Employment 2022

Last Updated July 06, 2022

Maldives

Law and Practice

Authors



S&A Lawyers LLP is a market-leading law firm specialising in corporate and commercial law, providing legal services to key government agencies, international financial institutions, and large local and multinational corporations. The firm provides a broad range of services on matters pertaining to employment law in the Maldives, including general advice on employment agreements and policies, dismissals, employment benefits and incentives, disciplinary and discrimination matters, and regulatory compliance. The firm mostly represents employers from the tourism industry in the Maldives – the industry consisting of the greatest number of employees. The firm has represented its clients in all aspects of employment law and many cases have been recognised as landmark cases in the legal landscape of employment law.

The following regulations and legislation have brought significant developments and clarifications to the employment laws of the Maldives within the past year, which are as summarised below:

  • the Minimum Wage Order;
  • the Service Charge Regulation; and
  • the Civil Procedure Act.

Minimum Wage

The Minister of Economic Development (the “Minister”), in November 2021, determined the applicable minimum wage for the first time in the Maldives. The newly introduced minimum wage has been in effect for Maldivian employees since 1 January 2022 and was determined based on private and public sector as follows:

Hourly rates for private sector employees

  • Micro enterprise: No applicable minimum wage.
  • Small enterprise: MVR21.63.
  • Medium enterprise: MVR33.65.
  • Large enterprise: MVR38.46.
  • Others (businesses not falling within any of the above categories): MVR21.63.

Rate for public sector employees

  • MVR33.65 per hour
  • Permanent employees who work at least 30 hours per week: MVR7,000 per month

Minimum wage comprises of the employee’s basic salary and fixed allowances (if any). It does not include variable allowances. The 7th Amendment to the Employment Act was ratified on 21 September 2022. This amendment effectively removed the previous statutory time frame for the implementation of minimum wage for expatriate employees in the Maldives and instead the time frame is now at the government’s discretion.

Service Charge

The Employment Act 2008 originally introduced the requirement to distribute service charge amongst employees if service charge was levied. By virtue of the sixth amendment to Employment Act 2008, it became mandatory for tourism-related businesses to levy and distribute service charges. The Service Charge Regulation (the "Regulation") was subsequently implemented, clarifying the responsibilities of employers relating to service charges. The Regulation clarified the service charge calculation, collection and distribution, and record keeping and reporting obligations of the employer.

It is currently not mandatory for service providers (except tourism-related businesses) to levy and distribute service charges. If such service providers choose to levy service charges, they shall be distributed in accordance with the Service Charge Regulation.

Civil Procedure Act

The Employment Act stipulates a three-month limitation period in which to file unfair dismissal claims. The limitation period to file a complaint to the Employment Tribunal with respect to a decision of the committee on the prevention of sexual abuse and harassment is 180 days, as per the Prevention of Sexual Abuse and Harassment Act. The employment laws of the Maldives do not provide a limitation period for other employment complaints.

The Civil Procedure Act, which came into force in June 2022, introduced a three-month limitation period for all employment-related disputes. Notably, this sets a limitation period for claims concerning unpaid wages which has not had a limitation period in the past.

A new Employment Tribunal Regulation was implemented in January 2022 owing to the provisions of the Civil Procedure Act, which allows costs and attorney fees to be awarded to the winning party. Therefore, the Employment Tribunal may now award any costs and attorney fees which are reasonably incurred by the winning party. This is yet to be tested by the Tribunal. 

No distinction is made between blue-collar and white-collar employees.

The Employment Act applies to all employees in the Maldives regardless of gender, nationality or industry. The only group of individuals that are exempt from the Employment Act are the Maldives Police Service and Maldives National Defence Force employees, which has its own employment legislation to govern the employer and employee relationship. There are specific regulations relating to the employment of expatriates in the Maldives, which mostly govern the administrative aspects of expatriate employment in the Maldives; for example, administration of work permits, issuance of work visas and collecting fees relating to work permits.

There are three types of employment agreements:

  • agreements of a definite term;
  • agreements of an indefinite term; and
  • agreements specific to certain types of work.

