Service Charges Should Now be Shared by Covered Employees under R.A. 11360 and no Share to the Management

Service Charges Should Now be Shared by Covered Employees under R.A. 11360 and no Share to the Management

On August 7, 2019 Republic Act (R.A.) 11360 was enacted mandating that all service charges collected by hotels, restaurants and similar establishments be distributed completely and equally among the covered workers except managerial employees. This amends Article 96 of the Labor Code, as amended.

See the PDF Version of R.A. 11360 Here

The law does not include any share for the management. Previously, the distribution used to be 85% for the workers and 15% for the management.

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Further, R.A. 11360 provides that in the event that the minimum wage is increased by law or wage order, service charges paid to the covered employees shall not be considered in determining the employer’s compliance with the increased minimum wage.

Illustration:

Average Service Charge distributed to each covered employee is P100.00 per day. Sometime in November 2019, a new NCR minimum wage order took effect granting P30.00 increase to the daily wage of all workers receiving the minimum.

The establishment cannot claim that it is already compliant due to distribution of the P100.00 average daily service charge share of each employee.

R.A. 11360 provides as well that to facilitate resolution of any dispute between the management and the employees on the distribution of service charges, a grievance mechanism shall be established. If no grievance mechanism is established or if inadequate, the grievance shall be referred to the regional office of the Department of Labor and Employment which has the jurisdiction over the workplace for conciliation.

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