In the Philippine hospitality and service industry, the distribution of service charges has long been a point of contention and evolution. For agency-hired employees—such as janitorial staff, security guards, or outsourced waiters—working alongside direct hires, the question of "who gets what" is governed by specific labor laws and recent legislative shifts.
1. The Core Legal Basis: Republic Act No. 11360
The primary governing law is Republic Act No. 11360, enacted in 2019, which amended Article 96 of the Labor Code of the Philippines.
Before this amendment, the law mandated an 85-15 split: 85% of the service charge went to the employees, while 15% was retained by management to cover losses/breakages or as a management fee. R.A. 11360 abolished this split.
The 100% Rule: All service charges collected by hotels, restaurants, and similar establishments must now be distributed completely and equally (100%) among all covered employees.
2. Are Agency Employees "Covered Employees"?
This is the most critical distinction for agency-hired staff. Under the Implementing Rules and Regulations (IRR) of R.A. 11360, the definition of "covered employees" is broad but specific:
- Inclusion: All employees under the direct employ of the establishment are covered.
- Agency Staff Inclusion: The Department of Labor and Employment (DOLE) clarified through Department Order No. 206, Series of 2019, and subsequent labor advisories, that the benefit extends to outsourced workers or agency employees provided they are deployed to the establishment.
Essentially, if an agency worker is performing tasks that contribute to the service for which the charge is collected, they are entitled to their share. This prevents a "two-tier" system where workers doing the same job are treated differently regarding tips.
3. Distribution Mechanism and Frequency
The law and its IRR provide a strict framework for how these funds should reach the pockets of agency workers:
- Equal Share: The total amount collected must be divided by the total number of covered employees. The share of an agency employee must be equal to the share of a regular, direct-hire employee.
- Frequency: Distribution must occur once every two weeks or twice a month at intervals not exceeding sixteen (16) days.
- Non-Diminution of Benefits: The service charge share is on top of the minimum wage. An employer or agency cannot use the service charge to "offset" the payment of the legal minimum wage.
4. Responsibilities of the Establishment vs. The Agency
While the law is clear on the right to the tip, the administrative flow is often where confusion arises:
| Entity | Responsibility |
|---|---|
| Principal Establishment (e.g., Hotel/Restaurant) | Responsible for collecting the service charge and calculating the total pool. They must ensure that the agency workers deployed to them are included in the headcount for distribution. |
| The Agency (Contractor) | Acts as the conduit. In many arrangements, the establishment remits the share of the agency workers to the agency, which then must pass it 100% to the workers without any "administrative deductions." |
5. Exclusions from the Benefit
It is important to note that not everyone in the building is entitled to a share of the service charge. The law excludes:
- Managerial Employees: Under the Labor Code, these are individuals with the power to lay down and execute management policies or to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees.
Agency staff who hold purely supervisory or managerial roles within their agency’s hierarchy at the establishment may be excluded depending on their specific functions.
6. Dispute Resolution and Enforcement
If an agency employee is denied their share of the service charge, the legal recourse follows the standard labor dispute mechanism in the Philippines:
- Grievance Machinery: If there is a Collective Bargaining Agreement (CBA).
- SENA (Single Entry Approach): A mandatory conciliation-mediation process handled by DOLE.
- Labor Arbiter: If mediation fails, the case is brought before the National Labor Relations Commission (NLRC).
Summary of Rights for Agency Workers
- 100% Participation: You are entitled to a share of the 100% service charge pool.
- Equality: Your share must be the same as a direct-hire employee in the same establishment.
- Transparency: Employees have the right to inspect records regarding the collection and distribution of service charges to ensure they are receiving the correct amount.