Changes to service charge system hit

The Philippine Hotel Owners Association Inc. (PHOAI) has urged President Duterte to veto a proposed law that will prevent management from getting its share of service charges, part of which is traditionally used as buffer for losses, pilferage and breakage of hotel supplies and equipment.

PHOAI—a nonstock, nonprofit organization of owners of the country’s major hotels, resorts, tourist inns, pension houses and serviced apartments—
said in a July 16 letter to Mr. Duterte that the consolidated bill providing for the service charges collected by hotels, restaurants and other similar establishments to be distributed in full to all covered employees would have negatives effect on the hotel and restaurant industry.

Under Labor Code Article 96, 85 percent of the service charge is mandated to be distributed to the employees, and 15 percent can be used to offset losses, pilferage and breakage of hotel supplies and equipment, and at the discretion of management, for distribution to the supervisors and managers.

During the public hearings, the lower House approved a distribution of 90 percent for the employees, and 10 percent for the losses, pilferage and management. But the Senate version approved a 100-percent distribution of the service charge to the employees and supervisors.

This was adopted in the final consolidated bill now awaiting Mr. Duterte’s signature and will lapse into law by Aug. 8 unless vetoed.

While the proposal seems to favor labor, the association warned that the removal of the 15-percent buffer would have a negative effect not just on the employees but also on the competitiveness of the entire Philippine hospitality and restaurant industry.

“The existing 15 percent for pilferage and losses is there for the protection of the employees. Without such fund, an erring employee will be summoned and receive disciplinary action for each loss or breakage. While subjected to due process, the time consumed for hearings and deductions from their pay becomes an administrative burden, not just for the hotel, but for the employees as well. This will likewise be part of their 201 files (employee’s record) and will have an effect on their records,” the letter said.

Such a law will also cause a distortion of the salary and benefits between the covered employees and managers, which will result in diminution of benefits to the managerial employees and curb the motivation of employees to seek higher positions and assume bigger responsibilities in the organization.

“The service charge is considered a hotel-wide incentive for improved performance. Optimum service performance is achieved through everyone’s participation and cooperation, and not just from a particular segment of the total workforce,” the association said.