Can service charge received by employees as incentives be incorporated into the calculation of their basic salary to meet the requirement of minimum wage?

CRYSTAL CROWN HOTEL & RESORT SDN BHD (CRYSTAL CROWN HOTEL PETALING JAYA) v. KESATUAN KEBANGSAAN PEKERJA-PEKERJA HOTEL, BAR & RESORT SEMENANJUNG MALAYSIA [2020] 7 CLJ 709

• Crystal Crown Hotel & Resort Sdn Bhd (“Management”) managed the Crystal Crown Hotel, Petaling Jaya (“Hotel”).

• Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Resort Semenanjung Malaysia was a trade union of the employees of the Hotel (“Union”).

• When the Hotel first commenced operations in 1995, there was no collective agreement between the Hotel and its employees.

• The employees’ remuneration package consisted of, inter alia, a basic salary and service charge.

• The Union only gained recognition in 1999.

• In 2011, a trade dispute arose between the Hotel and the Union.

• The Hotel intended to implement a clean wage system and remove the service charge system. Alternatively, if the service charge system is maintained, whether the Hotel can restructure the wages by utilising the service charge or a portion thereof to top up its employees’ basic wages to meet the payment of minimum wages.

• The Union disagreed.

• The Industrial Court, agreed with the Union and maintained the service charge system be retained for employees covered under the scope of the first collective agreement.

• Dissatisfied, the Hotel filed an application for judicial review at the High Court to quash the said award by the Industrial Court but the application was dismissed.

• The Hotel appealed to the Court of Appeal.

• The Court of Appeal stated that based on the National Wages Consultative Council Act 2011, the implementation of the minimum wage system must not, in any way, result in the employees getting anything less favourable than their current wages.

• The basic restructured wages also must not be less than the amount of wages earned by the employees pursuant to the contract of service.

• The Hotel’s proposal was less advantageous to the employees as they were deprived of the element that the service charge was a separate element of remuneration.

• The Hotel’s proposal would have prevented the employees from receiving the payment of the service charge that they have been receiving since the operation of the Hotel in 1995. This payment should have been made over and above their basic minimum wage