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Discriminatory ‘Service Charge Law’ must be corrected

The Manila Times logo The Manila Times 9/20/2019 The Manila Times
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Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not represent the views of MSN or Microsoft.

IT was meant to benefit lower-paid employees in the hotel and restaurant industry, but the so-called Service Charge Law — Republic (RA) Act 11360 — as written has many unintended negative consequences, not the least of which is its discriminatory effect on managerial employees. As it has already been signed into law, it now becomes the responsibility of those who will craft its implementing rules and regulations (IRR) to correct its flaws.

President Rodrigo Duterte signed RA 11360 into law on August 7, and the IRR must be completed and released by October 6. The new law mandates that all rank-and-file and supervisory employees should receive 100 percent of the service charge collected at establishments — restaurants and hotels — where it is added to customers’ bills.

Managerial employees, defined by RA 11360 as “who lay down and execute management policies or to effectively [sic] recommend such managerial actions,” are specifically excluded by the law from sharing in the collected service charges.

The law amends Article 96 of the Labor Code, which provided that the covered employees would receive 85 percent of the collected service charges, with 15 percent being retained by the establishment. The business was mandated to use the 15 percent to cover losses and breakage that would otherwise be charged to employees (excluding instances of theft or malicious damage), and could use whatever remained at its discretion, such as distributing it to managerial employees.

The 85-15 percent split had been in place since 1975, when it was first implemented through Presidential Decree 850 of then-President Ferdinand Marcos.

Even though the law as passed specifies that managerial employees are excluded from receiving a share of service charges, the Department of Labor and Employment (DoLE) has said that in the implementing rules and regulations, the exclusion may be extended to supervisory employees as well since “I think it (the law) is intended for minimum wage earners and those with low pay,” Labor Secretary Silvestre Bello 3rd said last month.

The framers of RA 11360 and the DoLE clearly do not understand the concept underlying service charges. The individual pay earned by any worker in an establishment is based on that worker’s individual contribution and responsibilities to the business. The collected service charges, on the other hand, reflect the establishment’s performance as a whole — the more business, the greater the amount that is collected. That performance requires the contribution of the entire workforce as a team, and should be shared equally. It is logically wrong, and a violation of its purpose and mandate, for the DoLE to suggest that managers and supervisors do not contribute to team performance in a business, and should be excluded from a share in the reward for it.

The DoLE should also consider that the new law would potentially hurt wage earners who were previously protected from bearing the costs of losses and damages under the old 85-15 split of service charges. That protection has now been removed, which means employees could now be held liable for even unintentional mistakes.

Since the DoLE has indicated that, as the lead agency in crafting RA 11360’s IRR, it has the authority to depart from what is strictly written in the law, it should do so. Managerial and supervisory employees should be given an equitable share in collected service charges, as these are intended for the establishment as a whole, not individual employees. The DoLE should also include provisions to ensure that the employees whom the law is meant to help are not disadvantaged by it by being obliged to pay the costs of forgivable losses and damage.

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