The document outlines the authorized causes for separation pay, including retrenchment, redundancy, and disease, detailing the computation methods and requirements for termination notices. It emphasizes the importance of procedural due process in terminations, especially related to disease, and provides legal citations to support these guidelines. Additionally, it clarifies that separation pay shall include regular allowances and is exempt from taxation in certain cases.

1. Faster legal solutions
jdpconsulting.ph
jdpconsulting
www.jdpconsulting.ph
Separation Pay
Authorized Causes

2. Coverage
Separation pay is given to employees when termination is for autho-
rized causes, namely:
1) Installation of labor-saving devices;
2) Redundancy;
3) Retrenchment;
4) Closing of a business – not due to serious financial losses;
5) Disease; or
6) Impossible reinstatement.
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

3. Computation
½ month pay per year of service:
1) Retrenchment to prevent losses (i.e., reduction of personnel effected by
management to prevent losses);
2) Closure or cessation of operation of an establishment not due to serious
losses or financial reverses; and
3) When the employee is suffering from a disease not curable within a
period of six (6) months and his/her continued employment is prejudicial
to his/her health or to the health of his/her co-employees.
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

4. Computation
1 month pay per year of service:
1) Installation by employer of labor-saving devices;
2) Redundancy, as when the position of the employee has been found to be exces-
sive or unnecessary in the operation of the enterprise; and
3) Impossible reinstatement of the employee to his or her former position or to a
substantially equivalent position for reasons not attributable to the fault of the em-
ployer, as when the reinstatement ordered by a competent authority cannot be im-
plemented due to closure or cessation of operations of the establishment/employ-
er, or the position to which he or she is to be reinstated no longer exists and there
is no substantially equivalent position in the establishment to which he or she can
be assigned.
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

5. Regardless of the computation or ground:
1) A fraction of at least six (6) months being considered as one
(1) whole year.
2) he minimum is 1 month pay.
Computation
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

6. “The employer may terminate the employment of any employee due to the
above-mentioned authorized causes by serving a written notice on the em-
ployee and the Department of Labor and Employment through its regional
office having jurisdiction over the place of business at least one (1) month
before the intended date thereof.”
Important: For disease, case law requires termination to be made following
just cause procedure. (See next slide.)
Notice of Termination
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

7. Deoferio v. Intel Technology Philippines, Inc. (2014)
"The Labor Code and its IRR are silent on the procedural due process re-
quired in terminations due to disease. Despite the seeming gap in the law,
Section 2, Rule 1, Book VI of the IRR expressly states that the employee
should be afforded procedural due process in all cases of dismissals.
Case Law
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

8. "In Sy v. Court of Appeals and Manly Express, Inc. v. Payong, Jr., promulgat-
ed in 2003 and 2005, respectively, the Court finally pronounced the rule
that the employer must furnish the employee two written notices in termina-
tions due to disease, namely: (1) the notice to apprise the employee of the
ground for which his dismissal is sought; and (2) the notice informing the em-
ployee of his dismissal, to be issued after the employee has been given rea-
sonable opportunity to answer and to be heard on his defense. These rulings
reinforce the State policy of protecting the workers from being terminated
without cause and without affording them the opportunity to explain their
side of the controversy."
Case Law
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

9. “The computation of separation pay of an employee shall be based on
his/her latest salary rate.”
Regular Allowance: “In the computation of separation pay, it would be
error not to integrate the allowance with the basic salary. The salary base
properly used in computing the separation pay should include not just the
basic salary but also the regular allowances that an employee has been
receiving.”
Basis
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

10. “Exempted from taxation is the separation pay received by an employee as
a result of his/her separation from the service of the employer due to death,
sickness or other physical disability or for other cause beyond the control of
said employee such as retrenchment, redundancy or cessation of business
operations.”
Exempt from Income Tax
Citation: 2016 Handbook on Statutory Monetary Benefits by DOLE-BWC

11. For more information, please visit
www.laborlaw.ph
We value feedback. �
For comments or permission to use slides,
send us an email: info@jdpconsulting.ph.
LABORLAW

12. www.jdpconsulting.ph
Brought to you by
Faster legal solutions

13. In-House Training
Join us for learning sessions on
these Human Resource topics:
HR Legal Compliance
Labor Unions
Company Policies
Labor Complaints
Outsourcing Manpower
Disciplinary Actions
We also offer coaching & mentoring.
Visit www.cpdc.ph for more details.PROFESSIONAL
DEVELOPMENT
CENTER
ONTINUING