Today let's talk about employees who are thinking of resigning or have been terminated or separated from their jobs. I'm going to do a magic trick right now Atty. Ramon, try to guess what is the most burning question in their heads... Are you ready? I'm ready. I bet they are thinking, "Will I receive separation pay?" And that is exactly the same question that our reader, Leilan M., asked:
"Attorney if an employee has been with a company for ten years, but went AWOL, does he have the right to ask for separation pay?"
Interesting. Now if you've been wondering the same thing, stick around, and let's tackle that in today's article.
This episode is brought to you by "The Complete Employee Discipline System" A book that teaches owners, managers, and supervisors how to handle any offense easily and systematically. It provides step-by-step procedures from incident reports all the way to the clearance process. Stand your ground and discipline with confidence. Go to info.legalguide.ph/discipline to learn more.
Welcome to Legal Guide Philippines where we simplify the law to help you make better choices. I'm Atty. Ramon Ramirez and I are with my partner, Atty. Erwin Zagala. Alright, so today we're talking about separation pay. Separation.
When exactly is an employee entitled to separation pay Atty? Erwin? Does it cover all employees who leave their work and I want to know Attorney Erwin how much are we supposed to pay a separated employee? This is a question that we get over and over again and it comes from both sides, the management, and the employee's side. That's why we decided that this was a hot topic video that will help a lot of you.
What is Separation Pay?
So let's get started. What is Separation Pay? Yes Attorney, what is separation pay? The hard thing here in the Philippines, separation pay as a term is being thrown around like they know what it means. So here's how it usually plays out. Alright. Let's say you were fired from work, or separated from work, or terminated. Whatever it is... the misconception is that "Attorney, shouldn't it be simple? separation - - - pay." So if you're separated from work, there should be... pay. Separated... There should be pay. Give me money.
So the problem with that is there's no qualification on how they got separated from employment. So for some people: "You stole from your last boss?" "Yes, but I got separated, so there should be separation pay." Or, "I went AWOL, as a result, I got separated and because of that, there should be a separation pay." If you're going to read that literally, what other conclusion can you reach? Actually... A lot.
If you go with what the law says otherwise. Separation pay is a monetary award given for employees terminated under authorized causes. So I think we said a mouthful. Is that clear enough for you? Yes, for me, but I think we need to make it clearer Atty. Erwin. So to make it easier for everyone, I think we should start off by talking about the different kinds of ways that can you be separated from your work. Okay, sure.
Let's talk about it one by one. First is, Just causes. It refers to the violations done by employees that lead to their termination from work. Why is it called "just" (cause)? Because it's a fair/makatarungan reason. So what are the examples of these just causes Atty. Erwin? Serious misconduct, willful disobedience, or it's a fancy way of saying, professional trouble maker. All right. Gross and habitual neglect and so on and so forth. So, for example, theft, or they stole from the office. That's serious misconduct and you can be terminated based on just causes.
"Attorney, what is your legal basis for just causes?" Our basis is Article 297 (sorry, we mentioned Art. 296 in the video!) of the labor code. You can check it out for yourselves. Okay, so that's the first one. Again, what's the first one? Just causes. Let's add. Atty. Ramon, we made a video on this. What do you call the people who voluntarily choose to leave their work? I know that. Resignation, Atty. Erwin. I do that.
One of our highest viewed videos, on resignation. You guys might want to check it out, but what is resignation? It's voluntarily choosing to leave work. You are the one who decided that, I don't want to be here, or there's a better opportunity somewhere else. So you left. Is it clear? So what are the two? Just causes and resignation. Okay, let's add the third one which is Authorized causes. What are Authorized causes? This means situations wherein without any fault on the part of the employee, there were circumstances that led to their termination. Okay, so let me get this clear.
The employee is separated from work or is terminated from work, but the employee who was separated didn't do anything. There's no wrongdoing. Yes, that's under articles 298* and 299* of the labor code. (*corrected Article numbers) Would it be clearer for you if I tell you a story? Yes, absolutely. Better. So let's imagine There's a factory here, and there are three employees. Their work is to wrap products in the packaging department. Why three? Because the first one opens the package, the second is to blows air to open it up, and the last one puts the item in. That's what they do the whole day. Very efficient. These three were eventually called into HR. And they learned that the factory bought a robot. What does the robot do Atty. Erwin? There is an assembly line, when the item arrived at this point, zzzzzt, and it's done.
It looks like you're enjoying my demo too much. Anyway, so this happened, The three workers, can pack around twenty units in one hour. This machine can pack two thousand units in 20 minutes. Not even close, right? So what the boss did is, they terminated the three employees on the basis of the installation of labor-saving devices. That is one of the authorized causes under the labor code. So as you can see from this example... The question is, did the three do anything wrong? No, they didn't. They didn't steal, they didn't do any of the just causes.
They were doing things as efficiently as they can. Open, blow, and then close. But they were terminated as a result of being replaced by labor-saving devices. Now, in that instance, it's an authorized cause. What is the meaning behind it? Again, the employee didn't do anything wrong. But because of the circumstances which are enumerated by law, the law allows or otherwise authorizes the employer to terminate the employment of certain employees. So that's where the term "authorized" comes in. The law "allows" or "authorizes" the employer to terminate the employment in these cases. Now it's clear. It's clearer now Atty. Erwin. Now that you understand those three general ways of leaving work. Okay. I'm going to describe separation pay in a new way, that I guarantee you, you will never misunderstand it moving forward and you will instinctively know when to apply it. Are you ready? Yes, sir.
