Tips Cannot Count Towards The Minimum Wage

Co-authored by Wong Keat Ching and Teoh Alvare of Zul Rafique & Partners

The Minimum Wages Order 2012 (MWO 2012) went into effect on January 1, 2013. The accompanying guidelines—"Guidelines on the Implementation of the MWO 2012"—made it clear that employers could use payments other than an employee's wages to count towards the minimum wage and to meet the employer's payment requirements. In a key court decision, the 2012 guidelines have been held to be ultra vires and unlawful insofar as they allow hotels to count service charges that employees receive towards their wages.

Paragraph 3(v) of the 2012 Guidelines expressly provides that, "for the hotel sector where the service charge collection is implemented, the employer may convert all or part of the service charge meant for distribution to the employee, to form part of the minimum wages."