8. Service Charge (RA 11360; DO 242, s. 2024)

Establishments

Applies only to establishments collecting service charges such as hotels, restaurants, lodging houses, night clubs, cocktail lounge, massage clinics, bars, casinos and gambling houses, and similar enterprises, including those entities operating primarily as private subsidiaries of the Government. (Labor Code, Art. 96)

Service Charge different from Tip

Tip, not normally part of the salary, it being given voluntarily by the customer. Service charges are considered part of the cost of the food, goods, or services ordered by the customers.

Distribution

• 100% of collected service charges distributed completely and equally among covered employees
• Management retains no portion for losses, breakages, or distribution to managerial employees, who are excluded from the distribution, under RA 11360 and DOLE Department Order No. 242, s. 2024
• Distributed and paid to the employees not less than once every 2 weeks or twice a month at intervals not exceeding 16 days
• Supervisory employees who are not managerial employees share in the 100% distributed to covered employees.

Abolition and Integration

In case the service charge is abolished, the share of the covered employees shall be integrated into their wages. (Labor Code, Art. 96)

The basis of the amount to be integrated shall be the average monthly share of each employee for the past 12 months immediately preceding the abolition or withdrawal of the charges. (IRR Labor Code, Sec. 5, Rule VI, Book 3)

OCCUPATIONAL SAFETY AND HEALTH STANDARDS LAW (R.A. No. 11058)

Under this law, Er is required to observe safety standards and provide safety devices. On the part of the Ee, the Implementing Rules require proper use of these safeguards and devices. (Azucena, 2021)

Synthesis of the Rules

• Service charges must be pooled;
• 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 services charges. (DOLE Handbook on Workers’ Statutory Monetary Benefits, 2014ed.)
• The entire amount of service charges collected is distributed equally among covered employees, except managerial employees, under RA 11360 and DOLE Department Order No. 242, s. 2024;
• It shall be given twice a month with intervals of not more than 16 days;

If the service charge is abolished, the covered employees’ service-charge share shall be integrated into their wages based on their average monthly share for the 12 months immediately preceding abolition. Voluntarily given tips are not automatically subject to this integration rule under RA 11360.