DOLE issues revised IRR on Service Charge Law

The Department of Labor and Employment has issued the revised implementing rules and regulations (IRR) of the Service Charge law, which now excludes managerial employees from benefiting from the collected service charge.

In a two-page department order, DOLE said the new IRR covers “all employees, except managerial employees, regardless of their position, designation or employment status, and irrespective of the method by which their wages are paid.”

“The rules apply to all establishments collecting service charges such as hotels, restaurants and other similar establishments, including those entities operating primarily as private subsidiaries of the government.”

Managerial employee, as defined under the new IRR, refers to “any person vested with powers or prerogatives to lay down and execute management policies or hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or to effectively recommend such managerial actions.”

Signed by Labor Secretary Bienvenido Laguesma, the department order said “all service charges collected by covered establishments shall be distributed completely and equally based on actual hours or days of work or service rendered, among the covered employees.”

“The shares referred to herein shall be distributed and paid to the covered employees not less than once every two weeks or twice a month at intervals not exceeding 16 days,” added Laguesma.

Labor group Federation of Free Workers welcomed the new IRR, saying in a statement that the “new rules are expected to increase the take home pay of workers in the service industry as they are intended to improve distribution of service charges to all employees, now excluding managerial employees.”

It noted that this development meant exclusive benefit for non-managerial employees.

“We urge all service sector employers – like those in hotels, restaurants, lodging houses, nightclubs, cocktail lounge, massage clinics, bars, casinos, gambling clubs and golf and sports clubs, among others – to comply with these new regulations promptly,” it added.

The federation also called on employers to work collaboratively with the unions and their employees to ensure a smooth transition to this more equitable system.