If your employees resign, what would they be entitled to? Are there any benefits or special pay that you need to release? If so, when are payments supposed to be given? We tackle these things in this article.
The Right to Resign
Let's get a few fundamentals in place so our discussion can proceed smoother. Let's define resignation:
Resignation is a voluntary act on the part of the employee to leave their current employment. It's a fancy way of saying, "I quit!"
How do people resign?
Under the labor code, there is a proper way of resigning. An employee must give a written document, more commonly known as a "resignation letter", to the employer stating their intention to leave 30 days prior to the date of his intended resignation. This is to allow for a turnover period. I can't stress how important the 30-day notice is. This is one of the responsibilities given to the employee under the law. If you’re interested in the obligations of a resigning employee, read my article "Is immediate resignation allowed?"
Can Employers Refuse the Resignation?
No. There is a difference between getting authorization and giving notice. When you need authorization, you need another person's permission before you can do something. When you give notice, you are merely informing the other person that you are doing something you are allowed to so that they can make preparations and adjustments. Let's differentiate the 2 concepts further so you're clear.
What does "authorization" mean?
When we talk about authorization, I think about a teenager asking permission from their parents to go out with their friends. If Mommy and Daddy say no, then no bueno for the mall trip with your BFF's, kid. Sorry. That is authorization or asking permission. Without the permission, you can't proceed without repercussions.
What does "notification" mean?
But if you're already a 30-year-old adult, working and responsible enough for your own hours, then you can choose whether or not to tell your parents that you are going out. Can they stop you? Heck no, legally you're a fully grown adult. You can do what you want (theoretically at least haha! You know how Filipino parents can be). Just notify your parents and give them the courtesy of knowing where you are, so they don't worry (or they open the door for you when you get back home later on).
Much like the full-grown adult, the labor code assumes that the employee is capable of making responsible choices and so, the law allows them to make responsible choices for themselves in terms of ending their employment. Unlike the teenager, they don't need permission (or authorization) to leave.
Instead of securing the authorization, they only provide a notification in the form of following the proper resignation procedure (30 day notice and turning over pending work among other things).
Resigning employees are entitled to the things they already "earned"
Now that we've cleared the concept of a proper resignation, let's now talk about what they are entitled to. In my workshops, we make it as easy as possible to understand and remember by phrasing it this way:
As a general rule, employees who resign are only entitled to things they have already "earned".
Let's make a general enumeration of things that are already considered "earned" by resigning employees:
Last Pay
On the last day of the 30-day period, most probably the company is busy checking if the resigning employee still has accountabilities or pending remittances to surrender. So mostly, resigning employees would probably have their last pay on hold until the clearance is given. These employees are entitled to receive the pay for the days they reported to work.
Proportionate 13th month
The law prescribes 13th month pay for a certain class of employees as well. If the resigning employee is one of them, then they are entitled to the pro-rated 13th month pay depending on what time of the year they chose to leave the employer.
Unused Service Incentive Leave Credits
Certain employees are covered by the Service Incentive Leave (SIL) benefit under the labor code. These are 5 mandatory paid leaves given to employees who have served a year or more with the employer. If these are unused, the proportionate earned credits are considered convertible to cash. For resigning employees, these should be included in the last pay computation.
Extra Benefits Voluntarily Given by the Employer
One of the powers of the employer is to establish incentives and benefits for their employees. These are issued under the concept of management prerogative. Check the policies on these goodies to see if the resigning employee is entitled to receive them as well. Some samples include allowances, unused leave credits aside from the SIL, and items such as rice, food and prepaid load.
Is he entitled to separation pay?
In every workshop I've done, this question never fails to come up. Finally we get to tackle this in our online classroom. Are you ready for the answer?
Resigning employees are not entitled to separation pay.
Why? Simple answer is that they aren't on the list.
"What list?" you may ask. Well, the law specifically enumerated the situations wherein employees get the right to separation pay. Resignation simply isn't one of them. If you want so see this list, please read my article "When do you give separation pay?"
Just to recap what I discussed in that article, the only people entitled to separation pay would be the people who are removed from their jobs on the basis of authorized causes for termination. They are employees who, through no fault of their own, are forced by circumstances to leave their employment.
Why are resigning employees treated differently from terminations due to authorized causes?
Let me ask you something: when an employee resigns, who decided that? Was it the employee or the employer? Going back to our definition, resignation is a voluntary act on the part of the employee. The employee decided it was a good idea to move on from their current employer.
The main difference is the "source" or the "impetus" of the termination. Who made the move? In resigning employees, the impetus for the termination came from them. It wasn't brought about be circumstances or forced upon them by the employer. The resigning employee decided this themselves, and as a result, they excluded themselves from the category of people entitled to separation pay.
Summary
As a recap, we discussed:
- What a proper resignation looks like.
- The difference between notification and authorization.
- The concept that resigning employees get to keep what they have "earned".
- That they also get to keep any additional benefits voluntarily granted to them.
- Samples of these "earned" salaries and benefits.
I hope that this article was able to settle the question for your resigning employees once and for all. All it takes is understanding what the law says so you can treat resigning employers fairly, and you ensure that you are giving them what is properly due.
Additional Resouce if you’re thinking of resigning
I hope this was able to help you understand resignation better, but chances are, you still have questions. Click here for additional resources which I think can help you, as well as a preview video. Go to info.legalguide.ph/resignation to learn more.