What is separation pay, and how is it computed?

Answer

Separation pay is the amount owed to an employee whose employment ends for an authorized cause — such as redundancy, retrenchment, closure not meant to defeat the law, or disease — under Articles 298 and 299 of the Labor Code. It is generally not owed when the dismissal is for a just cause based on the employee's own fault.

The amount depends on the ground: typically one month's pay or one-half month's pay per year of service for retrenchment, closure, or disease, and one month's pay per year of service for installation of labor-saving devices or redundancy, with a fraction of at least six months counted as one whole year.

Sources & further reading

• Labor Code Art. 298 — authorized causes
• Labor Code Art. 299 — disease as a ground
• Full report: 13th month pay & final pay

Cases on this topic

• Alliance of Government Workers v. Minister of Labor and Employment
• Bani Rural Bank v. De Guzman
• Boie-Takeda Chemicals, Inc. v. De la Serna
• Brokenshire Memorial Hospital v. NLRC
• Central Azucarera de Tarlac v. CAT Labor Union-NLU
• Dario Nacar v. Gallery Frames
• Davao Fruits Corporation v. Associated Labor Unions
• Dentech Manufacturing Corporation v. NLRC

Related questions

• What is 13th month pay, and who is entitled to it?
• How is 13th month pay computed?
• Is 13th month pay taxable in the Philippines?
• When is a dismissal legal? (security of tenure)