WHO ARE COVERED BY THE LAW ON SERVICE CHARGE?
Establishments covered
The rules on service charge apply only to establishments collecting service charges, such as hotels, restaurants, lodging houses, night clubs, cocktail lounges, massage clinics, bars, casinos and gambling houses, and similar enterprises, including those entities operating primarily as private subsidiaries of the government.
Employees covered
The same rules on service charges apply to all employees of covered employers, regardless of their positions, designations or employment status, and irrespective of the method by which their wages are paid except those receiving more than P2,000.00 a month.
WHO ARE EXCLUDED FROM THE COVERAGE OF THE LAW ON SERVICE CHARGE?
Specifically excluded from coverage are employees who are receiving wages of more than P2,000.00 a month. However, it must be pointed out that the P2,000.00 ceiling is no longer realistic considering the applicable minimum wages prevailing in the country. Hence, it must be disregarded.
SHARING AND DISTRIBUTION
Percentage of Sharing
All service charges collected by covered employers are required to be distributed at the following rates:
[1] 85% to be distributed equally among the covered employees; and
[2] 15% to management to answer for losses and breakages and distribution to employees receiving more than P2,000.00 a month, at the discretion of the management.
Frequency of Distribution
The share of the employees referred to above should be distributed and paid to them not less often than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.
INTEGRATION
In case the service charge is abolished, the share of covered employees should be considered integrated in their wages, in accordance with Article 96 of the Labor Code. The basis of the amount to be integrated is the average monthly share of each employee for the past twelve (12) months immediately preceding the abolition or withdrawal of such charges.
SOME PRINCIPLES ON SERVICE CHARGE
Tips and services charges are two different things. Tips are given by customers voluntarily to waiters and other people who serve them out of recognition of satisfactory or excellent service. There is no compulsion to give tips under the law. The same may not be said of service charges which are considered integral part of the cost of the food, goods or services ordered by the customers. As a general rule, tips do not form part of the service charges which should be distributed in accordance with the sharing ratio prescribed under Article 96 of the Labor Code. However, where a restaurant or similar establishment does not collect service charges but has a practice or policy of monitoring and pooling tips given voluntarily by its customers to its employees, the pooled tips should be monitored, accounted for and distributed in the same manner as the service charges. Hence, the 85% : 15% sharing ratio should be observed.
The same rules on service charges apply to all employees of covered employers, regardless of their positions, designations or employment status, and irrespective of the method by which their wages are paid except those receiving more than P2,000.00 a month.
WHO ARE EXCLUDED FROM THE COVERAGE OF THE LAW ON SERVICE CHARGE?
Specifically excluded from coverage are employees who are receiving wages of more than P2,000.00 a month. However, it must be pointed out that the P2,000.00 ceiling is no longer realistic considering the applicable minimum wages prevailing in the country. Hence, it must be disregarded.
SHARING AND DISTRIBUTION
Percentage of Sharing
All service charges collected by covered employers are required to be distributed at the following rates:
[1] 85% to be distributed equally among the covered employees; and
[2] 15% to management to answer for losses and breakages and distribution to employees receiving more than P2,000.00 a month, at the discretion of the management.
Frequency of Distribution
The share of the employees referred to above should be distributed and paid to them not less often than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.
INTEGRATION
In case the service charge is abolished, the share of covered employees should be considered integrated in their wages, in accordance with Article 96 of the Labor Code. The basis of the amount to be integrated is the average monthly share of each employee for the past twelve (12) months immediately preceding the abolition or withdrawal of such charges.
SOME PRINCIPLES ON SERVICE CHARGE
Tips and services charges are two different things. Tips are given by customers voluntarily to waiters and other people who serve them out of recognition of satisfactory or excellent service. There is no compulsion to give tips under the law. The same may not be said of service charges which are considered integral part of the cost of the food, goods or services ordered by the customers. As a general rule, tips do not form part of the service charges which should be distributed in accordance with the sharing ratio prescribed under Article 96 of the Labor Code. However, where a restaurant or similar establishment does not collect service charges but has a practice or policy of monitoring and pooling tips given voluntarily by its customers to its employees, the pooled tips should be monitored, accounted for and distributed in the same manner as the service charges. Hence, the 85% : 15% sharing ratio should be observed.
• Service charges are not in the nature of profit share and, therefore, cannot be deducted from wage.
