Separation Pay: Meaning Under the Labor Code

For the authorized causes in [Article 298 [283]](/law/labor-code/article-298) ([283] is its number before the 2015 renumbering) and [Article 299 [284]](/law/labor-code/article-299). The amount depends on the cause:

• Labor-saving devices or redundancy: at least one month pay, or at least one month pay for every year of service, whichever is higher.
• Retrenchment to prevent losses, or closure not due to serious business losses or financial reverses: one month pay, or at least one-half month pay for every year of service, whichever is higher.
• Disease: at least one month salary, or one-half month salary for every year of service, whichever is greater.

The redundancy rule reads:

The articles on just causes ([Article 297 [282]](/law/labor-code/article-297)) and on resignation ([Article 300 [285]](/law/labor-code/article-300)) do not provide for separation pay. An employment contract, a collective bargaining agreement or a company policy may give more than the law requires.

Article 298 [283] requires a written notice to the workers and to the labor department at least one month before the intended date. In Jaka Food Processing v. Pacot (2005), the Supreme Court held that a dismissal for a proven authorized cause stays valid even without that notice, but the employer must pay nominal damages. In that case the Court also removed the separation pay, because the company's serious business losses were proven.

No. When a worker is illegally dismissed and going back to work is no longer possible, labor tribunals may order separation pay instead of reinstatement, together with backwages. That award comes from the illegal dismissal, not from Article 298 or 299. In Keng Hua Paper Products v. Ainza (2023), the Court said the backwages then run until the decision ordering separation pay becomes final.

Separation pay is also different from retirement pay, which is due when an employee retires under [Article 302 [287]](/law/labor-code/article-302).

Made-up illustration: Ramil has worked 6 years and 7 months as a driver for a Quezon City company. The company closes his department because the work is no longer needed and gives him and the labor department written notice a month ahead. This is redundancy. The 7 months count as one whole year, so Ramil's minimum separation pay is one month pay for each of 7 years of service.

To compute an amount, use the separation pay calculator. For final pay, see the final pay and separation pay guide. See also Retrenchment requirements and Can you be fired for being sick?