The Ramadan Allowance

We wish all Maldivians and Muslims a blessed month of Ramadan.

Maldives begins the fasting month of Ramadan today on Tuesday, 13 April 2021.

The Ramadan benefit

Apart from the faith related significance of Ramadan, the month of Ramadan thrusts a legal obligation on all Maldives employers – a payment that has come to be coined as the “Ramadan Allowance”. Some even call it a “Ramadan Bonus”.

Actually, it is a statutory benefit payable (by law) to all Maldivian employees coinciding with the arrival of the holy month. The figure set by law is MVR3,000.00. The payment is due before the first day of Ramadan.

As the law currently stands, it does make a distinction between a Maldivian employee and an overseas employee. The law makes it compulsory for all employers to pay this statutory benefit to all Maldivian employees. If there are Muslims within the ranks of overseas employees of an employer, it is left to the discretion of the employer to make (or not to make) that payment.

In its application on Maldivian employees, the legal obligation of payment neither takes into account position rank seniority or function of an employee, nor does it draw a distinction between those having to report to work during Ramadan or would otherwise be on leave for the month.

The same is true as regards employees under permanent or temporary employment, or even probation for that matter.

The applicability criterion is simple:  is a person an employee during the month of Ramadan. If so, the law will bite the employer and come to the aid of the employee.

Legal development

How did it all begin? When was it introduced? How has it changed over the past?

The Employment Act was first introduced in 2008 as Law Number: 2/2008. It is interesting to note that the law did not in its original version have any mention of a payment specific to Ramadan.

However, just a few months after the birth of the Employment Act, and in the very same year of its introduction, an amendment was brought to the Act in the form of Law Number: 14/2008 on 13 October 2008. It incorporated several improvements to the existing law.

One of them was the introduction of the Ramadan benefit to all employees. This was achieved by the introduction of a new provision – section 51. The payment was to be made to all employees and the statutory minimum was set at one third the salary.

In just a couple of years, a second amendment was brought in 2010 on 7 August 2010 via Law Number: 12/2010. This time, the law was amended to make the payment applicable only to Muslim employees rather than all employees.

It further provided clarity on the minimum payment of one third of the salary.  The general rule still remained to be a minimum payment equivalent to one third of the salary. However, the law went on to explain that if the one third figure happened to be less than MVR 2,000.00 the minimum figure payable would be MVR2,000.00 and if the one third were to exceed MVR10,000.00 the payment would be capped at MVR10,000.00.

Five years later, a fourth amendment was brought on 11 June 2015 via Law number: 14/2015. This time the law amended the amount payable as benefit and provided for a standardized payment of MVR3,000.00. While retaining the earlier rule on payment being due only to Maldivian employees, the law left it to the discretion of employers to provide this benefit to overseas Muslim employees on their payroll.

Interestingly, the law allowed a year of hibernation for this new rule to take effect. As the new rule remained on hold, the clause did provide some interim measures.

The employers were asked to provide the Ramadan benefit at the rate of one third the salary. If one third of the salary happened to be less than MVR 2000.00, the floor was set at MVR2,000.00 and if the one third happened to be more than MVR10,000.00, the ceiling was fixed at MVR10,000.00.

Based on the above historical excursion, we can say that the current and prevailing position on this Ramadan benefit is that which was introduced on 11 June 2015.

Today, this benefit is a standardized payment set by law and fixed at MVR3,000.00 payable uniformly to all Maldivian employees alike irrespective of position, function, rank or seniority, and whether or not the employment is temporary, permanent or probationary.

Labor relations

Maldives Labor Relations Authority is a creature of statute. It was formed under section 76 of the Employment Act when the law was first introduced in 2008.

One of the objects of the authority is to ensure compliance with the employment law and regulations made under it. The authority is also tasked with the mandate to institute awareness on subjects covered in the law, and provide for a framework or channel to attend to disputes between employers and employees.

If an employer requires clarity on the entitlement (or not) of a person to this statutory benefit, it may contact its professional advisors or get in touch with the Labor Relations Authority for guidance and support.

By: MN

Photo: Courtesy Mihaaru