: Up to 14 weeks of paid maternity leave for mothers.
• Sick Leave: Generally not mandated by law; employers may choose to provide it.
• Parental Leave: Currently under review but not widely available.

Leave Type	Duration	Payment Status
Annual Leave	15 days	Paid
Maternity Leave	Up to 14 weeks	Paid
Sick Leave	Varies	Depends on employer policy
Parental Leave	Currently under review	N/A

Holidays

Gibraltar observes several public holidays throughout the year. Employees are entitled to time off on these holidays, and if they work on a public holiday, they are typically compensated at a higher rate.

Public Holidays

The following are recognized public holidays in Gibraltar:

1. New Year’s Day (January 1)
2. Commonwealth Day (March 9)
3. Good Friday (Date varies)
4. Easter Monday (Date varies)
5. Workers’ Memorial Day (April 28)
6. May Day (May 1)
7. Spring Bank Holiday (Last Monday in May)
8. Queen’s Birthday (June 15)
9. Late Summer Bank Holiday (Last Monday in August)
10. Gibraltar National Day (September 10)
11. Christmas Day (December 25)
12. Boxing Day (December 26)

Holiday Name	Date Observed
New Year’s Day	January 1
Commonwealth Day	March 9
Good Friday	Date varies
Easter Monday	Date varies
Workers’ Memorial Day	April 28
May Day	May 1
Spring Bank Holiday	Last Monday in May
Queen’s Birthday	June 15
Late Summer Bank Holiday	Last Monday in August
Gibraltar National Day	September 10
Christmas Day	December 25
Boxing Day	December 26

Understanding these regulations regarding working hours, leave entitlements, and public holidays is essential for employers operating in Gibraltar to ensure compliance with local labor laws and foster a supportive work environment for their employees.

Termination Requirements

In Gibraltar, the termination of employment can occur for several reasons as outlined in the Employment Act. Both employers and employees have the right to terminate employment, but certain procedures must be followed to ensure compliance with local labor laws. Common grounds for termination include:

• Mutual Agreement: Both parties agree to end the employment relationship.
• Redundancy: The position is no longer necessary due to organizational changes or economic reasons.
• Misconduct: Serious violations of company policy or unacceptable behavior by the employee.
• Lack of Capability: The employee is unable to perform their job effectively.
• Statutory Restrictions: Legal reasons that prevent the employee from continuing their work.

Termination Grounds	Description
Mutual Agreement	Termination agreed upon by both parties.
Redundancy	Position no longer required due to changes.
Misconduct	Serious violations leading to immediate dismissal.
Lack of Capability	Employee unable to perform job duties satisfactorily.
Statutory Restrictions	Employment cannot continue due to legal issues.

Notice Period

The notice period required for termination depends on the length of service. The following table outlines the required notice periods:

Length of Service	Notice Period
Less than 1 year	1 week
1 to 2 years	2 weeks
2 to 5 years	4 weeks
5 to 10 years	6 weeks
10 to 15 years	8 weeks
More than 15 years	12 weeks

Employers may also choose to provide pay in lieu of notice, allowing them to terminate employment immediately while compensating the employee for the notice period.

Severance Pay

In cases of redundancy, employees who have completed at least two years of continuous service are entitled to severance pay. The calculation for severance pay is based on the length of service and age of the employee:

• For employees under 41 years old: 0.5 week’s pay for each full year of service.
• For employees aged between 41 and 61: 1 week’s pay for each full year of service.
• For employees aged over 61: 1.5 weeks’ pay for each full year of service.

Age Group	Severance Calculation
Under 41	0.5 week’s pay per year
Aged 41-61	1 week’s pay per year
Over 61	1.5 weeks’ pay per year

Probation Periods

In Gibraltar, the first week of any employment under a contract is considered a probationary period. During this time, either party can terminate the contract without notice. After this initial week, if a probationary period is specified in the contract, it can last up to six months.

Key Aspects of Probation Periods

• The terms of the probation period should be clearly outlined in the employment contract.
• Regular evaluations are recommended during this period.
• Either party may terminate with minimal notice during probation.

Probation Duration	Notes
Up to 6 months	Evaluation recommended
First week	Considered probationary

Understanding these aspects—termination requirements, notice periods, severance pay, and probation periods—is essential for employers operating in Gibraltar to ensure compliance with local labor laws and manage employee relations effectively.

Misclassification

In Gibraltar, the distinction between employees and independent contractors is critical for compliance with labor laws. Misclassification can lead to significant legal and financial repercussions for both parties involved. Understanding the differences in rights, obligations, and tax implications is essential for both businesses and contractors.Employees vs. Independent ContractorsEmployees typically work under the direct control of their employer, who dictates work hours, methods, and tools used. In contrast, independent contractors operate with more autonomy, managing their own work processes while delivering specific outcomes.

Aspect	Employee	Independent Contractor
Control	High control by employer	Low control; autonomy over work
Payment Structure	Regular salary or hourly wage	Payment per project or service
Benefits	Entitled to benefits (sick leave, etc.)	Not entitled to employee benefits
Tax Responsibilities	Employer withholds taxes	Responsible for own taxes

Legal Implications

Misclassifying a worker can result in penalties for employers. If a worker is classified as an independent contractor but functions as an employee, the employer may be liable for unpaid taxes, social security contributions, and employee benefits. Conversely, individuals misclassified as contractors may miss out on crucial employment protections, benefits, and legal rights.

Contractual Agreements

For independent contractors, a well-defined contract is essential. This contract should outline the scope of work, payment terms, deadlines, and intellectual property rights. It is advisable to consult a lawyer specializing in Gibraltar employment law to ensure compliance with local regulations.

Contract Element	Details
Scope of Work	Clear description of services
Payment Terms	Specific payment structure
Deadlines	Timeline for project completion
Intellectual Property Rights	Ownership details for created work

Tax Obligations

Independent contractors in Gibraltar are responsible for their own tax obligations. This includes registering with the Income Tax Office and filing annual tax returns. The tax regime in Gibraltar is relatively straightforward:

• Income Tax: Contractors must report income earned and pay applicable taxes at a flat rate of 10% on their net business income after deducting allowable expenses.
• Value Added Tax (VAT): Contractors must register for VAT if their annual taxable turnover exceeds a specific threshold set by the government.

Tax Type	Responsibility
Income Tax	Report and pay taxes on earnings
VAT	Register if applicable

Insurance Considerations

While not mandatory, having adequate insurance is crucial for freelancers and independent contractors. This type of insurance protects against financial liabilities if a third party suffers injury or property damage due to business activities.Understanding these components—misclassification risks, legal implications, contractual agreements, tax obligations, and insurance considerations—is vital for businesses hiring independent contractors in Gibraltar. Proper classification ensures compliance with local laws while protecting both parties’ rights and responsibilities.