Under Republic Act No. 11360, all service charges collected by hotels, restaurants, and similar establishments are distributed completely, that is 100%, to the covered rank-and-file employees. This replaced the old 85-15 rule that let management keep 15%. The service charges are distributed equally among the covered employees and paid not less than once every two weeks or twice a month at intervals not exceeding sixteen days. If an establishment stops collecting service charges, the amount employees were receiving is integrated into their wages.
Waiters, hotel staff, and other service workers used to watch management keep a slice of the service charge customers paid for their service. Republic Act No. 11360 ended that: now the workers get all of it.
The Old Rule vs. the New
Before RA 11360, the Labor Code split service charges 85% to employees, 15% to management (to answer for losses and breakages). RA 11360 scrapped the split. Now, 100% of the service charges collected by covered establishments is distributed to the covered employees. Management no longer keeps a share.
Who Shares and How
The service charges are pooled and distributed equally among the covered rank-and-file employees — not just the front-of-house staff who directly served the customer, but the covered workforce, so kitchen and support staff generally share too. Managerial employees are excluded from the distribution. The pooled charges are shared equally, subject to the implementing rules.
How Often It Is Paid
The distributed service charges must be paid to the employees not less than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. This keeps the money flowing to workers regularly rather than being held indefinitely.
Which Establishments Are Covered
The law covers establishments that collect service charges — hotels, restaurants, lodging houses, night clubs, cocktail lounges, massage clinics, bars, casinos, gambling houses, and similar enterprises, including those managed by non-profit or government entities. It applies to the service charge, which is distinct from a voluntary tip a customer gives directly to a worker.
If Service Charges Are Abolished
A protective feature: if the establishment stops collecting service charges, the average amount the employees were receiving from them over the relevant period is integrated into their basic wages. In other words, an employer cannot simply abolish the service charge to cut the workers’ take-home pay — the benefit becomes part of the wage.
Practical Advice
- Employees: you are entitled to 100% of the service charges, distributed equally and paid at least twice a month. If your employer is still keeping a share, or holding the charges, that is a violation you can raise with DOLE.
- Employers: distribute the full service charge to covered employees on the required schedule, exclude only managerial employees, and remember that abolishing the charge integrates the benefit into wages rather than erasing it.
Frequently Asked Questions
How much of the service charge do employees get? One hundred percent. Under RA 11360, all service charges collected are distributed to the covered rank-and-file employees. The old rule that let management keep 15% was repealed.
Who shares in the service charge? The covered rank-and-file employees, shared equally, which generally includes support and kitchen staff, not just those who directly served the customer. Managerial employees are excluded.
How often must service charges be paid out? Not less than once every two weeks, or twice a month at intervals not exceeding sixteen days.
What if the employer stops collecting service charges? The average amount the employees were receiving is integrated into their basic wages, so abolishing the charge cannot be used to reduce their pay.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If your employer is not distributing service charges correctly, our firm can help you claim what you are owed. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.