Business Costs for End of Employment

Business’ Cost for End of Employment FAQ (v2022-1)

What benefits do I have to pay my employees that resign? Do I owe them any separation pay?

No. It is important to ensure that you have written evidence of the resignation.  In the event that a former employee may sue you for ‘illegal dismissal’, it would be your burden to prove that they resigned.

What benefits do I have to pay my employees that are retiring?

If your retiring employee has been working with you for at least five years, and is at the retirable age (60), he/she is entitled to ½ month salary for every year they were employed.

If the contract provides another retirement scheme/benefit, the higher benefit will be applied.

What is included in ‘half-month’ pay?

All other benefits, such as 1/12 of the 13th month pay, pro-rated service incentive leave, etc.

If I have redundant employees, what benefits are they entitled to when they are ‘redundated’?

Yes. You are required to pay ‘separation pay’ of 1 month per year of employment.

If I reduce my manpower due to business losses, do I need to pay separation pay?

Yes. But, only ½ month per year of employment.

If I terminate my employees, what benefits must I pay them?

If you terminate with due process, and for one of the ‘just causes’ listed in the labor code, you are not required to pay separation pay.

What are the ‘just causes’ for termination?

  1. Serious Misconduct;
  2. Willful disobedience;
  3. Gross and habitual neglect of duties;
  4. Serious breach of employer’s trust.

If I close my business, do I have to pay separation pay to my employees?

If you closed due to business reverses, you are not required to pay separation pay.  Otherwise, you must pay ½ month for every year of service.

Please note: that there are procedural and reportorial requirements with the Department of Labor and Employment whenever an employee is separated from employment with your company.  If you are unsure of how to comply, it is highly recommended that you refer to the resources provided by the DOLE and/or speak to a lawyer.