Service charge not mandatory

Egay Uy . 

IN December last year, the Senate  approved on third and final reading Senate Bill No. 1299 which seeks to require that service charge collected in establishments to be given to all covered employees.

Its author, Sen. Joel Villanueva, chairman of the Senate committee on labor, said the “proposed measure seeks to address the injustice brought upon our hardworking workers in the service industry who provide the actual service but rarely get their proper share in collection.”

While restaurant and hotel workers, whether regular, contractual, or agency-hired, would be entitled to 100 percent of the service charge as long as they directly deliver the service to customers, the bill does not require the collection of service charge from customers.

“The bill does not make the collection of service charge mandatory to avoid interference with the right of management to exercise discretion in the operation of their business,” Villanueva said.

If service charge is not compulsory, can a customer of a restaurant or hotel refuse to exclude it from the amount he pays?

According to some sources in the Internet, a service charge is an amount that is added to one’s bill in a restaurant to pay for the work of the person who comes and serves you.  This is collected as an additional item in a diner’s bill.  Additionally, they say that if you have received poor service, then you can refuse to pay a compulsory service charge.

But why are self-service restaurants collecting a service charge from diners?  Isn’t the cost of labor of these establishments already factored into their pricing?  Are restaurants that collect service charge as part of a diner’s bill also pay the corresponding taxes on these collections?

One analysis in the Internet says that by this imposition, the business establishment is actually asking the customer to pay for the value added tax that businesses are required to pay to the Bureau of Internal Revenue.  The collection of service charges therefore doubly hits the diner or customer.

Hardest hit would be families who seldom go out and only eat in restaurants to celebrate special occasions and milestones in their lives, e.g., graduation, birthday, anniversary, and the like.

Shouldn’t restaurants and hotels be required to conspicuously post an announcement that service charges are not compulsory hence the customer may opt to just give a direct tip to the waiter or employee who directly rendered the service?

(Egay Uy is a lawyer. He chairs the City’s Regulatory and Complaint Board, co-chairs with the city mayor the City Price Coordinating Council, and chairs the city’s Joint Inspection Team.  He retired as a vice president of Cepalco.)