The Maldives Government has brought out the service charge regulations required under section 52 of the Employment Act, published on 16 March 2021. The authority responsible for its enforcement is the Labor Relations Authority.
According to the regulations, service charge must be collected by every business operating within the tourism sector. It is levied at the rate of at least 10% on the price of each of the services provided by the business. Every transaction that is liable to collect service charge must specify the amount collected as service charge.
Furthermore, the amount due to an employee as service charge for a given month shall be decided based on the division of the total receipts by the number of days of the month multiplied by the number of days worked by the employee.
Daily amount due for an employee is assessed by dividing the total amount to be distributed as service charge by the total number of days worked by employees in that month. In assessing the days worked by an employee, their paid leave and off days should not be counted out and shall be included.
Receipts of service charge for the previous month shall be distributed to employees before the end of the current month. Arrangements shall be made by employers to inform and advise their employees of total receipts for the previous month as service charge and distribution due for an employee who worked during that month. This should be advised before the end of the current month.
If service charge is not collected by a tourism sector business according to law or if an employer fails to distribute service charge as required by law, a fine not exceeding MVR100,000 would be levied.
If requisite information on service charge collection and distribution is not maintained according to these regulations by a business that collects service charge, or if an employer does not abide by a directive issued by the Labor Relations Authority, a fine not exceeding MVR10,000 may be levied at the first instance, and a fine not exceeding MVR 50,000 may be levied at every repetition.
Where requisite information on service charge collection or distribution is not filed within the deadline, a grace period of 7 days would be provided to file the overdue information, and any failure to do so would invite a fine not exceeding MVR 25,000 at the first instance, and MVR50,000 for every repetition.
For more information, read the published regulation here: https://www.gazette.gov.mv/gazette/download/6029