Service Charges

Service charge is an additional pay given to covered employees by establishments that collect service charges for services rendered. Establishments collecting service charges are required to pay all of them to rank-and-file employees. Service charges shall be distributed completely and equally, based on actual hours or days of work or service rendered.

1. Concept

Service charges – refer to the additional payment for services collected by hotels, restaurants, and similar establishments. (Article 96, Labor Code, as amended by R.A. 11360)

These establishments include those entities operating primarily as private subsidiaries of the Government. (Section A, Chapter 7, 2022 DOLE-BWC Handbook on Workers’ Statutory Monetary Benefits, p. 24)

2. Covered and excluded employees

All employees, except managerial employees as defined by law, under the direct employ of the covered establishment, regardless of their positions, designations or employment status, and irrespective of the method by which their wages are paid, are covered. (Section B, Chapter 7, Ibid.)

a. Distribution

All service charges actually collected shall be distributed completely and equally, based on actual hours or days of work or service rendered, among the covered employees, including those already receiving the benefit of sharing in the service charges. (Section C, Chapter 7, Ibid.)

b. Those already enjoying the benefit prior/at effectivity of R.A. 11360

All employees who are already receiving service charge prior to, or at the time of the effectivity of Republic Act No. 11360 and its implementing rules and regulations, including contractor’s employees, shall continue to be entitled to the distribution of collected service charge. (Section 2, DOLE Labor Advisory No. 14, Series of 2019)

3. Payment

The service charges collected shall be distributed and paid to the covered employees once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. (Section D, Chapter 7, Ibid.)

4. Minimum wage increase

In the event that the minimum wage is increased by law or wage order, the service charges paid to the employees shall not be considered in determining the establishment’s compliance with the increased minimum wage. (Section D, Chapter 7, Ibid.)

5. Employment contract, company policies, CBA

The above discussion may be superseded by any stipulation favorable to the employee via an employment contract, company policies, collective bargaining agreement, or analogous thereto.

References

▪ Republic Act No. 11360

⦁ Book III, Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

⦁ Book IIII, Omnibus Rules Implementing the Labor Code

▪ 2022 DOLE-BWC Handbook on Workers’ Statutory Monetary Benefits

▪ DOLE Department Order No. 206, Series of 2019

▪ DOLE Labor Advisory No. 14, Series of 2019

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/Updated: March 5, 2023