An employee who is terminated for an
authorized cause is entitled to separation pay of at least 1 month pay. It is a
form of compensation provided for the transitional period during which the
employee is looking for another employment after the employee is separated from
the company. The fraction of at
least six (6) months is considered as one (1) whole year.
The
employer may terminate the employment of any employee due to the
above-mentioned authorized causes by serving a written notice on the employee
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.
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.
Notes: Resigned or Terminated by Just Cause
employees are not entitled to the separation pay.
One-half (1/2) Month Pay per Year of Service
● Retrenchment to prevent losses
● Closure or cessation of operation of an
establishment not due to serious losses or financial reverses
● When the employee is suffering from a
disease not curable within a period of six (6) months
One-Month Pay per Year of Service
● Installation by employer of labor-saving
devices
● Redundancy
● Impossible reinstatement of the employee
to his/her former position or to a substantially equivalent position for
reasons not attributable to the fault of the employer, as
when the reinstatement ordered by a competent authority cannot be implemented
due to closure or cessation of operations of the establishment/employer, 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. The computation of separation pay of an employee shall be
based on his/her latest salary rate and allowances should be included in the
computation. It’s exempted from the employee’s income tax.
Notes: In
accordance with the Tax Code of the Philippines, it’s exempted from taxation.