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Case Update: Service charge should be included in calculation of wages in retirement benefits

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EMPLOYMENT & INDUSTRIAL RELATIONS
Employment – Retirement benefits – Wages – Service charge – Whether service charge should be included in the calculation of wages in retirement benefits – Employment Act 1955, section 2
 
National Union of Hotel, Bar & Restaurant Workers Peninsular Malaysia & Anor v Mahsyur Mutiara Sdn Bhd (Sheraton Langkawi Beach Resort)
[2018] 1 ILR 241, Court of Appeal
 
Facts The first appellant is a trade union registered under the Trade Unions Act 1959 in which Puan Zurriyani is a member. The respondent is a company and operates a hotel known as Sheraton Langkawi Beach Resort. The first appellant and respondent had entered into a collective agreement (“the CA”). Upon Puan Zurriyani’s retirement, she lodged a complaint with the first appellant that the respondent had failed to pay her retirement benefits and that the service charge, which was part of the wages, had not been included in the calculation of retirement benefits. The first appellant then lodged a complaint for non-compliance with the CA to the Industrial Court. The Industrial Court ordered the respondent to comply with the CA and pay the sum of retirement benefits which included service charge. Dissatisfied, the respondent applied for judicial review to quash the award. The application was allowed and the High Court held that the service charge was not part of the wages and should not be included in the calculation of retirement benefits. Hence, this appeal.
 
Issue The issue is whether the service charge should be included in the calculation of wages in the retirement benefits.
 
Held In allowing the appeal, the Court of Appeal held that since the CA was silent on the definition of ‘wages’, and in light of the definition provided by the Employment Act 1955 (“the Act”), the word ‘wages’ in the CA is to include all payments paid to employees for work done in respect of his contract of service which is not only confined to basic salary. Therefore, adopting the definition of the Act, it was held that service charge forms part of “wages” for the purpose of computing retirement benefits.