All service charges collected by hotels, restaurants, and similar establishments[1] (the “covered employers”) are required to be distributed at the rate of 85% for all covered employees who will equally share therein, and 15% goes to management who shall apply it to losses and breakages, and, if so decided, for distribution to employees receiving more than Php2,000.00/month.[2]

Except managerial employees, service charge applies to all employees of covered employers, regardless of the employees’ position, designation or employment status, and irrespective of the method by which their wages are paid.[3]

The collected service charges are to be distributed and paid to the employees not less than once every two weeks or twice a month at intervals not exceeding 16 days.[4]

If the service charge is abolished, the share of the covered employees is considered integrated in their wages.[5] The basis of the amount integrated will be the average monthly share of each employee for the past 12 months immediately preceding the abolition or withdrawal of such charges.[6]

If a restaurant or similar establishment does not collect service charges but instead has a practice or policy of monitoring and pooling tips given voluntarily by its customers to its employees, the pooled tips are to be monitored, accounted, and distributed in the same manner as service charges.[7]


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[1] Similar establishments include lodging houses, night clubs, cocktail lounge, massage clinics, bars, casinos and gambling houses, and similar enterprises, including those entities operating primarily as private subsidiaries of the Government (Section 1, Rule VI, IMPLEMENTING RULES OF BOOK III).

[2] LABOR CODE. Article 96; IMPLEMENTING RULES OF BOOK III OF THE LABOR CODE, Paragraph 2, Section 2, Rule VI.

[3] Ibid. Paragraph 1, Section 2, Rule VI.

[4] Ibid. Section 4, Rule VI.

[5] LABOR CODE. Article 96.


[7] Id at 121.