Definite agreements are for a period not exceeding two years and automatically terminate upon expiry. If, however, the term of the definite agreement can be renewed or extended beyond two years, the agreement will be deemed an indefinite agreement. Agreements that exceed two years are permanent or indefinite agreements.

There is a statutory requirement to enter into an employment agreement and for it to be in writing. The employee must be provided a signed copy of the agreement and it shall include:

  • details of the employee;
  • the employment status;
  • date of commencement of employment;
  • salary and benefits;
  • guideline for calculation of salary;
  • payday;
  • leave entitlements;
  • disciplinary procedures; and
  • grounds for dismissal from employment.

Employees should also be provided a written job description stating the duties and scope of employment.

The terms of employment are commonly provided by the employer; however, minimum statutory rights are established to ensure the fundamental rights of employees are upheld irrespective of whether such rights are included in the employment agreement.

The working hours of an employee cannot exceed 48 hours a week (excluding overtime). The employee shall not be required to work more than six consecutive days a week without having 24 consecutive hours of rest. However, an employee working at a tourist resort, on a tourist vessel, or in an uninhabited island designated for industrial projects may be allowed to work more than six consecutive days a week subject to accumulation of such employee’s rest days. Such employees may also be allowed to work an additional two hours each day but must be paid at the rate of overtime pay in accordance with the Employment Act.

Although there are no statutory maximum working hours per day, an employee is entitled to the following breaks each working day:

  • a 15-minute break for prayer during each prayer time or a 15-minute break for four consecutive hours of work performed by an employee; and
  • a 30-minute break for a meal after five consecutive hours of work.

It is possible for an employer to contract these breaks to be excluded from the maximum working hours under the Employment Act.

Overtime is governed by the Employment Act in the Maldives. If an employee works in excess of 48 hours per week, the employer is generally required to pay 1.25 times an employee’s hourly wage as overtime. The employer shall pay 1.5 times the employee’s hourly wage if the overtime falls on a public holiday. It is also a statutory requirement that employees shall not be required to work overtime unless agreed in the employment agreement.

An employee required to work normal hours on a public holiday shall be paid at least an amount equivalent to half of the minimum wages earned on a normal day of work in addition to any overtime entitlement.

The Employment Act specifies certain groups of individuals to be exempt from the Employment Act provisions relating to working hours, overtime payment and public holiday pay. These groups include the following:

  • persons working in emergency situations;
  • crew of seagoing vessels or aircraft;
  • persons in senior management posts;
  • imams and other employees at mosques; and
  • persons on on-call duty during the hours of duty.

Flexible arrangements and part-time contracts are not specifically regulated in the Maldives. However, if the employer and employee were to negotiate any terms that are more favourable than the minimum guaranteed terms, these terms would be upheld under the principles of freedom of contract.

The first order determining minimum wage was issued by the Minister of Economic Development in November 2021. See 1.1 Main Changes in the Past Year for further details.

Employers were required to comply with the Minimum Wage Order for all Maldivian employees before 1 January 2022, and for expatriate employees before 22 September 2022.

In addition to the minimum wage, a statutory compensation guaranteed for all Maldivian employees is the Ramadan bonus of MVR3000, which is to be paid by employers before the beginning of Ramadan. The payment of this bonus to foreign Muslim employees is at the discretion of the employer.

Employment law does not prohibit the employer and employee from agreeing to terms that are more favourable than the minimum rights under the Employment Act. As such, any bonus entitlements are generally dependent on the term of the employment agreement, in which there may be guaranteed bonuses and discretionary bonuses.

In the Maldives, there is no requirement to make a 13th-month salary payment.

Annual Leave

An employee is entitled to 30 days of paid annual leave upon completion of one year of employment. Annual leave shall be taken no later than within 12 months from the expiry of the year in which the leave was acquired as it cannot be accumulated. Additionally, annual leave shall not include sick leave, public holidays, maternity leave, or notice period prior to termination of employment. Any annual leave entitlement for which the employee has not been paid by the employer shall be paid to the employee prior to the termination of employment.

Medical Leave

Employees are entitled to 30 days of medical leave during each year of employment. Employees who are unwell for two consecutive days or less are entitled to take medical leave without the need to provide a medical certificate for 15 out of the 30 days of medical leave. The employer may require the employee to present a medical certificate from a registered practitioner prior to approving any additional medical leave upon utilising the 15 days' medical leave without a medical certificate.

