The overall Philippine hotel industry boomed post-COVID-19, and with the annual growth, it escalated to 4.11% and will continue to grow consistently until 2028. This escalation growth is supported by legal frameworks enacted to ensure agency workers are paid fairly. The service sector entities are supposed to function and, by law, comply with the amended Service Charge Law so that all workers receive just and proper treatment.
Republic Act No 11360 of 2019 is known as Service Charge Law. This law states the simple thing. Whatever the service charges in hotels, restaurants, and other similar establishments should be fairly distributed to employees. The wage amount may increase or decrease, but it should not affect the number of charges employees receive.
Overall, the "Department of Labor and Employment," also known as DOLE, regulates implementing rules and regulations. Distribution Service charges must be distributed completely and equally among the covered employees except managerial employees.
Let's understand service charges and their laws for hotels, employers, and employees to ensure the right implementation.
The Philippines is one of the tourist areas where there is more interaction between hotels and restaurants than in regular cities. The service charge law is one pivotal change that has resulted in a positive shift in employment. The laws are designed for fairness and transparency in the service industry, regardless of the workers' minimum wage.
The department order signed by Labor Secretary Bienvenido Laguesma noted, “All service charges collected by covered establishments shall be distributed completely and equally based on actual hours or days of work or service rendered among the covered employees.
New laws were introduced in 2024, which is important for service-based sectors to stay updated on as it surely impacts their workers and employees. Fairly, it was to improve the livelihoods of employees.
Various rules and key provisions regarding the Philippines' service charges need to be addressed and taken care of.
Department Order No. 242, series of 2024, was issued by the Philippine Department of Labor on February 1, 2024. The revised rules and regulations of Article 96 were implemented to ensure compliance with the labor code.
Let's go through each one so that you are up to date with the compliance and overall implementation of the charges.
All service charges should be shared equally amongst employees, their hourly days worked, and their wage calculations. Meanwhile, employers still retain the legal right to discipline employees, provided such managerial actions do not interfere with the distribution of service charges.
Direct employees and hired workers in private establishments are entitled equally to their share of service charges. All workers, whether in employment or otherwise, should receive the service charges fully and without discrimination.
Every employee, except managerial staff or authorized staff, is entitled to share the service charges, no matter their position, designation, employment status, or wage method. This includes non-regular workers as well as employees who were previously excluded. Management must enforce the management policies in such a manner that service charges are fairly and equitably distributed among the employees.
In a way, it is fair to distribute the charges amongst those working in the service sector facilities.
The distribution of service charges should occur at least every two weeks or, overall, twice a month. To make it easy, within 16 days. Article 96 of the Labor Code states that it is mandatory to distribute the service charge collection, where the full amount should not go to the business.
The law stipulates that 85% of the collected service charge should be distributed amongst employees, and the rest, 15%, should be allocated to the management for breakages and losses if they happen.
This distribution scheme applies to both regular and probationary employees, promoting fairness in sharing funds. Moreover, it provides an additional source of income for service industry employees, complementing their regular wages.
The rule says service charges should be equally distributed if included in the bill. Generally, it is lawful to mention the service charge in the bill in the first place.
If any non-compliance activity is addressed, it leads to penalties and employee claims. If service charges are not distributed regularly and equally, employees can file a complaint against the workplace with the Department of Labor and Employment
Reasonable and unreasonable service charges have a simple meaning. Reasonableness determines whether the service charge is legally acceptable to customers. There are no strict laws regarding reasonable service charges from customers. Still, it is important to ensure that the charges reflect the services received overall and are not excessive or invalid.
Under the Consumer Act of the Philippines, consumers are generally protected from the unfair distribution of wage laws, which may include unjustified service charges. If any consumer witnesses exorbitant service charges, they can file complaints with the Department of Trade and Industry.
In February 2024, the DOLE issued department order no. 242, where revising the Service Charge Laws is implemented. Dole directed its regional, provincial, field, and satellite offices to monitor the compliance of establishments that collect service charges. This states the establishments' compliance with covered employees' dispute referral system.
This change ensures that a broader range of establishment workers, such as waiters, chefs, assistant cooks, or any other support staff, receive a fair share of the total service charges.
Overall, this update in the service charge law reflects the government's commitment to ensuring fair compensation for all types of services and sector workers and promoting the equity and transparency of the distribution of service charges.
The service charge laws of 2024 are a pivotal step in the service industry. They represent fairness, transparency, and equal service charge distribution among employees. They have mandated the equal distribution of service charges, which has expanded the coverage and employee category to receive timely, full, and equal payment.
Moreover, it has a positive compliance effect and consumer protection that underscores the government's commitment to service sector employers. Here, these payments give employees the upper hand in terms of the cost of living apart from their monthly fixed wage.
Overall, employers and employees should always stay up to date with the regular updates that are reinforced by the government to avoid penalties and unfair activities in establishments. Moreover, it drives smooth operations in the organization that promotes progressive legislation.
The Service Charge Law requires that service charges collected from establishments such as hotels and restaurants be equitably distributed: 85 percent to employees, while 15 percent goes to management. Here, covered employees means all employees directly engaged in service charge collection establishments except managerial staff.
The service charges must be distributed at least once every two weeks or twice a month so that the employees do not suffer from irregular income supplementation as prescribed under Article 96 of the Labor Code.
Non-compliance results in fines and claims from workers. Workers may bring complaints before the DOLE. Labor and Employment DOLE shall investigate claims, and violations shall be resolved.
No, service charges cannot be included in the minimum wage. They constitute additional pay shared fairly and separately by the employees under the law.
The Consumer Act of the Philippines protects consumers from excessive and unfair service charges. If a consumer experiences an unjustified charge, that consumer can now file a complaint with the Department of Trade and Industry.
Entities operating primarily and providing services have service charges mentioned in the bill, which need to be paid by customers. There are a few service charge collecting establishments, and they are;