Who are Eligible for Retirement Pay?

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Published — April 3, 2019

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Related article: Retired from SSS, and still working?

The Philippine Constitution states that it is the obligation of the State to adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. There shall also be priority for the needs of the underprivileged, sick, elderly, disabled, women and children (Art. 13 Sec. 11 of the 1987 Constitution). Aside from this, Article 15 Section 4 of the Constitution further declares that it is the duty of the family to take care of its elderly members while the State may design programs of social security for them. These are some of the state principles anchored to Article 302 (287) of the Labor Code of the Philippines which provides for the grant and coverage of Retirement Pay.

Retirement generally refers to withdrawal of older workers from paid working life (Read here). This is the concept that is most commonly used, and is generally consistent with the popular and technical use of the term (Ibid). On the other hand, the term “older workers” usually depend on the agreement of the employer and employee under a Collective Bargaining Agreement (CBA) or a mutually consented company policy, plan or program on retirement benefits.

Minimum Requirements Under Article 302 of the Labor Code

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any CBA and other agreements. The retirement benefits granted by the said agreements shall not be less than the following minimum requirements:

1. Age threshold: Age of sixty (60) years or more, but not beyond sixty-five (65) years;
   1. However, in case of an underground or surface mining employee, age threshold is fifty (50) years of age or more, but not beyond sixty (60) years of age.
2. Years of Service: Served at least five (5) years in the said establishment. However, parties cannot stipulate a period higher than 5 years, otherwise it will run counter to the rule that favors workers and their benefits (Joselito Guianan Chan, Bar Reviewer on Labor Law, 3rd Revised edition, Page 369, ChanRobles Publishing Company (2017).
3. Amount of Retirement Pay: Retirement pay is equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months-being considered as one (1) whole year.

Employees Covered

The following employees are eligible to avail of retirements benefits under Article 302 of the Labor Code:

1. All employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid;
2. Employees of service and other job contractors;
3. Domestic helpers or persons in the personal service of another;
4. Underground mine workers;
5. Employees of government-owned and/or controlled corporations (GOCCs) organized under the Corporation Code or without original charters (Joselito Guianan Chan, Bar Reviewer on Labor Law, 3rd Revised edition, Pages 365 to 366 ChanRobles Publishing Company (2017).
6. Part-time Employees which includes those under a fixed-term employment who did not attain permanent status (De La Salle Araneta University v. Bernardo, G. R. No. 190809, February 13, 2017).

The only exemptions specifically identified by Republic Act No. 7641 or the Retirement Pay Law which amended Article 302 of the Labor Code and its Implementing Rules are:

1. Employees of the National Government and its political subdivisions, including government-owned and/or controlled corporations, if they are covered by the Civil Service Law and its regulations; and
2. Employees of retail, service and agricultural establishments or operations regularly employing not more than 10 employees (De La Salle Araneta University v. Bernardo, February 13, 2017).

Recent Supreme Court Interpretation on Retirement

In the case of Laya vs Philippine Veterans Bank, G.R. No. 205813, January 10, 2018, the acceptance of an employee of the employment offer which carried with it his acquiescence or implied consent on other rules and regulations, plans, and policies that the employer may subsequently implement, such as the employer’s retirement program or plan, does not work as a valid consent secured from employee for the implementation of a retirement plan or program. This is because retirement plan or program should be the result of the bilateral act of both the employer and the employee based on their voluntary agreement that the employee agrees to sever his employment upon reaching a certain age.

In the same case, the Supreme Court further declared that an employee in the private sector who did not expressly agree to the terms of an early retirement plan cannot be separated from the service before he reaches the age of 65 years. The employer who retires the employee prematurely is guilty of illegal dismissal, and is liable to pay his backwages and to reinstate him without loss of seniority and other benefits, unless the employee has meanwhile reached the mandatory retirement age under the Labor Code, in which case he is entitled to separation pay pursuant to the terms of the plan, with legal interest on the backwages and separation pay reckoned from the finality of the decision.

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OTHER SOURCES:

1. Dentor, Frank & Spencer Byron, WHAT IS RETIREMENT? A REVIEW AND ASSESSMENT OF ALTERNATIVE CONCEPTS AND MEASURES, QSEP Research Report No. 427, McMaster University Social Sciences, https://www.econstor.eu/bitstream/10419/66879/1/571570844.pdf, Last Accessed: April 01, 2019
2. Joselito Guianan Chan, Bar Reviewer on Labor Law, 3rd Revised edition, ChanRobles Publishing Company (2017)

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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