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Notes On Separation Pay

Employees terminated due to authorized causes may be entitled to separation pay, while those terminated due to just causes are not. [Authorized causes include installation of labor-saving devices, redundancy, retrenchment, closure or cessation of operations, and disease.] Separation pay amounts depend on the authorized cause and length of service, with 1 month's salary being the minimum amount. Employees terminated during probation for failing to meet standards are also not entitled to separation pay.

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291 views2 pages

Notes On Separation Pay

Employees terminated due to authorized causes may be entitled to separation pay, while those terminated due to just causes are not. [Authorized causes include installation of labor-saving devices, redundancy, retrenchment, closure or cessation of operations, and disease.] Separation pay amounts depend on the authorized cause and length of service, with 1 month's salary being the minimum amount. Employees terminated during probation for failing to meet standards are also not entitled to separation pay.

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Theodore Dolar
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I.

Separation Pay

An employee may be entitled to receive separation pay depending on the nature of his
or her dismissal from employment. It is imperative to note that this, being merely a guideline,
may not be sufficient to cover specific cases of which the Supreme Court has ruled in a certain
ratio.

Separation pay, in simple terms, is remuneration received by an Employee who has


been terminated for causes not due to his own fault. These causes are referred to as Authorized
Causes and they are enumerated under the law. Under the Philippine Labor Code, as amended
by DOLE Department Order 147, Series of 2015, the Authorized Causes are:

a. Installation of Labor-saving Devices;


b. Redundancy;
c. Retrenchment or Downsizing;
d. Closure or Cessation of Operation;
e. Disease.

Under the same Department Order, the minimum Separation Pay that should be
received by the Employee depends on the cause invoked for his termination.

If the termination is under Installation of Labor-Saving Devices or Redundancy, then


Separation Pay must be at least 1 month’s salary, OR 1 month’s salary for every year of
service, whichever is higher.

If the termination is due to Retrenchment, then the Separation Pay must be at least 1
month’s salary, OR ½ of 1 month’s salary for every year of service, whichever is higher.

If the termination is due to Closure or Cessation of Business Operations not due to


Serious Business Losses, then the Separation Pay must be at least 1 month’s salary, OR ½ of 1
month’s salary for every year of service, whichever is higher. HOWEVER, if the closure is due to
Serious Business Losses or Financial Reverses, then no Separation Pay is required.

If the termination is due to Disease, then Separation Pay must be at least 1 month’s
salary, OR ½ of 1 month’s salary for every year of service, whichever is higher.

In all these instances, any length of service which is at least 6 months but less than a full
year shall still be considered a full year for the purposes of computing the Separation Pay.

For employees on a probationary status, if their dismissal is based on the fact that they
failed to meet the standards disclosed to them and are expected of them to meet, they are not
entitled to separation pay.

II. Employees Terminated on Just Causes

Under the Labor Code, an employee’s termination is the test of whether or not such an
individual is entitled to receive it. In Philippine law, the Labor Code makes a distinction between
what is called a “Just Cause” and “Authorized Cause”

Just Causes are those causes recognized by law as grounds to terminate an employee
from employment because of the fault of the employee. They are not entitled to receive
separation pay. The law specifically outlines Just Causes under Article 297 of the Labor Code
to be the following grounds:
1. Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work;
2. Willful disobedience or Insubordination
3. Gross and habitual neglect by the employee of his duties;
4. Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative;
5. 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
representative; and
6. Other Analogous cases.

Under DOLE Department Order 147-15, the elements required for such termination to be
valid varies depending on the cause of termination:

1. Serious misconduct or willful disobedience by the employee of the lawful orders of


his employer or representative in connection with his work;
a. There must be misconduct
b. Such is characterized to be grave and aggravated
c. Must be related to the performance of the employee’s duties
d. It must be shown that the employee becomes unfit to work for the employer
2. Willful disobedience or Insubordination:
a. There must be disobedience or insubordination
b. Must be willful and intentional and must be characterized by a wrongful,
perverse attitude
c. Order violated must be reasonable, lawful, and made known to the employee
d. The order must pertain to the duties which he has been engaged to discharge
3. Gross and habitual neglect by the employee of his duties;
a. There must be neglect of duty
b. Neglect must be both gross and habitual
4. Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative;
a. There must be an act, omission, or concealment
b. Act, omission, or concealment involves a breach of legal duty, trust, or
confidence of the employer
c. Committed against the employer or his/her representative
d. Must be in connection with the employee’s work
5. 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
representative; and
a. There must be an act or omission punishable by law
b. The employee commits these acts against the employer, any immediate
member of the latter’s family, or his or her duly authorized representative
6. Other Analogous cases
a. Act or omission similar to those specified in these cases
b. It must be voluntary or willful on the part of the employees

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