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The above discussion may be superseded by any stipulation favorable to the employee via an employment contract, company policies, collective bargaining agreement, or analogous thereto.


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

/Updated: March 5, 2023

Content Details

Disclaimer: All information is for educational and general information only. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected. Please refer to our full Disclaimer.

For updates: If the legal provisions being discussed have been amended or repealed by legislation or has been the subject of a Supreme Court decision which may have impacted how it is interpreted, do let us know so we can consider for the next update. Reach out via our Contact Us

Related Content

FAQ: Night shift differential pay

Answers to frequently asked questions on night shift differential pay in the Philippines. 1) What is the difference between night shift differential pay and night

Holiday Pay

Holiday pay is a an additional pay provided to a covered employee during regular holidays.

FAQ: Overtime Pay

Answers to frequently asked questions on overtime pay in the Philippines. 1. In General What is overtime pay? Overtime pay – refers to an additional

Labor Standards

Labor standards refer to legally-mandated benefits required to be given to the employees by the employer or, in some cases, by the Government. Summary ▪

Cases: Premium pay

The following are the related or relevant Labor Law Cases or Jurisprudence on the topic. 1) Covered and excluded employees Peñaranda v. Bagana Plywood Corporation

Videos & Podcasts

DOLE Updates

Learn more via

Masterclass Courses