Court of Appeal holds introduction of Minimum Wages Order 2012 should not prevent employees from receiving payment of service charge previously received

20 October 2020

In Crystal Crown Hotel & Resort (Crystal Crown Hotel Petaling Jaya) v Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Resort Semenanjung Malaysia [2020] 7 CLJ 709, the issues for adjudication were (i) whether the hotel could implement a “clean wage system” and remove the service charge system; and (ii) if the service charge system is to be maintained, whether the hotel could restructure the wages by utilising the service charge payments to top-up its employee’s basic wages to meet the minimum wage.

The court held that the “clean wage system” is less advantageous to the employees, as the employees are being deprived of the service charge, which is a separate element of the remuneration. Further, the salary of the employees should be borne by the hotel and the service charge payment should have been made over and above their minimum wage. This is because the service charge payments made by the customers were premised on the understanding that it would replace tipping. Therefore, the service charge payments cannot be utilised by the hotel to meet its minimum wages requirement.