Have you ever wondered what really happens to the service charge you see added to your restaurant or hotel bill? You’re not alone. Many customers assume it goes directly to the staff who served them, but for years, that wasn’t always the case. Before 2019, only a portion of those charges went to workers — and management kept a cut.
Thanks to Republic Act No. 11360, that’s no longer allowed. Today, 100% of collected service charges must go to non-managerial employees, ensuring the people who actually deliver the service receive the full benefit.
Let’s break down what the law says, who’s covered, and what workers and business owners need to know to stay fair and compliant.
What Is RA 11360?
Republic Act No. 11360, passed on August 7, 2019, redefined how service charges must be handled in hotels, restaurants, and similar establishments in the Philippines. The law mandates that 100% of all service charge collections be distributed solely among non-managerial employees, ensuring that those who directly serve customers receive the full benefit.
This legal shift eliminated the previous system where management could claim a share of the service charges. It affirms that customer appreciation, expressed through service charges, should go to the individuals providing the actual service.
Then vs. Now: The 85–15 Split Is Gone
Before RA 11360
- 85% of service charges were distributed to non-managerial employees
- 15% went to management for “breakages or losses”
After RA 11360
- 100% of collected service charges now go exclusively to non-managerial employees
- Management no longer receives any portion
This reform benefits frontliners by providing them with a fairer share of the income generated from customer service.
Who’s Covered?
Covered Businesses:
Establishments such as hotels, resorts, restaurants, cafés, bars, clubs, casinos, spas, salons, and catering companies that collect mandatory service charges.
Not Covered:
Businesses that do not collect service charges, including most fast-food chains, canteens, and retail stores.
Covered Employees:
All non-managerial staff—whether regular, probationary, casual, or contractual—are entitled to receive their share. Those considered managerial, defined by their authority to hire, fire, or shape company policies, are excluded.
How Should Service Charges Be Distributed?
- Frequency: At least twice a month (every two weeks)
- Basis of Distribution: May be prorated based on actual hours worked or as stated in a company policy or Collective Bargaining Agreement (CBA)
- Transparency: Employers must keep clear records and ensure that the distribution process is fair and inclusive
- Deductions: Only lawful deductions are allowed, such as proven breakages attributable to a specific employee if agreed upon in the CBA or company rules
Employers cannot use the service charge fund to offset general business losses or errors in previous distributions.
Penalties for Non-Compliance
Employers who violate RA 11360 face serious consequences:
| Violation | Penalty |
| Failure to distribute service charges | Fine of ₱1,000–₱10,000 and/or 3 months to 3 years imprisonment |
| Obstruction of inspection or retaliation against workers | Additional sanctions, including possible business closure |
| Knowingly violating provisions (by corporate officers) | Personal liability and potential imprisonment |
Where to File Complaints
Employees may file complaints through:
- Single Entry Approach (SEnA): A non-adversarial option for conciliation via the Department of Labor and Employment (DOLE)
- DOLE Field Office: For small claims not exceeding ₱5,000 per claimant
- DOLE Inspector Visit: For onsite checks and issuance of compliance orders
- National Labor Relations Commission (NLRC): For more complex or high-value claims, or if reinstatement or damages are being sought
Prescriptive Period:
Labor claims related to service charges must be filed within three years from the time the amount should have been paid.
Suggested Documentation:
Payslips, company policies or CBA, employment ID or contract, and calculations of unpaid service charge. Affidavits from coworkers can further strengthen the case.
Do SC and PWD Discounts Affect the Service Charge?
No. The 20% discount given to Senior Citizens (SCs) and Persons with Disabilities (PWDs) does not affect the amount that must be distributed as service charges under RA 11360.
Typically, the service charge is computed before applying the discount. Even though the discount lowers the total bill paid by the customer, it does not reduce the service charge unless explicitly computed after discount—which is uncommon and not legally required.
The law remains clear: the entire collected service charge must still be distributed in full to eligible employees. The customer discount impacts the bill but not the service charge pool.
Frequently Asked Questions (FAQs)
- Are employers required to collect a service charge?
No. RA 11360 does not require businesses to impose a service charge. However, if they do, they must follow the distribution rules under this law. - Can service charges be used to cover general business losses?
No. Employers cannot use service charges to recover losses unrelated to specific, proven employee fault. - Can agency-hired employees receive a share of the service charge?
Yes. All non-managerial employees, including those hired through agencies, are entitled to a share of the service charge. - Can prior overpayments or errors be deducted from future service charges?
No. Employers are not allowed to withhold future shares to correct past errors or overpayments. - What if my employer only gives part of the service charge or delays it?
You can report the violation to DOLE through the SEnA process or file a formal complaint. You are also protected from retaliation.
Conclusion
RA 11360 marks a significant step forward in protecting workers’ rights in the service industry. By requiring 100% of service charges to be distributed to non-managerial staff, the law ensures that those who provide direct customer service benefit more fairly from the revenue they help generate. With clear penalties for violations and accessible complaint mechanisms through DOLE and the NLRC, the law empowers employees to claim what is rightfully theirs. It also promotes transparency, fairness, and better compensation for frontliners—reinforcing the value of their work in the Philippine labor system.