The Philippine hotel industry is on a recovery arc post-Covid-19, with annual growth expected to climb to 4.11% through 2028. This growth is supported by strong employment numbers, as well as by legal frameworks that ensure workers are compensated fairly.

Republic Act (RA) No. 11360 of 2019, also called the Service Charge Law, is one example. The law mandates that collected service charges in hotels, restaurants, and other establishments are fairly distributed to employees. It also specifies that any increase in base wages will not affect the amount of charges employees receive. The law’s implementing rules and regulations (IRR), issued by the Department of Labor and Employment (DOLE), contain other important provisions.

For hotels, RA 11360 effectively raises the take home pay of frontline employees, providing a pathway to an engaged workforce and more efficient operations. On the other hand, hotels must understand the law’s provisions and what they mean for the sector to ensure compliance, as well as to properly train key staff to enforce it.

Let’s find out what the law’s key provisions are and what they mean for hotels and the managers who must implement the law.

Here are the key provisions of the Service Charge Law you need to know:

• Full and Equal Distribution: All service charges must be shared fully and equally among eligible employees.
• Twice-monthly Distribution: Charges are distributed at least twice every month for timely compensation proportional to employees’ hours worked.
• Grievance Resolution: Workers can raise issues with distribution through their union or through DOLE
• Protection of Benefits: The law prohibits any reduction in existing employee benefits to compensate.

The law’s IRR were revised in early 2024 to exclude managerial employees from the law’s coverage. This means that service sector employees, such as waiters and cooks, take home a bigger share of collected service charges.

The revised rules also extended coverage to “contractual, non-regular or agency workers,” a big change from the previous IRR that specified only employees directly employed by the establishments would receive service charges.

Hotel managers play a critical role in ensuring compliance with the Service Charge Law. To effectively administer the law, managers must work closely with HR and payroll administrators to understand how to calculate and collect service charges and how to pool charges from various payment sources, as well as be aware of who exactly is covered or excluded from the law.

Additionally, managers need to follow the prescribed frequency of payment distributions and observe the proper handling of grievances related to benefits or payment schedules. Effective training strategies are essential to equip managers with the knowledge and skills required for these responsibilities.

Some examples of training strategies include:

An important step is to create a tailored training program that meets the unique needs of hotel managers. This program should focus on understanding the Service Charge Law, its impact on hotel operations, and practical steps for compliance. By identifying specific goals, like fair distribution practices and effective grievance handling, managers can be better prepared to adhere to the law’s provisions.

An effective training curriculum should include a mix of workshops, seminars, online courses, and interactive sessions. These methods cover all aspects of the Service Charge Law and prepare managers for real-life situations. Role-playing exercises for distribution and grievance resolutions scenarios can be particularly helpful in building confidence and competence.

Incorporating legal experts and HR professionals into the training process is crucial. Their insights ensure that hotel managers are fully aware of legal requirements and best practices. Regular consultations with these experts can also keep training programs updated with any changes in the law.

DOLE may update the law’s IRR again or issue new directives covering service sector employees. Regular refresher courses ensure that managers are always informed about the latest legal requirements and industry practices.

Given the critical role of hotel managers in enforcing the Service Charge Law and ensuring the fair distribution of benefits, AI-powered learning and development (L&D) platforms can be a valuable tool. Hiring efficient managers can be challenging, so focusing on developing and transforming potential talent internally can yield better results.

Sprout Solutions’ partners, Cypher and Disprz, provide AI-powered platforms designed to enhance learning and development in the hospitality industry. Cypher simplifies compliance training, upskilling, and onboarding with AI-driven, personalized courses that meet regulatory standards. Disprz enhances training with AI-driven learning paths, continuous assessments, and a mobile app for flexible learning. Paired with Cypher, they streamline onboarding, skill development, and progress monitoring, leading to ongoing improvement and superior guest experiences.

Complying with RA 11360 and adapting to its updated IRR are essential for the growth and efficiency of the Philippine hospitality sector. Compliance with the law can promote a motivated workforce, enhancing service quality and customer satisfaction.

Leveraging advanced learning platforms like Cypher and Disprz can streamline compliance training, upskill staff, and ensure regulatory adherence in a dynamic hospitality landscape.

Learn about why 1,300 clients choose  Sprout as their partner throughout the employee lifecycle here. For more info, check out our HR Blogs which tackle related topics on L&D, digital transformation, and more.