Philippines Separation Pay Calculator for Employees

About the Philippines Separation Pay Calculator for Employees

When a Philippine employer ends a job for an authorized cause, the Labor Code sets a minimum separation pay. For redundancy or the installation of labor-saving devices it is at least one month pay for every year of service; for retrenchment to prevent losses, a closure not due to serious losses or a disease that makes continued work unlawful or harmful, it is half a month pay for every year of service. In every one of these cases it is at least one month pay, and a fraction of six months or more counts as a whole year.

Choose the cause, enter your service as years and months or as exact dates, and your latest monthly salary (or daily rate) with the regular allowances you receive. The calculator applies Article 298 or 299 (formerly 283 and 284), shows both amounts the law compares and which one applies, works out every other cause on the same figures, compares your employer's offer, and lists the notice, the tax rule and what else belongs in your final pay. Everything stays in your browser.

Common uses

• Check the separation pay in a redundancy, retrenchment or closure notice before you sign a quitclaim.
• Compare the package your employer offers with the Labor Code minimum.
• Work out what a closure would cost an employer for each employee.
• See how much an extra few months of service would add under the six-month rule.

Separation pay by cause

One month pay for every year of service:

• Installation of labor-saving devices and redundancy, when the position has been found excessive or unnecessary — at least one month pay (Article 298).
• Reinstatement that has become impossible through no fault of the employer — the establishment has closed, or the position no longer exists and there is no substantially equivalent one (DOLE handbook).
• A security guard left without a service assignment by reason of age (DOLE's rules for the private security industry, in the handbook).

The handbook states no one-month minimum for these last two, so with less than six months of service the calculator shows nothing for them and says so.

Half a month pay for every year of service (at least one month pay):

• Retrenchment to prevent losses, and closure or cessation of the business not due to serious business losses or financial reverses (Article 298).
• Disease — the employee has a disease and continued employment is prohibited by law or prejudicial to the employee's or co-employees' health; DOLE describes it as a disease not curable within six months (Article 299).
• A security guard without a service assignment for a continuous period of six months, and a worker in a contracting or subcontracting arrangement without one for three months (DOLE handbook).

Nothing under the Labor Code: a closure due to serious business losses or financial reverses; a dismissal for a just cause (Article 297), which still needs a written notice of the causes and a chance to be heard (Article 292(b)); and a resignation (Article 300), where the employee gives a month's notice unless there is a just cause to leave at once. A contract, company policy or collective bargaining agreement can give separation pay in these cases.

Articles 283 and 284 became Articles 298 and 299 when DOLE renumbered the Labor Code, so older documents use the old numbers.

The six-month rule and the pay it is based on

A fraction of at least six months counts as one whole year, so 7 years and 6 months count as 8 years and 7 years and 5 months as 7. Separation pay is based on your latest salary rate, and DOLE's handbook adds that it would be an error not to integrate the allowances an employee regularly receives with the basic salary (Handbook on Workers' Statutory Monetary Benefits).

For a daily-paid employee the calculator turns the daily rate into a month with DOLE's estimated equivalent monthly rate: the daily rate times the days paid in a year, divided by 12 — 313 days for six working days a week, 261 for five, 365 for an employee paid for every day of the month. The handbook calls these factors guides, so enter your own number of days if your payroll uses one.

Notice, final pay and tax

For the causes in Article 298 the employer must serve a written notice on the employee and on DOLE — through the regional office with jurisdiction over the place of business — at least one month before the separation takes effect (Labor Code).

The final pay — unpaid salary, the cash value of unused service incentive leave and other convertible leave, the pro-rated 13th month pay, separation pay, retirement pay, any refund of tax withheld in excess, and cash bonds due back — must be released within 30 days of the separation, unless a company policy or agreement is more favourable. The employer also issues a certificate of employment within three days of a request (DOLE Labor Advisory No. 06).

An amount received because of a separation from the service for death, sickness or other physical disability, or any cause beyond the employee's control is excluded from gross income, so separation pay for redundancy, retrenchment, closure or disease is not taxed (Tax Code, Section 32(B)(6)(b)). Pay you receive on resigning is not covered by that exclusion.

Other countries

For the UK, the UK Redundancy Pay Calculator works out statutory redundancy pay by age and service; for Australia, the Australia Redundancy Pay Calculator applies the National Employment Standards. The Philippines 13th Month Pay Calculator works out the pro-rated 13th month pay that goes with your final pay.

Limitations

• The statutory minimum only. A contract, company policy or collective bargaining agreement can give more, and the higher amount then applies.
• Whether the cause and the procedure were valid — proof of losses, the notice, the choice of who goes — is a legal question for DOLE, the NLRC or the courts. An illegal dismissal has other remedies that this calculator does not work out.
• Pay that varies from month to month, such as commissions or piece rates, is not averaged: enter the monthly figure you want to use.
• Separation pay granted in place of reinstatement in a dismissal case, and schemes set by a collective bargaining agreement, follow their own terms.
• An estimate for information, not legal advice. A dispute about final pay can be brought to the nearest DOLE regional, provincial or field office for conciliation (Labor Advisory No. 06).

Privacy

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