Dear PAO,

I am confused about how my separation pay was computed. I was dismissed from my job due to redundancy in our company. The reason stated in the letter given to me by my employer was: “Process Improvements and Automation of Functions which render the position as redundant since the new process or automation requires less personnel.” I have been with the company for 17 years and was given a separation pay equivalent to one-half (1/2) month’s salary, multiplied by the number of years I worked. I believe that my employer should have used one month’s salary as the basis instead of just half (1/2). Am I right? Thank you very much for your response.

Casey

Dear Casey,

According to the Labor Code of the Philippines, workers have certain rights when termination is due to redundancy. One of the most important benefits granted to them is separation pay.

Redundancy occurs when a company decides to lay off employees for various reasons, such as restructuring operations, a decreased need for a particular job, or changes in technology. This often happens when a company is experiencing financial difficulties or can no longer sustain certain positions.

Article 298 of the Labor Code outlines the computation of separation pay, which is also dependent on the reason for the termination of employment. It provides that:

“ARTICLE 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.”

According to the afore-mentioned provision, there are various reasons for termination of employment, such as the installation of labor-saving devices, redundancy, retrenchment, and the closure or cessation of business operations. It is also evident that the computation of separation pay varies depending on the reason for the termination of employment.

Regarding your situation, if you were separated from your job due to redundancy in your company, the computation of your separation pay should be equivalent to your one month salary, multiplied by 17 years. Your employer cannot use one-half month’s salary as the basis, as the reason they provided for your termination was: “Process Improvements and Automation of Functions.” This is considered redundancy. Therefore, the correct basis for calculating your separation pay should be one month of your salary, not just half (1/2) a month.

We hope that we were able to answer your queries. This advice was based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

We appreciate your trust and support.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected]