Labor Relation Authority (LRA) has gazetted the new service charge regulation under the Sixth Amendment.
Following the Sixth Amendment, which came into force on 1 January 2021, all services provided in the tourism sector are required to levy a service charge at a rate not less than 10%. For all other sectors, levying a service charge has been made optional.
The new service charge regulation will require employers in the tourism sector to count off/rest days while calculating service charge for the month. Moreover, service charge should be distributed equally amongst all employees without any discrimination between employees and thereby requiring all employees to be treated alike.
Furthermore, it is now mandatory to disburse service charge collected in the previous month before the end of the current month.
The Sixth Amendment retains the discretion given to employers to withhold no more than 1% of total service charge collected per month as an ‘administrative fee‘.
Employers are required to maintain regular records of total income received as service charge, number of employees to whom service charge is distributed in a particular month, the amount entitled to each employee as service charge and the amount distributed as service charge. Employers are also required to share this information bi-annually both with the Labor Relations Authority (LRA) and Maldives Inland Revenue Authority (MIRA), in accordance with the new regulation.
Enforcement measures with respect to service charge regulation introduced under the Sixth Amendment, include an obligation on employers to disclose the records on service charge as and when requested by LRA. Further measures include, imposition of a fine not greater than MVR 50,000 on those employers who fail to maintain records of service charge or disclose such records to LRA.
Moreover, tourism businesses who fail to levy a 10% service charge or distribute service charge equally amongst the employees can face a penalty fine of not greater than MVR 100,000.