Press Releases
SEPARATION PAY

Baguio City - While waiting for my turn to pay my bills at the mall bills payment area, I overheard a conversation between two workers were sharing their frustration about how they were being treated by their supervisors. One of the ladies, lets call her “Juana” hated her job.  She finally had given up trying to make things work so to make the story short she ended the conversation by saying to the other that she will resign from her job and just look for a new job.

It wasn't the first time I'd heard such conversations and it made me think about how much more prevalent unhappy and disgruntled employees are in today's workplaces. There are a lot of reasons why employees resign from work. Some reasons are a bad boss, not so good working relationship with other employees or demanding management decisions that takes away private and family time. Many employees today, no matter the kind of industry or services or job function, have declared, publicly and in private that all bets are off.

The reality is, some workers today have become demoralized by the turtle pace increase of salaries or in some places, salary cuts or bonds. They have grown tired of being flexible and working long hours, only to get disappointed when that flexibility isn't reciprocated by their managers or companies heads in the way they want it to be.

However, employees can't be faulted for having certain expectations, and employers can't be faulted too for making business decisions that are required for them to stay afloat in today's economy. Nonetheless, in many cases, trust has eroded. Employees expect more and so do companies.

So what will happen to “Juana” if she resigns from her current work? The question is, is she entitled to a Separation pay?  Separation Pay has been defined as the amount that an employee receives at the time of his severance and is designed to provide the employee with the funds during the period she is looking for another employment. However, this broad definition must not be taken at face value.

There are only limited instances wherein separation pay can be granted. First is termination for any of the authorized causes under the Labor Code as follows: a) Introduction of labor-saving devices; b) Redundancy; c) Retrenchment; d) Closure or Cessation; and e) Disease the employee found to be suffering and whose continued employment is prohibited by law or is prejudicial to his health as well as the health of his co-employees. As such, separation pay must be paid when the termination is based on the said authorized causes except when the closure of the company is due to financial losses.

For authorized causes, the law requires the employer to give written notices to both the worker and the Department of Labor and Employment (DOLE) 30 days ahead of the projected separation. Second, where there is illegal dismissal and reinstatement is no longer feasible. An illegally dismissed employee is entitled to two reliefs, namely back wages and reinstatement. However, where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is granted.

Third is as a measure of social justice where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. In this instance, the Supreme Court coined separation pay as financial assistance and allowed as a measure of social justice and based on exceptional circumstances. Hence, courts, in their discretion may grant separation pay based on compassionate justice taking into consideration the length of service of the employee, the amount involved, whether the act is the first offense, the performance of the employee, etc.

However, the Supreme Court sternly warned that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. However, where the reason for the valid dismissal is habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, there is no need to invoke compassionate justice.

In view of the foregoing, an employee is not entitled to separation pay when he is terminated based on just causes. Pertinently, he is also not entitled to separation pay when he tenders his resignation. Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment.

 

Thus, the elementary rule is that 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.

The computation of separation pay is based on the ground on which it is based. In case of termination due to the installation of labor saving devices or redundancy, the employee affected is 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 including termination of employment on the ground of disease, 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.

In illegal dismissal cases, where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative. It must be emphasized that this payment of separation pay is in addition to payment of back wages. A fraction of at least six (6) months shall be considered as one (1) whole year.

END/Patrick T Rillorta

[Back]
[Print]
2018-10-22
Dir.Exequiel Guzman
Welcome to the official home of the Philippine Department of Labor and Employme
Contact us:
Name

Your Email

Title/Subject

(Maximum characters: 50)
You have characters left.

Your Message

(Maximum characters: 300)
You have characters left.