Minimum Wage Increase Dilemma: Should Our Hotel Cover Security Agency's Extra Costs?

Dear Elders,

We are a leading boutique hotel registered under the Shops and Commercial Establishment Act. We have outsourced our security to another agency. The minimum wages were revised after we entered into the contract with them, wherein they had agreed not to hike their fees for at least one year. Now the security agency says that if it revises the rates paid to the guards as per the Minimum Wage (MW), then we should bear the additional cost as the principal employer. Our management obviously thinks otherwise. Who is right here? Please help.

Regards,
Shalini

A contract is an agreement between parties for a fixed set of terms and conditions. If you have a registered contract with the agency along with its validity period, it would hold good until then, subject to the clause that the rates won't be increased until the contract term expires. If not, then you might have to work around the increased rates and share the burden along with the agency.

Regards

There is no standard rule for this. It should be as per the agreement signed between the principal employer and the contractor. If 'not to increase the fees for one year' is a clause in the agreement, then the contractor cannot do so under any circumstances. Everybody knows that minimum wages are revised every six months, so the contractor must be aware that minimum wages will be revised within the next year. The contractor should have pointed this out at the time of signing the agreement itself.

But if such a clause is not mentioned in the agreement, then it should be resolved mutually.

Regards,
Kamal