The Working Pinoy

100% of service charges to be distributed to employees under new law

President Rodrigo Duterte has signed into law a bill that requires businesses to fully distribute their collected service charges to their employees.

Republic Act No. 11360 states that 100% of collected service charges must now be distributed equally to all rank-and-file and supervisory employees. Managers are also excluded from getting a share in the collective service charge.

Managers are defined as those “who lay down and execute management policies or hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees.”

What’s in the new Service Charge Law

In addition, the service charge distributed to the covered employees should also not be considered as the employer’s compliance to any new laws increasing the minimum wage.

A grievance mechanism to facilitate the resolution of any dispute between management and employees regarding the distribution of service charges must also be established.

Failure to establish such mechanisms, or inadequacies of any instituted mechanisms, shall be referred to the regional office of the Department of Labor and Employment (DOLE).

Bill sponsor thanks government for passing it into law

Senator Joel Villanueva, Senate Labor Committee Chairman and bill sponsor, lauds this development, which was almost four decades in the making.

Sa wakas, natapos na rin po natin ang laban ng ating mga manggagawa sa services sector na matagal nang hinihiling ang buong pagbabahagi ng service charge sa mga nagbibigay ng serbisyo sa mga restaurant, hotel, at mga katulad na establisyimento,” said Villanueva.

“The law allows our frontline service workers to enjoy the fruits of their labor, the reward for providing good, quality service.”

READ: Employment rate in Western Visayas at 94.6% as of April – DOLE

Villanueva adds that this amended provision should not diminish existing benefits that managers receive.

“Concerns on the possible effect of the measure on the benefits that managerial employees may receive are understandable. But we reiterate that the law also clarifies that nothing in it shall result in the diminution of existing benefits under present laws, company policies and bargaining agreements,” the senator said.

New Law amends old Labor Code Provision

Republic Act No. 11360 amends Article 96 of the Labor Code, which was established in December 1975.

Article 96 states that 85% of collected service charges by hotels, restaurants, and similar establishments must be distributed to all covered employees. The remaining 15% goes to management to cover losses and breakages, or for possible distribution to managerial employees.

January data from the DOLE shows that compliance rate to the old policy was at 99.65%, with 157 companies violating the regulation. However, Villanueva explains that despite this high compliance rate, the DOLE admitted that it did not examine whether the 85% is actually and accurately distributed to the covered employees.

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