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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.
AT A GLANCE:
Separation pay shall be paid by the employer to an employee terminated due to installation of labor-saving devices, redundancy, retrenchment, closure or cessation of operations not due to serious business losses or financial reverses, and disease.
An employee whose employment is terminated by reason of just causes is not entitled to separation pay except as expressly provided for in the company policy or Collective Bargaining Agreement (CBA).
(Section 5.5, Rule I-A, OLE Department Order No. 147, series of 2015)
Separation pay refers to the compensation given to an employee who is terminated due to authorized causes provided in Articles 298 and 299 of the Labor Code of the Philippines, as renumbered. (Separation Pay, 2023 DOLE Handbook on Workers’ Statutory Monetary Benefits)
This benefit applies to an employee in instances of authorized termination of employment covered by Articles 298 and 299 of the Labor Code.
Article 298 and 299 of the Labor Code provides that:
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. 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, 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. A fraction of at least six (6) months shall be considered one (1) whole year.
ART. 299. [284] Disease as Ground for Termination. – An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.
An employee’s entitlement to separation pay depends on the reason or ground for the termination of his or services. Where the termination is for authorized causes, separation pay is due. (Separation Pay, 2023 DOLE Handbook on Workers’ Statutory Monetary Benefits)
Given the foregoing, employees who are terminated due to authorized causes are entitled to separation pay.
Under DOLE Department Order No. 147, series of 2015, authorized causes refer to those instances enumerated under Articles 298 (closure of establishment and reduction of personnel) and 299 (disease as a ground for termination) of the Labor Code, as amended. These are causes brought by the necessity and exigencies of business, changing economic conditions and illness of an employee. (Section 4, par. A, Rule I-A)
Moreover:
“Separation pay shall be paid by the employer to an employee terminated due to installation of labor-saving devices, redundancy, retrenchment, closure or cessation of operations not due to serious business losses or financial reverses, and disease.” (Section 5.5, Rule I-A)
DOLE Department Order No. 147, series of 2015 further outlines the guidelines for payment of separation pay, to wit:
An employee terminated due to installation of labor-saving devices or redundancy shall be paid by the employer a separation pay equivalent to at least one (1) month pay or at least one (1) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.
An employee terminated due to retrenchment shall be paid by the employer a separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.
An employee terminated due to closure or cessation of business operation not due to serious business losses shall be paid by the employer a separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year. Where closure is due to serious business losses or financial reverses, no separation pay is required.
An employee terminated due to disease shall be paid by the employer a separation pay equivalent to at least one (1) month salary or one-half (1/2) month salary for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.
An employee whose employment is terminated by reason of just causes is not entitled to separation pay except as expressly provided for in the company policy or Collective Bargaining Agreement (CBA).
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