An employee is entitled to a separation pay after he resigns from his job. But why do some get more than others, even when both had the same number of years in service and are receiving almost the same monthly salaries?
Here is a summary of how a resigning employee’s separation pay is determined by the employer, as published by the National Wages and Productivity Commission.
- One-half Month Pay Per Year of Service
An employee is entitled to receive a separation pay equivalent to one-half month pay for every year of service, a fraction of at least six (6) months being considered as one (1) whole year, if his/her separation from the service is due to any of the following authorized causes:
- Retrenchment to prevent losses (i.e. reduction of personnel affected by management to prevent losses);
- Closure or cessation of operation of an establishment not due to serious losses or financial reverses; and
- When the employee is suffering from a disease not curable within a period of six (6) months and his/her continued employment is prejudicial to his/her health or to the health of his/her co-employees.
- One-Month Pay Per Year of Service
An employee is entitled to separation pay equivalent to his/her one-month pay for every year of service, a fraction of at least six (6) months being considered as one whole year if his/her separation from service is due to any of the following:
- Installation by the employer of labor-saving devices;
- Redundancy, as when the position of the employee has been found to be excessive or unnecessary in the operation of the enterprise; and
- Impossible reinstatement of the employee to his or her former position or to a substantially equivalent position for reasons not attributable to the fault of the employer, as when the reinstatement ordered by a competent authority cannot be implemented due to closure or cessation of operations of the establishment/employer, or the position to which he or she is to be reinstated no longer exists and there is no substantially equivalent position in the establishment to which he or she can be assigned.
An employee is entitled to a separation pay when his or her termination from work is due to any of the above circumstances.
An employee who voluntarily resigns from employment is not entitled to separation pay, except when it is stipulated in the employment contract or Collective Bargaining Agreement or based on established employer practice in the company.
Separation pay may also be granted to an employee under the following instances:
- As financial assistance as an act of social justice, even in cases of legal dismissal under Article 282 of the Labor Code of the Philippines, where the employee is validly dismissed but for causes other than serious misconduct or those involving moral turpitude;
- If an employee is illegally dismissed and is ordered reinstated but reinstatement is not viable because of the strained relationship between the employee and the employer;
- When the payment of separation pay is part of the company policy or a benefit granted under the CBA of the employer and the employee.