PRESIDENT Rodrigo Duterte recently approved Republic Act No. 11360 or the Service Charge Law.
The measure benefits the front-line or rank-and-file employees of service establishments such as hotels and restaurants. Prior to the enactment of this law, Article 96 of the Labor Code of the Philippines provides that eighty five percent (85%) of services charges collected by service establishments are to be given to employees and the remaining fifteen percent (15%) is to be retained by management to cover the losses and breakages.
The new law provides that the full collection for service charge shall be distributed completely and equally to all rank-and-file employees. This simply means that managerial personnel, as defined in the law, shall not have any share in the same. Prior to the enactment of R.A. 11360, managerial personnel may be given a share from the 15%, at the discretion of management.
Effectively, the new law increases the incentive for rank-and-file service employees by 15%. This in itself is substantial given what the wage rates and standard of living in our country are.
The challenge in realizing the intents of the law – allow frontline service workers to fully enjoy the fruits of their labor and the reward for their service from customers – lies in its implementation.
While the Department of Labor and Employment (DOLE) is yet to formulate the Implementing Rules and Regulations (IRR) of this law, the Secretary of Labor has already recognized the implementation challenge of the law not providing for any penal provision. This simply means that the DOLE cannot penalize establishments that will not distribute 100% of the collected service charge among frontline service employees.
Despite the absence of any penal provision, the law can still advance the welfare of the employees by including in the IRR the responsibility of management for and the right of employees to transparent information on the collected service charges or fees.
Without such right, the employees can be easily cheated by dishonest service business owners as the latter can understate the amount of fees collected.
Said provisions in the IRR will also facilitate the easier monitoring of the DOLE on the compliance with R.A. 11360 as employees will have factual basis in reporting non-compliant establishments.
On a related matter, our lawmakers may consider a measure that will make service charges voluntary and discretionary on the part of customers and not imposed by the establishments. Such measure will motivate service personnel to further improve the quality of the service they render. Given the current law, service establishments can easily opt out of the automatic service charge to be more competitive. When they do, frontline service personnel will not gain an additional 15% but lose the 85%.
