Hoteliers in Malaysia must pay out service charges collected to staff

Malaysia’s Federal Court has ruled that hoteliers must pay their workers the 10% service charge collected from customers, on top of their existing salaries. 

“Service charge, being monies collected from third parties, does not belong to the hotel. When it is paid by a customer as part of the bill, ownership in those monies does not vest in, or transfer to the hotel,” said Datuk Nallini Pathmanathan in a summary of her judgement to the press, according to The Edge media. 

“Ownership of the monies is immediately transferred and lies with the employees who are eligible to receive those monies,” she added. 

She said that the hotel has the task of collecting the money, but has to keep it separate from the funds for its own use.

Therefore hotels hold the service charges collected “effectively in trust for the eligible employees to be distributed on a specific date as provided for in their contracts”, she added. 

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The verdict was given in a civil appeal between Crystal Crown Hotel & Resort and the National Union of Hotel, Bar & Restaurant Workers, where the former was seeking a judgement on whether hotels could use the service charges collected to top up the monthly pay of their workers which fell below the minimum wage of RM1,000 (US$241).