You finish dinner in Manila and the bill carries a line for service charge. Under a law passed in 2019, every peso of that line has to be paid out to the restaurant's non-managerial staff, shared among them, with nothing kept by management.
It does not go to your server in particular, and it is not the restaurant's revenue.
What the law says now
Republic Act No. 11360, approved on 7 August 2019, replaced Article 96 of the Labor Code with a single rule:
"All service charges collected by hotels, restaurants and similar establishments shall be distributed completely and equally among the covered workers except managerial employees."
The same article adds that these shares do not count towards compliance with a minimum-wage increase — an employer cannot use them to top up pay to the legal floor — and requires a grievance mechanism for disputes about distribution, with referral to the labour department's regional office where none exists.
What it replaced
The old Article 96 split the money:
"All service charges collected by hotels, restaurants and similar establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees and fifteen percent (15%) for management."
So before 2019, fifteen centavos of every service-charge peso could lawfully go to management. RA 11360 removed that share entirely.
Who gets it, and how often
The statute itself is short, and some of the detail most summaries attribute to it comes from the implementing rules instead. The current ones are Department of Labor and Employment Department Order No. 242, series of 2024, which states that it supersedes the 2019 order.
It defines covered employees broadly — "all employees, except managerial employees as defined herein, regardless of their position, designations, or employment status, and irrespective of the method by which their wages are paid." That reaches supervisors who are not managerial, and staff on non-standard arrangements.
It also qualifies "equally". The money is to be "distributed completely and equally, based on actual hours or days of work or service rendered", so a part-timer gets a share in proportion to the time worked rather than a full one. And it sets the timing: distribution "not less than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days".
Commentary often says the money goes to "rank-and-file" staff, but the Act never uses that phrase, though it names managerial employees three times. Its only exclusion is managers.
Where it applies
The order covers "all establishments collecting service charges such as hotels, restaurants, and other similar establishments", and lists examples of the similar ones: "lodging houses, nightclubs, cocktail lounges, massage clinics, bars, casinos and gambling houses, and sports clubs." It also reaches entities operating primarily as private subsidiaries of the government.
There is no minimum headcount and no rate.
No rate, and no requirement to charge
The law does not require a business to charge a service charge, and it does not set one at ten percent or any other figure. The Act contains no percentage at all, and neither "10%" nor "mandatory" appears in the implementing order. The order defines covered establishments simply as "those that collect service charges".
A restaurant that adds no service charge is outside this law entirely. One that adds a charge and keeps any of it is in breach.
The Act also says nothing about tips left separately by the customer, and nothing about whether a customer may refuse the charge. Those questions are not answered by this law, and should not be answered on its authority.
How Singapore handles the same line
The contrast is useful for anyone who eats in both cities. Singapore's tax authority treats a service charge as part of the price — it is subject to GST, so a $100 meal with a $10 service charge carries $9.90 of GST, for $119.90 in total. And on whether a customer must pay it, IRAS says it "does not interfere with such business decisions", leaving it to the agreement between customer and business.
Singapore's guidance, in other words, concerns the tax on the charge, while the Philippine law is about who receives it.
Tips are a separate matter
Because the charge is pooled across all covered staff and divided by time worked, it behaves more like a collective wage supplement than a tip. A diner who wants one particular server to benefit can only make sure of it by handing that person cash.
What to do with it
Staff are entitled to a share of everything collected, paid out at least twice a month, and a dispute goes first to the establishment's grievance mechanism and then, where there is none, to the labour department's regional office.
For operators, the practical test is whether the whole charge reaches non-managerial staff on a schedule of sixteen days or less, with none of it used to make up wages.
Where this comes from
The current and former Article 96 are from Republic Act No. 11360 and Presidential Decree No. 442, read from the Lawphil reproductions because the Official Gazette did not respond on 17 September 2026. The implementing detail is from DOLE Department Order No. 242, series of 2024, dated 1 February 2024, read from a published reproduction because the department's own site did not respond either. The Singapore treatment is from IRAS guidance on GST for hotels and food and beverage businesses, read the same day.
The Act has no percentage anywhere in it and never mentions tips, though it refers to service charges five times; the implementing order refers to service charges ten times and never mentions a 10% rate or the word "mandatory". Older rules folded an abolished service charge into wages, but that provision is absent from the current text, so this guide does not rely on it.