Maternity Leave

All female employees are entitled to 60 days’ maternity leave based on a medical certificate specifying the estimated date of giving birth issued by a licensed medical practitioner. All government employees are entitled to six months' paid maternity leave. Employees on maternity leave will be entitled to full salary and benefits, and the leave period cannot be deemed a discontinuance of work that affects the employee’s rights and benefits. An additional leave of 28 days must be granted to an employee who submits a licensed medical practitioner’s certificate confirming the employee’s inability to return to work due to ill health. The employer has the discretion to pay during this additional 28-day leave period.

Paternity Leave

A male employee is entitled to three days of paid leave on the occasion of the birth of his child.

Break to Attend to a Child

An employee is entitled to two daily breaks of 30 minutes each to attend to the needs of a child once the employee returns to work after the completion of maternity leave. This leave is applicable until the child turns one.

Leave for Parents

Once the maternity leave period expires, the mother or father of a newborn child may take unpaid leave for a maximum of one year.

Family Responsibility Leave

Employees are entitled to ten days of paid leave annually to attend to important family obligations.

Circumcision Leave

An employee is entitled to five days of paid leave on the occasion of the circumcision of the employee’s child.

Confidentiality

Employment officials have a statutory obligation to maintain the confidentiality of information obtained in the course of carrying out their duties, relating to business secrets, productivity and the like of commercial ventures during the continuity of their employment and after dismissal. Clauses may be included in the employment agreement to prevent the disclosure of confidential information during and after employment but, as a general note, there is no statutory provision relating to confidentiality requirements of the employer and employee.

Employee Liability

Employee liability is subject to the term of employment agreement agreed between the parties.

Any clause in an employment agreement that purports to restrain or prohibit the conduct of an employee’s trade or profession is enforceable as long as the restraint is reasonable. It is, however, noted that what constitutes a reasonable period for such restraint has not been defined.

Non-solicitation clauses may be included in the employment agreement by an employer but it is unclear to what extent such a clause would be enforceable in the Maldives as it is untested.

The Maldives has not enacted any specific data protection legislation in respect of employment matters. As per the Employment Act, employment agencies shall not request or keep on record any information of a personal nature relating to a prospective employee except information that is essential to ensure that the person has the competence to discharge the employment sought. Such information shall be disclosed by the agency only to employers that have expressed interest in employing a person with certain abilities.

All foreign employees in the Maldives are required to hold a work permit prior to commencing work in the Maldives. The Expatriate Employment Regulation 2021 enacted under the Employment Act regulates the employment of expatriates in the Maldives. The Expatriate Employment Regulation was implemented in February 2021 after the repeal of the Expatriate Employment Regulation 2020, which essentially set out similar administrative rules required to employ a foreigner in the Maldives, including the rules relating to the issuance of an employment quota and applications for work permit approvals. The Expatriate Employment Regulation 2021 identifies certain areas of employment where expatriates are not allowed to be employed in the Maldives, including the following:

  • taxi drivers and other drivers working on hired services;
  • co-pilots or first officers on Maldivian airlines;
  • captains on sea vessels;
  • fishermen on board the fishing vessels;
  • photographers, videographers and similar artists;
  • artists involved in the entertainment industry; and
  • cashiers working at restaurants and cafes.

The employer and the person providing accommodation to the foreign worker must register with the Expat Online System. Subsequently, a Maldivian representative can be appointed by the employer and registered as a representative in the Expat Online System. The employer must then issue a letter of appointment to the foreign worker in order to obtain the employment approval. The employer will also need to obtain a quota, for which MVR2,000 is charged for every quota issued. Once a quota is granted, the employment approval will be granted, and this is required prior to arrival of the foreign worker in the Maldives. Upon arrival, the employee would be issued an annual work permit, which is renewable at the end of each year. The employer would be required to pay a monthly work permit fee.

There is no legal recognition of unions, though the Employment Act does not prohibit the formation of unions in the Maldives.

There are no recognised employee representative bodies in the Maldives.

