From 85% to 100%: Service Charge Should Now Fully Go to Employees

(SPOT.ph) It might surprise you to learn that the service charge added to your bill doesn't entirely end up with the employees who served you (as in the name), but that is fortunately now in the past with the Department of Labor and Employment’s (DOLE) revision of the Service Charge Act.

All employees are now entitled to receive 100% of the service charge from customers, which means a potentially higher take-home for those working in the service industry. This was done under the revised implementing rules and regulations (IRR) of Republic Act 11360, issued through Department Order No. 242, series of 2024. In effect since February 1, this applies to all establishments collecting such charges, like hotels and restaurants.

DOLE noted that service charge should be split “completely and equally, based on actual hours or days of work or service rendered, among the covered employees.” Employees must also receive their share at least bi-monthly, with no more than 16 days between payments.

Before the new IRR, the standard procedure was to distribute 85% of the collected service charges to employees, while the remaining 15% could be retained by the management to cover administration and distribution costs under Article 96 of the Labor Code.

Also read: Is There a Proper Amount to Tip Your Food Delivery Rider?

What to know about DOLE's new rules on service charge

This change includes all employees—contractual, non-regular, or agency workers—in the distribution of service charges. Specifically, the new guidelines specify that "all employees are covered except 'managerial employees', regardless of their position, designation, or employment status, and irrespective of the method by which their wages are paid."

The revised guidelines also emphasizes the non-diminution of benefits, meaning that the implementation of these new rules should not result in a reduction of the existing benefits of the covered employees.

Another key feature of the new IRR is the provision for resolving disputes regarding the distribution of service charges. It has expanded the dispute referral system to include DOLE's regional, provincial, field, or satellite offices with jurisdiction over the workplace so concerns can be addressed efficiently.

Employees who do not receive their rightful share of the collected service charge may complain to the DOLE or request assistance from the National Anti-Poverty Commission. They can do so anonymously.

Is service charge the same as tipping?

RA 11360 does not touch upon the practice of tipping by customers. 

However, NAPC Alternate Sectoral Representative Danilo Laserna clarified that this is separate and in addition to the service charge. Tipping remains a discretionary practice, where customers can give extra money directly to the service workers as a token of appreciation for good service whether or not a service charge is added to the bill.

Also read: To Tip or Not to Tip: What a GrabFood Rider Has to Say, Based on Experience