Introduction

1. The Employment Act imposed a statutory obligation on the government to introduce a minimum wage in the Maldives. The Minimum Wage Advisory Board (“Advisory Board”), established under the Employment Act, has the mandate to research and advise the Minister of Economic Development (“Minister”) on the minimum wage that should be set after consultations with stakeholders. The Advisory Board on 5 October 2021 has given their recommendations to the Minister.

2. The minimum wage has not been approved at the time of writing this Memo, and as such, this Memo outlines only the proposed regime as recommended by the Advisory Board. The Minister has made an announcement on 10 October 2021 stating that the government is reviewing the recommendations made by the Advisory Board. It should be noted that the Minister is under a statutory obligation to gazette the minimum wage within 30 days of receiving the recommendation from the Advisory Board. As such, the Minister should make this announcement on or before 4 November 2021. 

Definition of Minimum Wage 

Minimum Wage = Basic Salary + Fixed Allowance

3. The minimum wage proposed by the Advisory Board is defined as the employees’ basic salary and fixed allowance(s), if any. Basic salary is the pensionable wage¹ whereas fixed allowance is the amount fixed into the salary structure without any deductions and excluding basic salary. 

4. Minimum Wage does not include the following:

1. Overtime 
2. Service Charge 
3. Public Holiday Pay 
4. In-kind benefits such as accommodation, insurance, transportation, food, and other such allowances.

5. The Advisory Board further recommended to restructure the salary composition so that the basic salary forms at least 70% of the minimum wage. 

Minimum Wage under the Employment Act 

6. The Employment Act enacted in 2008 provided the legal framework enabling the Minister to determine the minimum wage based on the recommendation of the Advisory Board. This was considered as a discretionary decision of the Minister. It was only in the Sixth Amendment to the Employment Act in 2020, that this discretionary decision was amended to a positive statutory obligation on the Minister to determine the minimum wage and implement the regime within a period as specified in the legislation. 

7. The 6th amendment to the Employment Act introduced a tripartite representation for the Advisory Board comprising of two government representatives (Ministry’s representative and a representative from the Ministry of Finance), four representatives from the employers’ associations (tourism, construction, female business owners and small / medium enterprises) and representatives from the employees’ association. 

8. The Employment Act requires the Advisory Board to recommend minimum wage for the following:

1. Fisheries and agriculture industry 
2. Tourism industry 
3. Construction industry 
4. Transportation industry 
5. Health sector 
6. Education sector 
7. Small and medium enterprises sector 
8. Information, communication, and technology sector 
9. Maritime industry.

9. However, the recommendations by the Advisory Board for the private sector is only limited to the size of the business (micro, small, medium, and large enterprise). The Advisory Board’s recommendation is silent on the proposed minimum wage for the different industries required under the legislation. 

Private Sector 

10. The minimum wage recommended for the private sector is based on an hourly rate and it differs based on classifications based on the size of the employer as detailed below. The minimum wage recommended for the private sector is summarised in the table below. 

Classification	Characteristics2	Hourly Rate	Monthly Wage*
Micro enterprise	Less than 6 employees Annual revenue up to MVR 500,000 Annual net profit up to MVR 75,000	No applicable minimum wage	No applicable minimum wage
Small enterprise	6 to 30 employees Annual revenue between MVR 500,001 and MVR 5 million Annual net profit between MVR 75,001 and MVR 750,000	MVR 24.04	MVR 5,000.00
Medium enterprise	31 to 100 employees Annual revenue between MVR 5,000,001 and MVR 20 million Annual net profit between MVR 750,001 and MVR 3 million	MVR 33.65	MVR 7,000.00
Others	Large enterprises and other businesses not governed by the Small and Medium Enterprises Act 2013	MVR 42.79	MVR 8,900.00

* The Monthly Wage calculated in this column is an example based on an employee that is contracted to work 48 hours per week (maximum number of working hours under the Employment Act). It is common practice that the working hours is calculated up to the statutory maximum 48 hours a week and overtime is paid for work done pass the 48 hours a week. Therefore, when calculating the minimum wage for an employee whose salary is set monthly, it is important to calculate the minimum wage based on the maximum working hours before overtime allowance becomes applicable. There is no restriction on an employer to require the working hours to be 48 hours and an employer has the flexibility to set a lower maximum working hours before over time payment may be applicable. For example, a medium-sized business may contract an employee to work 40 hours a week, on a monthly salary of MVR 5,833, with the employer agreeing to pay overtime pass the 40 hours of work per week.

Public Sector 

11. The recommended minimum wage for permanent employees of the public sector who work at least six hours per day is to be determined on a monthly rate. This contrasts with their recommendation on the private sector where the minimum wage is set on an hourly rate. The Advisory Board recommends that the monthly minimum wage for permanent employees of the public sector who work at least 6 hours per day should be MVR 7000.

12. It is our observation that the proposed monthly minimum wage for the permanent employees of the public sector is a more favourable rate in comparison to the proposed private sector hourly minimum wage recommended by the Advisory Board. This is because the regular working hours for public sector employees is 30 hours a week (and any work done pass the 30 hours is paid overtime). The proposed monthly minimum wage of MVR 7000 effectively means that the suggested hourly rate for permanent employees of the public sector that work more than 6 hours a week is MVR 53.03 per hour.

13. The recommended minimum wage for public sector employees that work less than six hours per day is proposed on an hourly basis is set at MVR 33.65 per hour. It is our observation that this is equivalent to the minimum wage hourly rate proposed for private sector medium enterprises. 

Implementation 

14. Maldivian Employees: The Minister is under a statutory obligation to publish the applicable minimum wage on the government gazette within 30 days of receiving the recommendation from the Advisory Board3, that is, on or before 4 November 2021. The Employment Act requires the minimum wage to be implemented for all Maldivians before the end of 2021⁴.

15. Expatriate Employees: The Sixth Amendment of the Employment Act provides for a mortarium of two years for implementation of minimum wage for expatriate employees. This statutory obligation requires the minimum wage for expatriate employees to be introduced on or before 22 September 2022. However, the Advisory Board has recommended that the moratorium of two years be extended to five years, that is, until 22 September 2025. It is noted that this recommendation by the Advisory Board cannot be made effective without the statutory amendment of the Employment Act to authorise any such extension.