Minimum wage and the service charge conundrum in the hotel industry

This article examines the implementation of the Minimum Wages Order 2012 (‘MWO’) in the hotel sector. The remuneration structure in this industry is characterised by low basic wages supplemented by service charge and other allowances. These pay components combined invariably exceed the minimum wage rates prescribed by the MWO. In light of this, can the majority of hotel employees be deemed to be paid below the minimum wage? Under the Guidelines on the Implementation of the Minimum Wages Order 2012 issued by the National Wages Consultative Council, hotels are allowed to convert all or part of service charge into wages in order to comply with the MWO. The service charge is already a very pliable pay component — there are existing uncertainties surrounding the interpretation/computational treatment of service charge. The guidelines seem to have stretched the conceptual elasticity of service charge further. Implementing the MWO as per the guidelines will enable the hotel sector to comply with the MWO with minimal increase in labour cost. However, the guidelines have come under fire in Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia v Crystal Crown Hotel & Resort Sdn Bhd. Until the issues raised in this case are definitively resolved, the grey area concerning the restructuring of remuneration package in the hotel sector will remain.