What if employer stops collecting service charges?


Under Article 96 of the Labor Code of the Philippines (P.D. 442), service charges are split between the employer and all covered employees. However, Duterte has signed Republic Act 11360. The new law amended Article 96 of the Labor Code of the Philippines which gave restaurant and hotel workers 85% of the service charge collected from customers while management retained the remaining 15%. Now, the new law mandates 100% of the service charges to be distributed to covered employees.

OLD LAW: All service charges collected by hotels, restaurants and similar establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees and fifteen percent (15%) for management. The share of the employees shall be equally distributed among them.

NEW LAW: 100% of all service charges collected by hotels, restaurants and similar establishments shall be distributed to all covered employees. The share of the employees shall be equally distributed among them.

Many people have expressed the view that hotels, restaurants and similar establishments now have the motivation to stop collecting or abolishing service charges. They argue that, since 100% of said charges are now due to the employees and management will get nothing out of it, there is no more reason for employers to burden their clients and customers with service charges.

What they forget is that the law has already set a protection to employees against such management action. According to Article 96, in case the service charge is abolished, the share of the covered employees shall be considered integrated in their wages. In other words, even if the employer decides to stop collecting service charges, covered employees are still entitled to the same amount of service charges as a new part or as addition to their wages.
Article. 96. Service Charges. x x x In case the service charge is abolished, the share of the covered employees shall be considered integrated in their wages.
This last paragraph of Article 96 of the Labor Code presumes the practice of collecting service charges and the employer’s termination of this practice. When this happens, Article 96 requires the employer to incorporate the amount that the employees had been receiving as share of the collected service charges into their wages. In cases where no service charges had previously been collected (as where the employer never had any policy providing for collection of service charges or had never imposed the collection of service charges on certain specified transactions), Article 96 will not operate. (G.R. No. 177524)

SOURCE OF NEWS AND HOT-LINKED PHOTO: Duterte signs law giving 100% of service charge in hotels, restos to workers, Published August 13, 2019 6:04pm By VIRGIL LOPEZ, GMA News. https://www.gmanetwork.com/news/news/nation/704426/duterte-signs-law-giving-100-of-service-charge-in-hotels-restos-to-workers/story/

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