Service charge cannot be used to satisfy minimum wage obligations under Malaysian law, as it is not part of 'basic wages' as defined in relevant statutes.

Nallini Pathmanathan FCJ:

Introduction

[1] The statutory stipulation of a "minimum wage" represents the lowest level below which wages cannot be allowed to decline. The fixing of a minimum wage by Parliament recognises that wages cannot be left solely to market forces. The underlying philosophy is the recognition that labour must be remunerated reasonably, and that exploitation of labour through the payment of low wages is unacceptable¹.

[2] Hotel workers are recognised as one of the vulnerable groups requiring legislative protection (see Hansard on the second reading of the National Wages Council Consultative Act 2011 of 30 June 2011 at 12.48pm). In concluding that the introduction of a minimum wage was essential, the then Minister of Human Resources explained that the purpose was to alleviate the plight of low income workers so as to enable them to increase their purchasing power in view of the increase in the cost of living, as well as addressing the issue of poverty amongst the working poor.

[3] Where Parliament has fixed the minimum wage on a national basis, vide the National Wages Council Consultative Act 2011 ("NWCCA 2011") and the Minimum Wages Order(s) from 2012 - 2020 ("MWO 2012") consecutively, is it open to an industrial adjudicator to re-constitute it, or to rework such a minimum wage, notwithstanding that which Parliament has expressly legislated?

[4] The National Union of Hotel, Bar and Restaurant Workers ('the Union') maintains vigorously that any such reworking or modification of the minimum wage is not permissible. To this end the Union maintains that the utilisation of the service charge element of their remuneration, which employees receive as a separate benefit, to substitute (vide a clean wage system) or to supplement prevailing wage rates (vide a top up salary structure), so as to meet the statutory minimum wage is unacceptable.

[5] The employer, Crystal Crown Hotel & Resort Sdn Bhd (Crystal Crown Hotel Petaling Jaya) ('the Hotel') maintains on the other hand, that while a minimum wage may be necessary, the fixing of such a wage assumes that the employer possesses the capacity to pay such a minimum wage. That postulation, it maintains is not tenable in the hotel industry. And that is because the industry has survived thus far on the utilisation of the service charge element paid by the public, to subsidise hotel workers' wages. Without this supplement, the Hotel maintains it is unable to meet the threshold wage requirements stipulated under the NWCCA 2011.

[6] It is further maintained that no fixation of wages which ignores the capacity of the establishment to pay, is tolerable. To this end, the Hotel proposes to meet the minimum wage stipulated under the law, by utilising the element of "service charge" collected from the public, to supplement the prevailing rates of hotel workers' salaries. The workers would therefore no longer earn this element of their remuneration package as a separate allowance, but would instead receive a 'clean wage' which incorporates the service charge element, or a top up salary structure which uses the service charge to meet the requirements of the statutory MWO 2012.

[7] Is the appropriation by the Hotel of the service charge element and utilisation of the same, to pay the hotel workers their salaries to meet the statutory minimum wage, permissible? That, in effect, is the central issue for our consideration and adjudication in this appeal.

Questions Of Law

[8] This issue takes the form of two questions of law:

(a) Whether under the NWCCA 2011 hoteliers are entitled to utilise part or all of the employees' service charge to satisfy their statutory obligations to pay the minimum wage; and

(b) Whether having regard to the NWCCA 2011 and its subsidiary legislation, service charge can be incorporated into a clean wage or utilised to top up the minimum wage.

Amicus Brief

[9] In addition to the Hotel and the Union, the Malaysian Employers Federation and four Hotel Associations ('Ami