High Service Charge Paid by Resorts — Another Side to This Story?

From 1st January 2021 onwards, the law made service charge a mandatory levy in the Maldives tourism sector. This brought about a significant improvement to the livelihoods of hospitality workers, as resorts began to distribute service charge, of no less than 10 percent, equally among its employees.

The service charge paid by resorts is not published by the Tourism Ministry. Instead, employees of the resorts often provide this information, which is publicized on a Facebook page called “Resort Workers Maldives”. According to the page, service charge numbers for 38 resorts were published in December 2020. Out of these, service charges above USD 1,000 were paid from 19 resorts.

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Since then, the number of resorts that pays service charge has increased significantly. What’s more, for some resorts, the amount of service charge distributed to each employee has skyrocketed. Just last month, it was reported that a handful of resorts paid over USD 3000 as service charge. Several other resorts paid over USD 1000 in service charge as well.

Of course, these figures can be attributed to high tourist arrivals during the peak holiday season. However, the amounts distributed as service charge are For example, if a service charge of USD 3,000 is paid, USD 600,000 (MVR 9.2 million) will be required to be spent on service charge for a resort with 200 employees, and USD 1.5 million (MVR 23 million) will be required to be spent on service charge from a resort with 500 employees. Relative to the monthly income of a resort, this is a very high amount.

This begs the question: is there another side to this story that we do not know about? Are all employees of the resort being paid such high figures as service charge? Has the tourism industry improved this significantly? Or are some resorts using a trick in distributing their service charge, simply to show a high figure?

As mentioned earlier, it is now legally mandatory to distribute service charge to tourism industry workers. The Labor Relations Authority is empowered to impose a financial penalty not exceeding MVR 100,000 on any business within the tourism industry which fails to levy the service charge or distributes it unequally between staff. The authority is mandated further to provide in its regulations the manner in which the fine would be imposed or if and how other actions may be sanctioned against a defaulting business.

However, according to a resort employee, the government is doing very little in practice to implement the changes. The employee also stated that not done anything more to resolve the current issues. The result is that some resorts have started manipulating service charge numbers in order to show a high figure, by outsourcing the resort’s internal services.

For instance, under this outsourcing tactic, the spa will be operated by a separate party. The restaurant will be operated separately. Security and transport will be outsourced. Many other services will also be operated separately. This is done by establishing a separate company from the resort, or by giving these jobs to another party. Only a small number of employees will be designated as the resort’s own employees, which thereby increases the service charge per head of the resort. This is one of the facts hidden in the large service charge seen in many resorts.

A head of a large tourism company in the Maldives said that while many resorts do not pay “real service charges”, it is difficult for those who do to do so. Due to the service charge figure being publicized every month, resorts tend to face a lot of pressure. “We will always distribute service charges. However, those who do this are now facing pressure. A large service charge is currently being paid from many resorts, but not to all employees. Only to a few,” stated the company head.

Not all resorts manipulate their service charge figures in this way, however. Some resorts diligently distribute the service charge to each of their employees in a fair manner, which is what the law expects of them in the first place.

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