All Employers and HR professional must know how much is the minimum legal amount of separation pay that they must give to their employees who are leaving their company. Likewise, if you’re an employee who has been terminated by your boss for whatever reason, you may also need to have an idea if you are entitled to separation pay or not. The law understands the need of employees when they become jobless for reasons covered by Article 283 and 284 of the Labor Code. Separation pay gives employees a livelihood after he/she leaves his/her former company and while him/her is looking for a new job.
Separation pay is given to employees whose services are terminated by their employers due to the following reasons as stated under Articles 283 and 284 of the Labor Code of the Philippines as follows:
Art. 283 – States that Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
Art. 284 – States Disease as ground of termination. An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.
The previous articles stated the grounds where an employee can be entitled to a separation pay upon the termination of his/her services to the employer. An employee may also be terminated for just causes as enumerated below under Article 282 of the Labor Code. Generally, employees falling under this article are not entitled to separation pay.
Art. 282 – States that Termination by employer. An employer may terminate an employment for any of the following causes:
- a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
- b. Gross and habitual neglect by the employee of his duties;
- c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
- d. Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
- e. Other causes analogous to the foregoing.
Additional information:
The computation of separation pay shall be based on the latest salary rate, unless the same was reduced by the employer to defeat the intention of the Labor Code, in which case, the separation pay shall be based on the rate before the deduction.
The amount of the separation pay shall be multiplied with the number of years of actual service. In computing the length of service, a fraction of at least six (6) months is considered as one (1) whole year.
Generally, an employee who resigns is not entitled to separation pay except when it is stipulated in his employment contract or collective bargaining agreement, or such is an established practice or policy of the company. An employee resignation is presumed to be voluntary.
References:
DOLE: Basis of computation of separation pay
Labor Code of the Philippines