After reading this article about service charge, read also: Is Bonus a Demandable Right of an Employee?
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Hotels and other similar establishments may collect Service Charges
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Service Charges shall be distributed completely and equally among employees
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Service Charges paid to the employee is not part of the salary
Making a customer happy and satisfied is always best not only for establishments but also for employees. Customers may even give unexpected tips over and above service charges.
What is a service charge?
The law says:
A service charge is the amount that is added to a bill for any work or service performed. The old law provides for the distribution of service charges collected by hotels, restaurants and similar establishments at the rate of eighty-five percent (85%) for all covered employees and fifteen percent (15%) for management.
However, with the Service Charge Law, 100% of all service charges collected shall be distributed to all covered employees except managerial employees. 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.
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. In other words, the employers should comply with the increased minimum wage without considering the service charges they paid to the employees. On the other hand, it is expected that employees are to receive their increased minimum wage without reduction to their entitlement of service charges.
How should the service charges be distributed?
The law says:
All service charges actually collected by covered establishments are to be distributed completely and equally, based on actual hours or days of work or service rendered, among the covered employees, including those already receiving the benefit of sharing in the service charges.
It shall be distributed to the covered employees not less than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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