Service charge

Breakdown of service charges | The Manila Times

Dear PAO,

I work at a restaurant where there was a dispute recently over the distribution of service charges. The restaurant owner claims that as employees we only receive a portion of the service charge we collect from our customers. A senior employee, however, claims that employees should share the total amount of service fees collected and not just a part of it. They both say they have a legal basis for their claims. We are considering filing a complaint to clarify this issue, but we do not know if we have a legal basis for our complaint.


Dear Jenn,

From the details you provided, it appears there is confusion as to the breakdown of service charges collected by the restaurant you work for. This is likely due to changes in the law regarding the distribution of service fees.

The Philippine Labor Code previously had a provision applicable to your case, namely:

“Art. 96. Service charges. – All service charges levied by hotels, restaurants and similar establishments are distributed at the rate of eighty-five percent (85%) for all covered employees and fifteen percent (15%) for the management, the share of the employees is divided equally between them.In the event of the abolition of the service commission, the share of the employees covered is considered as integrated into their salary.

It may be on this basis that your employer asserted that service charges should be split between the employer and the employees. However, Republic Act 11360 (RA 11360) amended the above Labor Code provision. Under RA 11360, the relevant provision now reads:

“Art. 96. Service charges. – All service charges collected by hotels, restaurants and similar establishments are distributed in full and equally between the workers covered, with the exception of executives.” (emphasis ours)

Thus, the total amount of the service fees collected is now allocated to the employees covered without any part being paid back to the employer, contrary to the old law.

It is also important to note that, pursuant to the Implementing Rules and Regulations (IRR) of RA 11360 issued by the Department of Labor and Employment under Departmental Order 206, Series of 2019, covered employees by this rule in the service charges refer to all employees. , with the exception of executives, who are directly employed by the establishment, regardless of their position, employment status and method of salary payment. (section 2a)

Managerial employees, on the other hand, are those who are vested with powers or prerogatives to define or execute managerial policies, hire or transfer employees, among other things, or effectively recommend managerial actions. (Sec. 2c, id.)

In view of this, the old way of allocating service fees between employees and the employer has been replaced by the new law which grants covered employees the full amount of service fees collected.

We hope we were able to answer your questions. This advice is based solely on the facts you have related and our assessment of them. Our opinion may change when other facts are changed or elaborated.

Editor’s note: Dear PAO is a daily chronicle of the public ministry. Questions for Chef Acosta can be sent to [email protected]