How are service charges distributed?

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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

AT A GLANCE

All service charges actually 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, including those already receiving the benefit of sharing in the service charges.
In distributing the service charges, the shares shall be paid to covered employees not less than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.
In the event that the minimum wage is increased by law or wage order, service charges paid to the covered employees shall not be considered in determining the covered establishment’s compliance with the increased minimum wage.

All establishments collecting service charges such as hotels, restaurants, and other similar establishments, including those entities operating primarily as private subsidiaries of the Government are included in the coverage of the payment of service charges.

The law says:

This rule shall apply only to establishments collecting service charges such as hotels, restaurants, lodging houses, night clubs, cocktail lounge, massage clinics, bars, casinos and gambling houses, and similar enterprises, including those entities operating primarily as private subsidiaries of the Government. (Section 1, Rule VI, Omnibus Rules Implementing the Labor Code)

Who are covered employees?

All employees, except managerial employees as defined by law, under the direct employ of the covered establishment, regardless of their positions, designations, or employment status, and irrespective of the method by which their wages are paid. (Service Charges 7(B), 2022 Handbook on Workers’ Statutory Monetary Benefits, p.24)