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Where does your service charge go? 

June 26, 2017

Digital Reporter

Cover art Erka Capili Inciong

Ah, service charge: our favorite excuse not to tip. It is often an unwelcome surprise that comes at the end of a (hopefully) delicious meal at a nice, sit‑down restaurant. It serves as a mandatory tip of sorts, an additional 8% to 10% computed from your original bill. How many times have you gone over the receipt, searched for the magic words and exclaimed, “Oh, there’s service charge. No need to tip!”?

But is this service charge really going to your waiter’s pockets, just as how the tip works?

If we go by the Labor Code of the Philippines, Article 96 has this to say: “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. The share of the employees shall be equally distributed among them. In case the service charge is abolished, the share of the covered employees shall be considered integrated in their wages.”

If you and your friend go to a café that charges a ₱100 additional service charge for food that costs ₱1000 (sans value added tax), ₱85 of that should be split between all of the restaurant staff that made your scrumptious meal, and ₱15 goes to the restaurant owner.

But in an informal survey of restaurants ran by SparkUp in Quezon City, asking wait staff—ever so politely—if they really do get their 85%, their response is that it’s the other way around. Almost all of the service charge, around 85‑90%, according to the staff, actually go to the owners of the establishment. The leftover, 10‑15% gets split between the rest of the waiters and kitchen staff. Going by our ₱100 service charge example earlier, ₱90 of that would go to the owner. Assuming that our hypothetical café employs five more people, they get a measly ₱2 each for their hard work.

That arrangement, said attorney and former restaurateur Mark Brian Dela Cruz, could be perfectly legal, as long as the employees knew about the arrangement beforehand.

“What is under the Labor Code—85% for the staff and 15% for the management—is the minimum standard,” Mr. Dela Cruz explained in a phone call to SparkUp. “It is there unless the employers convey to the employee that 90% goes to the management and 10% goes to the employees, and they accept it in their contract.”

“By virtue of that stipulation in their contracts, the employees know that they have not been shortchanged by their cut in the service charge,” he added.

Mr. Dela Cruz said that he used to manage a small restaurant with only one outlet, so the 85%‑15% split in the Labor Code was amenable to him. But it might be unfair to larger establishments. “If you are a big restaurant or a big chain of restaurants, you can not afford the 85%‑15% split because you have to account for operational costs. It’s hard to compare the operations of big restaurants to small ones. You have to look at the bigger picture.”

So perhaps it’s time to reconsider tipping the waiters for their hard work. If you have the extra cash, what’s a few pesos to show your appreciation to all the work that goes into your dining?

Tipping isn’t mandatory in our culture, but it would certainly be greatly appreciated (Emily Post has an extensive guide to tipping here). There’s an aphorism that goes: If you can’t afford to tip, you can’t afford to go out and eat.