There are non-government organisations registered as associations that represent the interests of selected groups of employees; for example, the Tourism Employees Association of the Maldives and the Maldives Association of Human Resources Professionals.

Collective bargaining agreements are untested in the Maldives.

An employer must show reasonable cause to justify an employee’s termination. Motivation is not ordinarily required but may become relevant if an employee claims that an employer has discriminated against them or acted in bad faith.

Regardless of the grounds for dismissal, the employer must establish substantive and procedural fairness. This is the case for termination with and without notice, including where an employee’s actions constitute gross misconduct.

Collective redundancies are not subject to distinct rules. The Employment Act requires the employer to demonstrate that the redundancies are due to a situation of redundancy and that the procedural fairness required to establish justified dismissal should be upheld. The Employment Regulation (General Provisions) enacted under the Employment Act provides further guidelines as to the steps that should be upheld prior to terminating an employee on grounds of redundancy, including the following.

  • An actual situation of redundancy under which an employer may terminate an employee includes the following circumstances:
    1. a service or business of the employer is discontinued;
    2. restructuring of the employer’s operations; or
    3. a position is removed from the organisation due to a worsening of the employer’s financial situation.
  • The Employment Act requires the employer to uphold good faith to ensure that the redundancy is not targeted at any individual or group of employees.

The employer is required to provide the employee with notice prior to the termination of employment, excluding in a situation where an employee action amounts to fraud or gross misconduct. The notice period for termination for cause other than redundancy is as stated below:

  • employment for more than six months but less than a year – two weeks;
  • employment for more than a year but less than five years – one month’s notice; and
  • employment for more than five years – two months’ notice.

The notice required to be given in the circumstances where an employee is made redundant is different from the notice required for termination for reasons relating to the conduct or capacity of the employee. Prior to redundancy, the employer is required to provide the following notices depending on the duration of service:

  • employment for less than a year – one month's notice;
  • employment for more than a year but less than four years – two months’ notice; and
  • employment for more than four years – three months’ notice.

Employers must give notice in writing. Employers may also make a payment in lieu of notice, which must amount to the employee’s wages and other benefits that they would have received during a notice period. External authorisation is not required.

Dismissal without notice is defined as termination of an employment agreement without notice as otherwise required by law or the agreement. This includes giving a shorter period of notice than would otherwise be required.

An employer may summarily dismiss an employee where their work is deemed unacceptable, and the employee’s continued employment is deemed, on reasonable grounds, to be unworkable. Specifically, an employer must show:

  • that an employee has committed fraud; or
  • that their continued employment would, more likely than not, be detrimental to the employer or the employer’s business.

No particular formalities must be observed, but employers must act with procedural and substantive fairness.

Termination agreements are enforceable to the extent that they do not infringe the minimum statutory rights of the employee.

The legality of termination agreements has not been tested in the courts.

There is no specific protection against dismissal for particular categories of employee.

The concept of wrongful dismissal is not recognised as a distinct concept under Maldivian law, but instances of wrongful dismissal are covered under the umbrella term of "unjustified dismissal".

In a claim for unjustified dismissal, the employee must establish that they were an employee and have been dismissed. The onus is now on the employer to establish the grounds for dismissal, and that those reasons are fair and justifiable.

An employee has a statutory right not to be unfairly dismissed. As per the judicial precedents of the Maldives, the employer must demonstrate procedural fairness and substantive fairness. The acceptable reasons for justifiable terminations are circumstances relating to capacity and/or conduct of the employee, or economic and organisational reasons of the employer’s business.

Employees must submit any claims for wrongful dismissal to the Employment Tribunal within three months of the date of their dismissal. Claims can be made on the ground that the employee was dismissed without cause regardless of whether notice was given.

A claim cannot be brought by an employee dismissed during probation.

Consequences of Unjustified Dismissal

The statutory remedies for unjustified dismissal are reinstatement, re-engagement and/or compensation.

Compensation will be determined on the basis of what is "reasonable and just" detriment suffered by the employee, and the employee’s own contributions.

