Court rules Malaysia hotels cannot use service charge to prop up minimum wage

Sunday, 24 Mar, 2021 0

A landmark ruling in a Malaysia court could have wide-ranging implications for the hotel and restaurant industry in the country.

A judge ruled that hotels cannot use the 10% service charge paid by customers to bolster staff pay up to the mandatory minimum wage.

"Service charge, being monies collected from third parties, does not belong to the hotel. When it is paid by a customer as part of the bill, ownership in those monies does not vest in, or transfer to the hotel," Judge Datuk Nallini Pathmanathan said in summary.

"Ownership of the monies is immediately transferred and lies with the employees who are eligible to receive those monies."

"It follows that as the monies did not, at any point in time, belong to the hotel, there is no entitlement in law for the hotel to appropriate and utilise those monies to meet the statutory obligation created by the National Wages Council Consultative Act," Nallini added.

The judgment came in an appeal case between Crystal Crown Hotel and Resort and the National Union of Hotel, Bar & Restaurant Workers.

Industry leaders have said it could have major repercussions for the industry.

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Editor for TravelMole North America and Asia pacific regions. Ray is a highly experienced (15+ years) skilled journalist and editor predominantly in travel, hospitality and lifestyle working with a huge number of major market-leading brands. He has also cover in-depth news, interviews and features in general business, finance, tech and geopolitical issues for a select few major news outlets and publishers.

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