SERVICE CHARGE BILL TO PHILIPPINE LABOR CODE PASSED August 2019
IS TIPPED SERVICE THE FUTURE?
5 Issues With The New Philippines Service Charge Bill
On 7th August 2019 a new Bill was signed by President Rodrigo Duterte, amending the Labor Code. Republic Act No. 11360 now states that 100% of Service Charges collected by Hotels and Restaurant’s must be paid to employees and supervisory employees, but not Managers.
Previously, Article 96 of the Labor Code allowed for an 85% share of the Service Charge collected to go to Employees and 15% to Management.
Senator Joel Villanueva who wrote the Bill Amendment championed it on the basis that Department of Labor and Employment (DOLE) is unable to confirm that the full 85% is actually being handed over to employees. Villanueva stated that at least 157 companies are ‘known’ to be violating the earlier Labor Code.
One piece of good news is that the amendment clearly states that in the event of an increase to the minimum wage, either by law or wage order, an employee share of the Service Charge remains in addition to the wage increase. The Employer cannot use it as part of a wage increase.
Republic Act No. 11360 also requires that a grievance mechanism, to resolve disputes between employees and owners/management on the distribution of the Service Charges, is introduced by all businesses.
What are some of the arguments being raised against this new Bill?
- Some business owners may decide to stop charging a Service Charge, so staff will have to ‘up their game’ to attract tips instead.
- Some businesses use the 15% management portion of the Service Charge, to cover breakages and pilferage. With these changes, some may decide to dock breakages, and loss of stock, direct from staff wages instead.
- Other businesses may pass this 15% on to the Customer, resulting in higher room, beverage and menu costs. This will be in addition to the Service Charge customers will still pay.
- Some people are concerned that if Managers are not included in receiving a share of the Service Charge, there will be no incentive to take advancement opportunities; why take on more responsibility and stress if a junior employee could end up taking more pay home than you?
- If employees now get a higher share of Service Charge, this will increase the amount of tax they pay too. Will some be worse off?
What are your thoughts? Are the Bill amendments Good News for ‘rank and file’ staff?