Employers must not discriminate among employees on grounds of race, colour, social standing, religion, political beliefs or affiliation with any political party, sex, marital status, family obligations, age or disability. The prohibition on discrimination amongst employees carrying out equal work in the granting of employment, determination of remuneration, increase in remuneration, provision of training, determination of conditions and manner of employment, dismissal from employment or the resolution of other employment-related matters is provided in the Employment Act.

The burden of proof is on the employer to show that there is no discrimination, or that any discrimination is based on a justifiable inherent requirement of the specific job.

However, claims may not be brought for preferential hiring of Maldivians over those of different nationalities.

Claims for Anti-discrimination

Employees may file a claim in the Employment Tribunal on the grounds that the rights conferred to them under the basic principles in the Employment Act have been affected.

Damages and Relief

The Tribunal has the power to issue orders such as:

  • performing an act or ceasing the performance of an act;
  • reinstating an employee;
  • restoring a benefit or advantage; and
  • paying compensation.

The Employment Tribunal (established by the Employment Act in 2008) and, to some extent, the Labour Relations Authority are specialised forums for the resolution of employment matters.

It is possible to bring class action claims. An employer or the employee may be self-represented, or represented by a representative, or by an attorney.

Arbitration is not possible for the resolution of an employment dispute.

The costs (including attorney’s fees) associated with a case (for the claimant and respondent) are generally not awarded by the Employment Tribunal regardless of the outcome. However, the Employment Tribunal has in January 2022 implemented a new Employment Tribunal Regulation which repealed the previous Regulation that had stipulated an express prohibition on awarding costs and attorney’s fees. This change to the Regulation was brought as a result of the Civil Procedure Act which allows costs and attorney’s fees to be awarded to the winning party in civil claims for a first time in the Maldives.

There has not yet been any case law on this subject matter and it is yet to be seen how and in what instances the Employment Tribunal would award costs and attorney’s fees to the winning party. Unlike before, the claimant and/or respondent have the opportunity to seek an order for costs and attorney’s fees.

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Trends and Developments


Authors



S&A Lawyers LLP is a market-leading law firm specialising in corporate and commercial law, providing legal services to key government agencies, international financial institutions, and large local and multinational corporations. The firm provides a broad range of services on matters pertaining to employment law in the Maldives, including general advice on employment agreements and policies, dismissals, employment benefits and incentives, disciplinary and discrimination matters, and regulatory compliance. The firm mostly represents employers from the tourism industry in the Maldives – the industry consisting of the greatest number of employees. The firm has represented its clients in all aspects of employment law and many cases have been recognised as landmark cases in the legal landscape of employment law.

Increased Clarity on the 2020 Amendments of the Employment Act

The year 2020 saw the first significant amendment to the Employment Act (the "Act"). It was also a year where there were several measures taken by both the private and public sector to counter the effects of the COVID-19 pandemic on the Maldivian economy. Over the past year, government authorities have provided greater clarity to this important area of law through new regulations.

Some of these key areas of development in the regulations and legislation are discussed in this article.

Lifting the State of Public Health Emergency

The Maldivian government declared a State of Public Health Emergency after the first reported case of COVID-19 was identified on 12 March 2020. Subsequently, the Parliament enacted a special legislation under the Public Health Emergency Act 2020 (the “PHE Act”) to address a wide range of social and economic matters including numerous employment law concerns resulting from the COVID-19 pandemic.

The most significant employment related matter under the PHE Act was that employees were entitled to special paid leave under circumstances where the employee is required to quarantine. There was no limitation on the number of days of special leave that an employee was entitled to, and these were granted in addition to other statutory leave under the Employment Act. The PHE Act also allowed employers to layoff or terminate or reduce salary of employees under certain circumstances relating to COVID-19.

The PHE Act came into force on 22 September 2020 and, as the government lifted the state of public health emergency on 13 March 2022, the benefits under the PHE Act ceased after a period of 60 days on 12 May 2022.

Minimum Wage Order

Background

The first legislation governing employment was enacted in the Maldives in 2008. Section 59 of the Employment Act empowered the government to issue an order to set the minimum wage after consultation with the Salary Advisory Board. However, no such order was made and the matter relating to minimum wage became a matter of public interest in the Maldives 2018 presidential election. The introduction of a minimum wage was part of the presidential pledge made by the current administration when it assumed office in November 2018. However, several factors, including the economic impact of COVID-19 pandemic, delayed any action on the pledge and it was only addressed as part of the amendment to the Employment Act enacted on 22 September 2020.

