Separation Pay vs Retirement Pay

Article 298 lists four authorized causes: installing labor-saving devices, redundancy, retrenchment to prevent losses, and closing or stopping the business. The employee did nothing wrong, so the law asks the employer to pay. Article 299 adds termination because the employee has a disease and his continued employment is prohibited by law or is prejudicial to his health or that of his co-employees.

Separation pay is not due, as a rule, when an employee is dismissed for a just cause, such as serious misconduct or fraud under Article 297 [282]. In Jaka Food Processing v. Pacot (2005), the Supreme Court said that for a just cause "payment of separation pay, as a rule, is not required". The same case, quoting an earlier ruling, said that the right to separation pay is lost when a closure is due to serious business losses that are duly proved.

Article 302 sets a floor for retirement in the private sector:

Underground and surface mine workers may retire from 50, with 60 as their compulsory retirement age, after at least five years as mine workers. A company plan or a collective bargaining agreement may set its own terms, but its benefits may not be less than those of Article 302. In De La Salle Araneta University v. Bernardo (2017), the Supreme Court listed the requisites: the age of 60 or 65, at least five years of service in the establishment, and no retirement plan or other agreement providing retirement benefits.

Separation pay depends on the cause, under Articles 298 and 299:

Retirement pay is at least one-half month salary per year of service. Article 302 defines that term:

In both, a fraction of at least six months counts as one whole year. Use the separation pay calculator for an estimate, and see the final pay and separation pay guide.

For the separation pay for each cause in one table, see separation pay by cause.

Article 302 exempts retail, service and agricultural establishments or operations employing not more than ten employees or workers from retirement pay. Articles 298 and 299 do not contain a similar exemption for separation pay. See Retirement pay in the Philippines and Retrenchment and closure: when is it legal?

No. Retirement pay under Article 302 is paid by the employer. The SSS retirement pension is a separate benefit under the Social Security Act, and the last paragraph of Article 302 says that nothing in it deprives an employee of the benefits under that law. See the SSS pension and retirement guide and the SSS pension calculator.

Both are money claims arising from employer-employee relations, so Article 306 [291] applies: they must be filed within three years from the time the cause of action accrued. In De La Salle Araneta University (2017), the Court held that the claim for retirement pay accrued only when the employer refused to pay it. See Deadlines for labor money claims.

These are made-up examples to show how the rules work. They are not advice for any real case.

Jun is 62 and has worked seven years at a hardware store in Cebu with 25 workers and no retirement plan. He may retire under Article 302 and receive at least one-half month salary, as the article defines it, for each of his seven years.

Carlo is 45 and has worked eight years at a bank when his position is declared redundant. He is not retiring. Article 298 gives him at least one month pay for every year of service.

Rosa is 61 and has worked ten years at a small store with six employees and no retirement plan. The store is a retail establishment with not more than ten workers, so Article 302 exempts it from statutory retirement pay.

Talk to a lawyer if your employer refuses to pay separation or retirement pay, if you are offered less than the law or your plan provides, or if you are told your position is redundant. The answer often depends on documents such as a retirement plan, a collective bargaining agreement or proof of losses. If you cannot afford a lawyer, see Free legal help in the Philippines for the Public Attorney's Office (PAO) and other options.