Law News

Separation pay

Dear PAO,
I have been working in the same company for eight years and seven months now. Unfortunately, due to the pandemic, many of my co-workers and I have been told that we have just been terminated.  According to the management, the clients of the company are continuously decreasing.  Thus, they have no other choice but to terminate us because of excess manpower, which resulted in redundancy. I am now looking for other employment opportunities, but before I leave, am I entitled to anything from my previous company because of my termination?

Dear Ruben,
To answer your question, we shall refer to Presidential Decree 442, or otherwise known as the “Labor Code of the Philippines,” as amended and renumbered:

“Art. 298. (283) Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be 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. xxx A fraction of at least six (6) months shall be considered one (1) whole year.” (Emphases supplied)

Thus, under Article 298 of the Labor Code, employees who are laid-off from work due to authorized causes such as installation of labor-saving devices, redundancy, retrenchment, closure or cessation of business operations, and disease shall be entitled to a separation pay.  In your case, since you mentioned that the management terminated your employment because of redundancy, your separation pay shall be equivalent to at least one-month pay or one-month pay for every year of service, whichever is higher.

As an employee of the company for eight years and seven months, you shall receive your separation pay which is equivalent to nine months of your salary because the law provides that a fraction of at least six months is considered as one whole year.  Further, the basis for the separation pay will be your latest salary rate.

We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

By: Chief Public Attorney Persida Acosta

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to