Service Charge Law rules revised

THE Labor Department has revised the implementing rules and regulations (IRR) of Republic Act 11360, or the “Service Charge Law,” to make it inclusive through the removal of the direct employment clause.

The revised IRR, Department Order (DO) 242, series of 2024, improved the distribution of services to cover all rank-and-file employees of establishments — such as hotels and restaurants — to include “contractual, non-regular or agency workers.”

Under the new IRR, “covered employees refer to all employees, except managerial employees as defined herein, regardless of their position, designation, or employment status, and irrespective of the method by which their wages are paid.”

The new IRR specifies the nondiminution of benefits, which means that the new rules on service charge distribution shall not diminish the existing benefits of the covered employees.

RA 11360 provides that all service charges collected by hotels, restaurants and other similar establishments be distributed in full to all covered employees. Excluded from getting a share in the service charges are managerial employees.

Under the guidelines, the distribution of service charges will be in proportion to the number of hours or days of work or services rendered.

Employees or their unions have the right to file grievances. Workers without a union may seek assistance from the Department of Labor and Employment (DoLE) should there be concerns or disputes regarding the distribution of service charges.

A provision on dispute resolution concerning service charge distribution among covered employees was also updated by expanding the dispute referral system to the regional, provincial, field or satellite office level with jurisdiction over the workplace.

Conciliation through the SingleEntry Approach is allowed.

Monitoring of compliance was also added under Section 8, which orders DoLE regional, provincial, field and satellite offices to monitor private establishments’ compliance per Department Order 239, series of 2023, or the “Rules of Administration and Enforcement of Labor Standards Pursuant to Article 128 of the Labor Code.”

The DO 242 supersedes DO 206, series of 2019, which contains the previous IRR. It shall take effect 15 days after publication in at least two newspapers of general circulation.