Restaurants, hotels, salons and similar businesses that collect service charges must give all of it to their rank-and-file employees in equal shares. This guide shows how Sahora shares out the collections, pays them on the payslip as Service Charge Share and reports them.
The rules in short
- All of the service charges collected go to the covered employees. None of it is the company's income: until it is paid out it is money owed to them (Service Charge Payable).
- Every rank-and-file employee covered by a pool gets the same share. Managerial employees are left out.
- Shares are given out at least twice a month, never more than 16 days apart.
- A share is not basic pay. It doesn't change daily rates, overtime, holiday pay or night differential.
- Shares are taxable pay, also for minimum wage earners, whose minimum wage, holiday pay, overtime, night differential and hazard pay stay tax-free. Shares never use up the yearly tax-free amount for 13th month pay and other benefits (₱90,000), and they aren't de minimis benefits.
Legal basis: Art. 96 of the Labor Code as amended by RA 11360; DOLE D.O. 206-19; NIRC Sec. 32(B)(7)(e) as amended by RA 10963; RR 2-98 Sec. 2.78.1 as amended.
Before you start
- Owner / Management users and payroll officers prepare pools and add them to payroll. Payroll approvers and Finance users can see them.
- Your accounting firm sets how shares count for the 13th month pay and for SSS, PhilHealth and Pag-IBIG. You see these settings in Company setup, under Allowances and benefits, on the Service Charge Share line. You can't change, rename or switch off that item.
- Each pool is for one branch, or for the whole company, and one period.
Add a pool
- Open Payroll and click Service charge.
- Under Add a pool, choose the Branch (or Whole company), the From and To dates, and type the Service charges collected (₱) from your POS or Z-readings. Add Notes if you like, for example the Z-reading numbers.
- Click Add pool and list the employees.
Sahora opens the pool. It lists the branch's employees who worked for you during the period, leaves out managerial employees (with the reason "Managerial employee") and splits the collections equally. Each share is rounded down to the centavo, and the centavos left over go to the first employee by employee number, so the shares always add up to the collections.
To add several branches or periods at once, click Upload collections for several branches or periods. The import takes one row per branch and period. Download the Sahora template from the import page; on paid plans you can also upload your own layout. Each row becomes a draft pool with its employees listed. See Importing your data.
Check the pool
While the pool is a Draft you can change it. Each change splits the shares again.
- To change the collections, edit Service charges collected (₱) and click Save and split again.
- To leave someone out, type the reason (for example "On leave the whole period") and click Leave out.
- To put someone back, click Include. For a managerial employee, tick the box to confirm you mean to include them.
- To add someone the pool didn't list, for example an employee who moved from another branch during the period, choose them under Add someone not listed, type why they are in this pool and click Add to the pool.
- Delete this draft removes the pool.
The pool's page warns you when:
- the period is longer than 16 days;
- the shares don't add up to the collections;
- a managerial employee is included;
- no employee is included.
Finalize and add it to payroll
- Click Finalize. Sahora refuses unless every peso is shared out, and while a managerial employee is included without the box ticked.
- Under Add to a payroll, choose the payroll period for each pay group in the pool. Sahora offers the open periods ending on or after the pool's last day.
- Click Add the shares to payroll.
- Compute that payroll (again). Each employee's share is on their payslip as Service Charge Share.
While that payroll is a draft you can click Take out of the payroll. A finalized pool not in a payroll yet can go back to a draft with Reopen as a draft.
When the payroll is approved, the pool shows Paid out and each share records the payroll that paid it. The Payroll page reminds you of finalized pools whose period ended without being added to a payroll.
On the payslip, the 2316 and in the journal
- Payslip: the line Service Charge Share, under earnings.
- BIR Form 2316: under taxable supplementary compensation, Others, labelled "Service charge" (or "Service charge and other taxable pay" when the employee has other pay on that line). The alphalist follows the 2316.
- Payroll register: its own Service charge column.
- Journal entry: shares are debited to Service Charge Payable, never to salaries or benefits expense. Set the account in Company setup → Accounting. See Payout and the journal entry.
Reports
Open Reports:
- Service charge distribution register: each pool's shares per employee, the payroll each was added to and the date it was paid. Excel and PDF.
- Service charge reconciliation: per branch and period, what was collected, shared out, paid out and not paid yet, with the variance. Its Excel has the collection entry: debit Cash, credit Service Charge Payable. Use it for a DOLE inspection and to show that service charges are not part of your gross receipts.
Year-end clean-up
If service charges were paid earlier this year under another pay item (for example recorded as a benefit or as tax-free pay), open Payroll → Service charge → Year-end clean-up. It lists, per employee, the amounts under pay items whose name or code looks like service charge, and the year's tax due before and after.
Your accounting firm's admins reclassify them with Reclassify as service charge. The approved payslips stay as they are; the year-end payroll counts the tax-free part as taxable pay, and the 2316 reports the amounts as service charge. Do this before the year-end payroll is approved.
What can go wrong
- "All of the service charge must be distributed..." The shares don't add up to the collections. Check who is left out, then finalize again.
- "A managerial employee is included..." Leave them out, or tick the box on their line to confirm.
- "The payroll for ... is submitted or approved; choose a later period." Choose a period whose payroll is still a draft.
- "There is already a pool for this branch and period." Open the pool on the list instead.