This amendment, which was the sixth amendment to the Act, was the most substantive amendment since its introduction in 2008. The amendment to Section 59 of the Employment Act created an obligation for the relevant government minister to introduce a minimum wage for all employees working in the Maldives. This changed the position of the introduction of minimum wage from a discretionary matter to a mandatory requirement. The amendment also replaced the previous Salary Advisory Board with Minimum Wage Advisory Board, tasked with a specific mandate to advise the Minister of Economic Development on minimum wage matters.

The amendment required the minimum wage for all Maldivian employees to be effective before 1 January 2022. However, the 7th Amendment to the Employment Act, which was ratified on 21 September 2022, has removed the earlier statutory time frame for implementation of minimum wage for expatriate employees in the Maldives. Instead, the new amendment now makes the implementation subject to government discretion as and when the relevant Minister may make any such order. The distinction between Maldivian nationals and expatriates in terms of when the minimum wage is implemented could be considered as unconstitutional as the amendment allows the employer to discriminate based on the nationality of the employee. In addition, this could be considered as being in violation of Section 2 of the Employment Act that prohibits an employer from discriminating based on the nationality of the employee. However, there has not been any reported cases of such complaints filed with any authority.

The minimum wage proposed by the Minimum Wage Advisory Board is to be reviewed every two years. It is expected that the minimum wage for expatriate employees would be the same as the Minimum Wage Order that is currently in effect for Maldivian employees.

Minimum Wage Order

The Minister of Economic Development issued the Minimum Wage Order setting the minimum wage for Maldivian employees on 8 November 2021. The minimum wage was set based on the recommendation of the Minimum Wage Advisory Board. 

The minimum wage is defined as the employees’ basic salary and fixed allowances. The basic salary is the amount agreed in the employment agreement and, in most instances, it is considered the pensionable wage. Fixed allowances are any allowance stated in the employment agreement, excluding the basic salary, that is payable monthly without any deductions. The minimum wage does not include variable allowances such as overtime payment, service charge, contractual annual bonus, in-kind benefits such as accommodation, food, travel, insurance, or any other statutory benefits such as Ramadan allowance.

The sixth amendment to the Employment Act required the Minimum Wage Advisory Board to propose minimum wage based on industries such as fisheries, tourism, construction, transport, health and education. However, it is notable that the recommendation made by Minimum Wage Advisory Board was based on the size of the employer as opposed to the industry. This may have been because of the wide range of employers within any given industry or in order to achieve greater clarity in classifying employers based on Small and Medium Enterprises Act 2013 (“SME Act”). The Minimum Wage Advisory Board and the relevant Minister are empowered to request any employer for all information relating to minimum wage. If an employer fails to provide any such requested information, the employer could face a penalty of up to MVR50,000 and can be forced to disclose through an order.

The Minimum Wage Order distinguished the minimum wage based on private and public sector. The Minimum Wage Order defined minimum wage on an hourly rate for the private sector and contractual staff of the public sector. However, the minimum wage for full-time public-sector employees were set as a monthly minimum wage. 

Minimum wage – private sector

The minimum wage for private sector is based on hourly rate, and it differs depending on the classification of employer. The applicable minimum wage depending on the classification of the employer is summarised below.

Micro enterprise: no applicable minimum wage

Characteristics:

  • less than six employees;
  • annual revenue up to MVR1 million; and
  • annual net profit up to MVR250,000.

Small enterprise: minimum wage of MVR21.63 per hour

Characteristics:

  • six to 30 employees;
  • annual revenue between MVR1 million and MVR10 million; and
  • annual net profit between MVR250,001 and MVR2.35 million.

Medium enterprise: minimum wage of MVR33.65 per hour

Characteristics:

  • 31 to 100 employees;
  • annual revenue between MVR10 million and MVR30 million; and
  • annual net profit between MVR2.5 million and MVR5 million.

