As a reminder, the service fee refers to the amount added to the invoice for the work or service performed. More than 40 years later, the law was amended to grant 100% of the service fee to insured employees. According to Senator Joel Villanueva, who is also chair of the Senate Committee on Labour, Employment and Human Resources Development, this bill will now allow “our front-line employees to enjoy the fruits of their labour, the reward for providing good, high-quality services.” In 2019, Republic Act 11360 or Service Fees Act was enacted, which amends Section 96 of the Labor Code. The cited law is clear that all service charges should go to insured employees without a single centavo going to management. This is a departure from the original text of the law, which splits service costs between insured employees and management with a share of 85% and 15% respectively. Service charges are not distributed to these agents. Therefore, the equal distribution of service charges levied among workers should be implemented regardless of their position, title or professional status and regardless of how they are paid. Regular employees will benefit because they are the ones who receive the distributed service fee. However, employees at the executive level are excluded. All service charges charged by an employer must be fully and evenly distributed among all insured employees based on the actual hours or days of work or service performed.
Note that the law does not reduce existing benefits under applicable laws, company policies and collective agreements. In addition, it does not require all covered and similar establishments to charge service fees. The Service Fees Act sets out how service fees are to be paid and when they are to be paid to employees. On August 7, 2019, Republic Act No. 11360 was signed into law by President Duterte. The implementing provisions for Republic Act No. 11360 were subsequently promulgated on November 19, 2019. “Section 96 Service charges. – All service charges collected by hotels, restaurants and similar establishments are fully and equitably distributed among the employees covered, with the exception of managers. Under the new law, the Department of Labor and Labor (DOLE) has also issued the Act`s Implementing Regulations (TRI), which define relevant matters and establish the procedure for affected establishments and similar institutions in the distribution of service fees to insured employees.
Republic Act No. 11360 amends Section 96 of the Philippine Labor Code, which originally provided for 85 percent of service fees charged to hotel and restaurant employees, while management receives the remaining 15 percent. This is the standard rate of service charges for 40 years until the SB bicameral committee. No. 1299 in May 2019. The General Alliance of Workers` Associations (GAWA) and the Congress of Trade Unions of the Philippines (TUCP) both welcomed the signing by the President of RA 11360. GAWA General Secretary Wennie Sancho said the incentive should not only increase employees` incomes, but also their productivity. In the event that the minimum wage is increased by the Wage Regulation Act, the service fees paid to insured employees will not be taken into account in determining whether the employer is complying with the increased minimum wage. “In this case, in a restaurant where no service charge is charged, but the tips given are bundled, the 100% rule would likely follow (100% would be split equally among covered non-management employees).
The application of the 85% of 15% rule to given tips that are aggregated was consistent with previous DOLE rules. Establishments are not required to charge a service fee to their guests,” says Gana. According to article 96 of the Labour Code, all service charges charged by hotels, restaurants and similar establishments are divided 85 per cent for all insured employees, which must be divided equally among them, and 15 per cent for management. For some hotel companies, the impact of the new law could be very significant. Service fees are usually equal to or around 10% of revenue. Under the current legislation, 15% of that 10% would go back to management. Technically, this leads to a 1.5% reduction in the total income of these affected farms.
