Last May 2019, the Senate recently ratified the bicameral conference committee report on the Senate Bill 1299/House Bill 8784 or the service charge bill. Should the bill be signed into law, restaurant and hotel workers, whether regular, contractual, or agency-hired, would be entitled to 100-percent of the service charges and not the management.
As per the Labor Code, service charges collected by hotels, restaurants, and other establishments should be distributed at a rate of 85 percent to covered employees and 15 percent to the management. Section 3 Rule IV allows the management to utilize the 15% in losses, pilferages and breakages, and for distribution to managerial employees, at the discretion of management in the latter case.
Mr. Sergio Ortiz-Luis Jr., President of the Employers Confederation of the Philippines (ECOP), reiterates that this existing rule should be retained. He explained that the bill will cause wage distortions among employees of hotels, restaurants, and other similar establishments nationwide.
Wage distortion happens when an increase in the rates of wages removes or significantly reduces the pay advantage of one positions of employees over another.
Ortiz-Luis Jr. reiterated that this change is very dangerous and may lead to insubordination and weakening of productivity, if not corrected. The Labor Code provides that whenever this occurs within an establishment, the employer and the union shall negotiate to correct the distortions through the grievance procedure under their voluntary arbitration.
Although there is no legal requirement to restore the gap of distorted wages, the Labor Code and the Supreme Court recognize the need to correct this once it exists.