Businesses not governed by the SME Act:

Minimum wage of MVR38.46 per hour

Employers that do not fall within any classification above:

Minimum wage of MVR21.63 per hour

Minimum wage – public sector

The minimum wage for the public sector full-time employees that work at least 30 hours per week is set at MVR7,000 per month. The minimum wage for all other public sector employees is set at MVR33.65 per hour.

Penalty

Any employer who fails to pay the minimum wage would be considered to have committed an offence and could face a penalty between MVR1,000 – MVR3,000 for every instance of breach. In addition, if such a complaint is filed with the Employment Tribunal and the Tribunal was to find that the employer failed to pay the minimum wage, an order could be made requiring the employer to make up the shortfall and comply with the Minimum Wage Order.

Service Charge

Background

The Maldives is a popular tourist destination with approximately 170 resorts, each operating on a separate uninhabited island. In the early stages of tourism industry, levying a set service charge was not a common practice, and instead it was more customary that guests would directly tip employees.

In the late 1990s, the growth of tourism industry and operation of international hotel brands in the Maldives brought greater worldwide industry standards which included levying a service charge from the guests and distributing this among the employees at the resort. There was no legislation governing the requirement to distribute service charge to tourism industry employees at the time, however, its distribution became inevitable to retain talent and match the benefits of international hotel brand resorts.

The Employment Act 2008 did not impose an obligation on the employer to levy a service charge in the Maldives. However, it did impose an obligation to distribute the service charge amongst the employees if the service charge was levied. An employer may deduct an administrative fee, which was not to exceed 1% of the total service charge collected per month.

Sixth Amendment to Employment Act 2008 (effective January 2021)

This amendment made it compulsory for tourism industry to levy a minimum of 10% as service charge and distribute the service charge equally amongst all employees. The employer may deduct not more than 1% of the service charge as an administration fee.

Service Charge Regulation (effective March 2021)

Service charge requirement

Service Charge Regulation (the "Regulation") brought much needed clarity to the collection, distribution, record keeping and reporting obligations of the employer.

The Regulation defined the tourism establishments in the Maldives to include resorts, hotels, guest houses, tourist vessels and yacht marinas. The most predominant form of tourism establishment is the one-island-one-resort concept where each resort island has a resort operator. A resort generally has multiple amenities such as a wellness centre, restaurants, and water sports and diving facility. Such facilities could sometimes be outsourced to a specialised operator that will separately manage and operate the specific facility usually on a profit-share basis.

It is not mandatory to levy service charge for the following:

  • staff café/restaurant/canteen;
  • retail stores; or
  • rent of rooms and villas leased on long-term strata basis.

Distribution of service charge

Service charges collected from the previous month shall be distributed to employees before the end of the subsequent month. Service charges shall be distributed equally amongst all employees who are directly and indirectly involved in providing services for the employer.

Service charges collected from tourism establishments and outsourced facilities shall be separately distributed amongst the employees of the respective employer. For instance, if the spa is outsourced to a third party, the service charge collected from the spa services shall be distributed amongst employees of the spa only. Service charge is payable for the days worked by the employee and shall not be deductible for leave days utilised pursuant to leave entitlements under the Employment Act.

Recordkeeping and Reporting Obligations

The employer shall maintain monthly records regarding service charge, and such records shall be provided to the Labour Relations Authority (LRA) promptly if requested.

Employers levying service charge shall be registered with the LRA. The monthly records retained by the employer shall be provided to LRA and Maldives Inland Revenue Authority (MIRA) in the following manner:

  • records of the first six months of the year – before 1 October of the same year; and
  • records of the final six months of the year – before 1 April of the following year.

Penalty

If a business in the tourism industry fails to levy service charge or distribute service charge equally in accordance with the Service Charge Regulation, depending on the size of the business, the employer may be fined an amount not exceeding MVR100,000.

If the employer fails to keep records or to provide records to LRA when requested, the employer will be fined the first time an amount not more than MVR10,000 and an amount not more than MVR50,000 for any subsequent time. If service charge records are not submitted to LRA and MIRA on time as required under the Regulation, the employer shall be given seven days to submit the information, failing which a fine not exceeding MVR25,000 shall be imposed. In the event the same is repeated, a fine not exceeding MVR50,000 shall be imposed every time such is repeated.

