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Minimum Wage: A Safety Net for Workers

Work on minimum wage was initially declared on May 8, 2008, on the International Labour Day. However, implementation of a minimum wage remained stalled until it was re-initiated once again in May 2019 by establishing the Salary and Wage Advisory Board. The board developed the methodology to establish a baseline minimum wage that will be adjusted to the prevailing economic factors with technical assistance from the International Labour Organisation (ILO). An official report was published by the board to advise the Minister responsible for the labour mandate at the end of 2019.

However, with the emergence of the COVID-19 pandemic shortly afterwards, the government requested the board to undertake additional research considering the dire situation of the country’s economy, especially the impact on the Maldivian labour market.

During October 2020, the government expanded the minimum wage board with wider representation from all sectors: capturing both the business scale and gender dimension that prevails in the Maldivian business ecosystem. The 11-member board established additional tripartite dialogue to build on the methodology determined by the previous board. With the revised composition, the board conducted several exercises to update the baseline study and factoring the unique economic conditions that persisted post to the pandemic. The board presented the recommendation to the Minister of Economic Development, Uz. Fayyaz Ismail on 5th October 2021.

Based on the recommendations, Minister of Economic Development, Uz. Fayyaz Ismail on 8th November 2021, announced the first-ever minimum wage in the Maldives under a ministerial order. The order called for establishing a three-tier minimum wage that was differentiated according to the scale of businesses. Accordingly, the order established an hourly minimum wage rate of MVR 21.63 for small-scale businesses, MVR 33.65 for medium-scale businesses and MVR 38.46 for large businesses whilst businesses operating under the micro category were to be exempted from the minimum wage. The order also asserted the minimum wage to be effective for Maldivian employees starting from 1st January 2022.

Introduction of the minimum wages marked a pivotal point in the Maldivian labour market as it assured a guaranteed minimum pay for all Maldivian workers across all the sectors. This had indeed brought about a structural shift in the labour market with a positive spillover effect on the existing wage structure. The positive externalities also include the reduction in wide wage disparity and promote inclusive growth of the Maldivian labour market.

At the outset, it was estimated that at least 35,000 employees would benefit from the minimum wage, with around 39% (approximately 13,000) of the employees from the tourism sector benefiting from the minimum wage. Given that the government being one of the largest employers in the Maldives, around 46% (approximately 15,400) of employees will benefit from the minimum wage, though this will directly translate to an increase in the public finances. Further, state-owned-enterprises (SOEs) comprise 15% – third biggest impacted population – of those who are expected to benefit an increase in the wages due to the minimum wage.

The implementation of a minimum wage has resulted in significant changes in the Maldivian labour market, whilst favourably impacting strategic industries of the Maldives with significant local employment such as tourism. This has also been a huge step towards establishing the ILO-recognized decent work practices which will secure employee rights in the workplace and propel the Maldivian labour market forward.