LABOR CODE AND LABOR STANDARDS

Definition
Labor Standards refers to the standard conventions with respect to the workers, in matters of
basic worker rights, working conditions, wages to be paid & also related to job security.
Basically, it is done in order to improve labor employment on a global scale. Given the laying
down of the standards, a minimum level of protection is there from inhumane practices like
bullying, aggression, gender equality, etc. More than laying down of the labor standards, it is the
implementation which is important.
(https://www.mbaskool.com/business-concepts/human-resources-hr-terms/16748-labor-
standards.html)
The Labor Code of the Philippines stands as the law governing employment practices and
labor relations in the Philippines. It was enacted on Labor Day of 1974 by President Ferdinand
Marcos, in the exercise of his then extant legislative powers. It prescribes the rules for hiring and
termination of private employees; the conditions of work including maximum work hours and
overtime; employee benefits such as holiday pay, thirteenth month pay and retirement pay; and
the guidelines in the organization and membership in labor unions as well as in collective
bargaining.
(https://blr.dole.gov.ph/2014/12/11/labor-code-of-the-philippines/)

SERVICE CHARGES (ARTICLE 96)

A. Sharing
All rank-and-file employees of employers and contractors working therein collecting service
charges are entitled to an equal share in the eighty-five percent (85%) of the total of such
charges. The remaining fifteen percent (15%) of the charges may be retained by management
to answer for losses and breakages and for distribution to managerial employees, at the
discretion of the management in the latter case. Service charges are collected by most hotels
and some restaurants, nightclubs, cocktail lounges, among others.
UPDATED
Managerial employees “who lay down and execute management policies or to effectively
recommend such managerial actions,” and they are excluded from getting a share in the
service charges collected under the new law
With the new law, establishments which previously chose to allot the 15% or a portion
thereof of the service charges collected to losses and breakages are no longer required to set
aside an amount to account for such purposes, which may result in an increase in costs as
management will be forced to fully absorb such losses and breakages. Furthermore, if the
15% was previously distributed to managerial employees, they will lose a significant amount
of their income (https://www.bworldonline.com/the-new-law-on-service-charges/)
 B. Payments
The shares of the employees in the service charges shall be distributed to them once every
two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. Where the
company stopped collecting service charges, the average share previously enjoyed by the
employees for the past twelve (12) months immediately preceding such stoppage shall be
integrated into their basic wages.
C. Tips
Where a restaurant or similar establishment does not collect service charges but has a
practice or policy of monitoring and pooling tips given voluntarily by its customers to its
employees, the pooled tips should be monitored, accounted, and distributed in the same
manner as the service charges.
SERVICE INCENTIVE LEAVE (ARTICLE 95) (http://www.chanrobles.com/legal4labor3.htm)
A. Coverage
Every employee who has rendered at least one (1) year of service is entitled to Service
Incentive Leave (SIL) of five (5) days with pay. This benefit applies to all employees except:
1. Government employees, whether employed by the National Government or any of its
political subdivisions, including those employed in government-owned and/or controlled
corporations with original charters or created under special laws;
2. Persons in the personal service of another;
3. Managerial employees, if they meet all of the following conditions:
3.1. Their primary duty is to manage the establishment in which they are employed or of a
department or subdivision thereof;
3.2. They customarily and regularly direct the work of two or more employees therein; and
3.3. They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to hiring, firing, and promotion, or any other change of
status of other employees are given particular weight.
4. Officers or members of a managerial staff, if they perform the following duties and
responsibilities: 4.1. Primarily perform work directly related to management policies of their
employer;
4.2. Customarily and regularly exercise discretion and independent judgment;
4.3. (a) Regularly and directly assist a proprietor or managerial employee in the management
of the establishment or subdivision thereof in which he or she is employed; or (b) execute,
under general supervision, work along specialized or technical lines requiring special
training, experience, or knowledge; or (c) execute, under general supervision, special
assignments and tasks; and 27
4.4. Do not devote more than twenty percent (20%) of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the work described
in paragraphs 4.1, 4.2, and 4.3 above;
5. Field personnel and those whose time and performance is unsupervised by the employer;
6. Those already enjoying this benefit;
7. Those enjoying vacation leave with pay of at least five (5) days; and
8. Those employed in establishments regularly employing less than ten (10) employees.
B. Meaning of “one year of service”
The phrase “one year of service” of the employee means service within twelve (12) months,
whether continuous or broken, reckoned from the date the employee started working. The
period includes authorized absences, unworked weekly rest days, and paid regular holidays.
If through individual or collective agreement, company practice or policy, the period of the
working days is less than twelve (12) months, said period shall be considered as one year for
the purpose of determining the entitlement to the service incentive leave.
C. Usage/Conversion to Cash
The service incentive leave may be used for sick and vacation leave purposes. The unused
service incentive leave is commutable to its money equivalent at the end of the year. In
computing, the basis shall be the salary rate at the date of conversion.
The use and conversion of this benefit may be on a pro rata basis.
Illustration: An employee was hired on 1 January 2018 and resigned on 1 March 2019.
Assuming that he/she has not used or commuted any of his/her accrued SIL, he/she is entitled
to the conversion of his/her accrued SIL, upon his/her resignation, as follows:

ART. 95. Right to service incentive leave.

- (a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those employed in
establishments regularly employing less than ten employees or in establishments exempted
from granting this benefit by the Secretary of Labor and Employment after considering the
viability or financial condition of such establishment.
(c) The grant of benefit in excess of that provided herein shall not be made a subject of
arbitration or any court or administrative action.

ART. 96. Service charges. - 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.

Sick Leave
Holiday Pay
Night Shift
Labor Code
Labor Standards
Premium Pay
Maternity Leave
Thirteen Month Pay
Overtime Pay
Separation Pay
Retirement Pay