Costs and Attorney’s Fees

Costs and attorney’s fees have not been awarded by the Employment Tribunal as of date. Section 48 (c) of the Employment Tribunal Regulation 2015 states that costs and attorney’s fees will not be awarded. Consequently, each party will bear their own legal fees, irrespective of whether they win or lose the case.

However, the new Employment Tribunal Regulation which came into force in January 2022 has repealed the provision regarding the costs. As a result, a winning party may now claim costs and attorney’s fees. This is in line with the new Civil Procedure Act (CPA) which allows the court to award costs and attorney’s fees to the winning party (except in family or inheritance related matters).

The costs awarded, if any, will be determined by the Employment Tribunal or the court and it is unlikely that the winning party will recover all legal fees.

Statutory Limitation for Submitting Employment Related Complaints

The Civil Procedure Act which came into force in June 2022 states that all employment related matters, including claims for unfair dismissal, must be filed within a period of three months from the date of termination of employment or date on which right to file claim arose. Prior to the CPA, the statutory limitation period of three months applied only to a claim for unfair dismissal. For all other employment related claims, such as non-payment of wages, or unlawful deductions from wages, there was no statutory limitation period. 

Concluding Comments on Future Trends

The implementation of a minimum wage for all Maldivian employees effective 1 January 2022 is long awaited and a positive step forward in ensuring a minimum income is guaranteed specially for the lowest paid employees. Its implementation had a positive impact on the take home pay for a significant number of employees. The revision of the minimum wage in every two years will allow the policy makers to change minimum wage based on inflation, cost of living and other economic factors.

The Service Charge Regulation has brought clarity on the distribution of the service charge. The requirements to maintain records, and the bi-annual reporting (with details consisting of monthly payments of service charge to each employee) to the LRA and MIRA will strengthen compliance and enforcement.

The Civil Procedure Act sets a statutory limitation of three months for all employment related disputes. The CPA and the changes brought to the Employment Tribunal Regulation 2022 will allow the winning party to claim costs, which may be awarded at the discretion of the Employment Tribunal or the court.

As a result of the lifting of the state of public health emergency on 13 March 2022, the benefits (such as paid medical leave during a mandatory quarantine, in addition to statutory leaves) under the PHE Act have ceased as of 12 May 2022.

Changes to employment-related laws and policies have always been topical in election manifestos and pledges. Presidential elections will be held in 2023. Political parties have not made any specific pledges relating to employment matters yet. However, it is likely that the key political parties and presidential candidates will announce their policies relating to employment in their election manifestos and key pledges.

It is also likely that such policies would address the most pressing issues such as youth unemployment and under employment, particularly in the rural areas and among the female youth. Other key areas of employment-related matters include workplace health and safety, skills development to meet the skill gap, and the ever-increasing number of expatriates and undocumented foreign labour in the Maldives.

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Republic of the Maldives

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Law and Practice

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S&A Lawyers LLP is a market-leading law firm specialising in corporate and commercial law, providing legal services to key government agencies, international financial institutions, and large local and multinational corporations. The firm provides a broad range of services on matters pertaining to employment law in the Maldives, including general advice on employment agreements and policies, dismissals, employment benefits and incentives, disciplinary and discrimination matters, and regulatory compliance. The firm mostly represents employers from the tourism industry in the Maldives – the industry consisting of the greatest number of employees. The firm has represented its clients in all aspects of employment law and many cases have been recognised as landmark cases in the legal landscape of employment law.

Trends and Development

Authors



S&A Lawyers LLP is a market-leading law firm specialising in corporate and commercial law, providing legal services to key government agencies, international financial institutions, and large local and multinational corporations. The firm provides a broad range of services on matters pertaining to employment law in the Maldives, including general advice on employment agreements and policies, dismissals, employment benefits and incentives, disciplinary and discrimination matters, and regulatory compliance. The firm mostly represents employers from the tourism industry in the Maldives – the industry consisting of the greatest number of employees. The firm has represented its clients in all aspects of employment law and many cases have been recognised as landmark cases in the legal landscape of employment law.

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