Service charges collected by hotels, restaurants and similar establishments is governed by Article 96 of the Labor Code of the Philippines, as amended.
As amended by Republic Act No. 11360, approved August 7, 2019, all service charges collected by the said establishments shall be distributed completely and equally among covered workers. Previously, the business itself owns a portion of the said service charge.
The full text of Article 96 as amended by R.A. No. 11360 is as follows:
ART. 96. Service Charges. — All service charges collected by hotels, restaurants and similar establishments shall be distributed completely and equally among the covered workers except managerial employees.
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.
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 jurisdiction over the workplace for conciliation.
For purposes of this Article, managerial employees refer to any person vested with powers or prerogatives to lay down and execute management policies or hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or to effectively recommend such managerial actions.