Hotel contractual workers excluded from service charge

MANILA, Philippines — The Philippine Hotel Owners Association (PHOA) has signed an agreement with the Department of Labor and Employment (DOLE) to exclude contractual workers from receiving their share of service charges, in a bid to taper losses from the new Service Charge Law.

On the sidelines of the Arangkada forum, PHOA president Arthur Lopez said the agreement was signed earlier this week by PHOA, DOLE and the National Union of Workers in Hotel, Restaurant and Allied Industries (NUWHRAIN).

“We were able to negotiate with DOLE and the union to exclude. They have not released yet the IRR,” Lopez said.

“If you include all the contractual, it will dilute the share of the regular employees in a very big way,” he added.

Lopez said around 10 to 15 percent of the two million workers employed by hotels are contractual workers. He emphasized that they are hired when there are functions or banquets held in hotels that require more manpower.

In August, President Duterte signed the Service Charge Law, which provides for the service charges collected to be distributed in full or 100 percent to all covered employees.

Prior to the signing of the law, 85 percent of the collected service charge goes to the employees, while 15 percent is for losses, pilferage, breakage of hotel supplies and equipment, and at the discretion of management, for distribution to the supervisors and managers. This is stated under Article 96 of the Labor Code.

Lopez earlier stressed that the Service Charge Law would cause an increase in the cost of doing business due to the absorption of losses and breakages by the business and the service charge to managers would have to be paid as incremental payroll.

PHOA estimates that the Service Charge Law could result in around $2 million in losses.

Despite the exclusion of contractual workers, Lopez said hotels would still incur losses, forcing them to make adjustments in their operations.

“We have to reduce the number of people, we have to reduce costs. Improve productivity by multi-tasking,” he said.

While it was suggested that hotels increase their rates to make up for the losses to be incurred, Lopez said this is something hotels don’t want to do.

“We don’t want to do that because it will scare away the tourists,” Lopez said.

Meanwhile, with the higher costs of doing business, Lopez said this may lead to hotel investors having second thoughts of coming into the country,

“Well, they will still invest but they will have second thoughts,” he said.

“The Philippines still has very good tourism potential. We haven’t even scratched the surface yet,” he added.

Colliers International Philippines research manager Joey Roi Bondoc earlier told The Star that the Service Charge Law could dampen the competitiveness of hotels, which may discourage foreign hotel investors to consider the country.

“In our opinion, in any business that will be costlier to do business here, that will not have a positive impact on that sector,” Bondoc said.

The Philippine tourism sector has been improving its competitiveness, as the country ranked 75th out of 140 countries in the World Economic Forum (WEF)’s 2019 Travel & Tourism Competitiveness Report (TTCR).

The country climbed four spots from its 79th ranking in 2017, with score of 3.8 in the index, with 7 being the highest score.

“The Philippines had the fastest rate of improvement, moving up four places to rank 75th globally,” the WEF said.