HOTELS and restaurants violate Republic Act 11360, the Service Charge Law, if they remove the levy from their guests’ bills.
In an email, Atty. Jose Manuel “Chel” I. Diokno, chairman of the Free Legal Assistance Group and founding dean of the De La Salle University College of Law, told the BusinessMirror: “Hotels, restaurants, and similar establishments cannot just decide to remove all service charges–doing so would violate the principle of non-diminution of benefits. It is a basic rule that any benefit enjoyed by the employees cannot be reduced or discontinued by the employer.”
Diokno said this in response to reports of several hotels and restaurants deciding to remove their service charge, after the Department of Labor and Employment (DOLE) issued revised implementing rules and regulations (IRR) to the Service Charge Law. Under the new IRR as provided in DOLE’s Department Order 242, series of 2024, said these establishments should include casual, contractual, and agency-hired workers in the distribution of the service charge (SC), aside from regular employees, as well as managers already receiving a share prior to the law’s enactment in August 2019.
‘Administrative nightmare’
DIOKNO stressed: “It is just and right that the people who actually render services–waiters, kitchen staff, housekeeping, banquet staff, concierges, etc.—should receive service charges completely and equally regardless of position, designation, or employment status. Eliminating service charges is not only unfair, it is violative of the law.” Labor Secretary Bienvenido Laguesma said hotels should find other incentive schemes to retain efficient regular employes. (See, “Service charge must not be used as ‘reward’ to keep good hotel staff—DOLE,” in the BusinessMirror, March 5, 2024.)
An official of a major hotel operator, who spoke on background, described the new IRR as an “administrative nightmare for our Finance people” to implement. “I have banquet operations for 300 persons. To support that, I have to hire 150 people. Not all of them work the same number of hours, and the new rules say we can only give them their share from the SC charged. But not all of them work in the same departments supporting these banquet operations.”
Diokno underscored, “Employers cannot break the law just because it is inconvenient to them. Non-compliance can be reported to the DOLE Regional Office in the location of their workplace.” The lawyer recently posted an Instagram reel informing waiters, bellhops and other casual/contractual employees of hotels and restaurants that they were entitled to a share of service charges. (See https://tinyurl.com/ejsspkb8)
Contractual workers 80% of workforce
ACCORDING to the Philippine Statistics Authority, of the 372,623 workers employed in the accommodation and food-service sector in 2021, restaurants and food kiosks accounted for 73 percent or 272,194 workers; short term-accommodations or hotels had 72,898 workers (19.6 percent); and beverage-serving activities had 21,892 workers (5.9 percent).
While many restaurants remain unaffected by the new IRR as they hire only regular employees, a number of hotels, especially those operated by large hospitality chains, are staffed by casuals and contractual employees, a number of whom are hired through third-party employment agencies. (See, “Restos not affected by new rules on Service Charge law,” in the BusinessMirror, March 9, 2024.)
Industry sources estimated that casual/contractual employees can reach as high as 80 percent of a hotel’s total workforce. These include concierges, bellhops, waiters, kitchen staff, housekeeping, banquet staff, among others.
The Philippine Hotel Owners Association said the implementation of the new IRR will reduce the take-home pay of regular employees by 30 percent to 40 percent. The group, however, signed off on the new rules, according to Laguesma.