What is pampalubag loob
So I want you to think of separation pay as "pampalubag loob" or something to ease a person's feelings. What is pampalubag loob? It refers to small amounts of tokens you can give to ease the feelings or compensate for the trouble you caused. I especially like the definition under www.Tagaloglang.com. What did the tagaloglang.com say? Pampalubag loob is something used To soothe once wounded pride or to soothe hurt feelings or a conciliatory gesture, amelioration, mitigation gratuity, or consolation. In other words -- Pampalubag loob. Now, let's connect it, separation pay is the legal equivalent of Pampalubag loob. Stated otherwise, the law provides for separation pay to ease the shock of getting terminated if the employee didn't have anything to do with the termination.
He/she don't know anything, and it's not their decision. So they are compensated with Pambalubag loob. Is that making sense? Let's test if the lesson landed. So I'll mention the causes, the different reasons why you were removed or separated from your work, then tell me if they should be given pampalubag loob. Okay, Atty. Erwin. Just cause Theft. No way. Are you sure? You won't give pampulubag loob? No way. He/she was the one who did it. He was at fault for why he had to be terminated. He or she. So why will I give separation pay? Is it the right attorney?
Yes. AWOL. So, he had to be terminated. Just causes. Just cause What do you think? None. Resign. Out of my own volition, or I decided to leave my employment? No separation pay. That's because you made the decision. Yes. You had a say in the separation. Yes. That makes sense. What about the company closed? Which is one of the authorized processes. Well, I think that I should be given a pampalubag loob. Because it was closed. So give me some separation pay. You had a sickness that is incurable within six months. So I had to stop working? Yes. I think I should be given some sort of pampalubag loob because it's not my fault. And, of course, our favorite example, you were switched by a robot. Yes. And if my functions were changed by a robot, then I need some pampalubag loob as well.
So, guys, I hope that we have installed this concept into your system. It's now instinctual for you to know when separation pay applies. You now have "a feeling" for when separation pay applies. It's for cases wherein the employee doesn't have anything to do with why the termination or the separation happened. So, attorney, that's now very clear. Maybe you can tell us what are the usual authorized causes, just some examples. We can again go back to the labor code (Art. 298 -299) for the enumeration but what I can relay is retrenchment to prevent losses.
Retrenchment means that you are decreasing employees' reduction of personnel, closure, or cessation of operations, not due to serious losses or due to financial reverses. Those are different, there's closure because I chose to stop the business, or there's closure because of bankruptcy. Both of which are authorized causes. Employees suffering from a disease not curable within six months and continued employment is prejudicial to his/her health and they have his/her co-employees.
Of course our favorite -- installation of labor-saving devices, or robots. Yes. Redundancy. "Sorry, we hired too many lawyers or secretaries. One of the excess employees should be removed." Can be given authorized cause. It's redundancy. Check the law (Art 298). Yes. We're just throwing examples. Aside from those enumerated in the labor code actually there are instances where separation pay is given under jurisprudence. Jurisprudence is court cases -- Supreme Court Cases. That is decided. Jurisprudence states that in cases where it would be impossible to reinstate the employee. For example, the court wanted the employee to come back, but the company was already closed... or that division no longer exists, then just give them separation pay.
In some cases, strained relations exist. The employer and the employee had a big fight, and the court sees that resuming the work may not be productive if they'll have the employee back. Reinstatement should have been the decision but it looks like it's not going to happen. So separation pay should be given instead of reinstatement. Now, aside from those, there are also other DOLE issuances. You might want to check them out because, in these issuances, separation pay is required. they might need to provide a separation pay. This is not an exhaustive list. We're just trying to help you guys understand.
Shouldn’t violators get separation pay
Great. Now I have a question. So shouldn't, in a way... Shouldn't violators still get some sort of separation? Do you think? Why? What is the possible logic? Like for instance, Whether it was just an authorized or just cause for termination... But in authorized causes, it's clear, right? Yeah for authorize cause. But what about stealing, doing bad deeds... The fact is the employee will lose their job... I pity them. Since we pity them, shouldn't they still get some sort of separation pay? Shouldn't they still get some sort of pampalubag loob? Let's tackle that. My first instinct is to go to the law. And the answer is no. Because if the law intended for people under just causes to be given separation pay as well, then the law would have stated it, to begin with.
So the law is saying they are not entitled because it's not stated there. Next, for me, giving violators "pampalubag loob" doesn't make sense. It's not logical why? If you reward... For me... Separation pay is a form of reward. That separation pay. What you're actually doing is encouraging your employees to commit violations. Anyway, you'll get separation pay. Steal from the company or maybe be rude to the boss. Anyway, you'll be rewarded with separation pay no matter what you do. So it's counterproductive. I don't think it's a good idea.
But attorney, please give us a little consideration. If that's how you feel, then have the law changed. Guys, in our jurisdiction... We are a jurisdiction that follows the law. Yeah. Okay. It makes sense... Our framework makes sense. Let's just follow what the law says at this point. So another question that we usually get is now that we are clear which employees are entitled to separation pay.
How much should you pay?
how much should you pay? Yes, as separation pay. How much attorney? So... separation pay has different rates, you might be surprised and say, "Whuuut, it's not the same?!?" They are different. There are two, how many? Two general rates for separation pay and you can see this Under Article 298* and 299* (*corrected article numbers). Okay, let's do a quick summary: one-half month per year of service when... The authorized is retrenchment to prevent losses, Closure or cessation of operations, Or an employee suffering from a disease. That's the one-half month for every year (with minimum as 1 month) One-half month for the year of service Okay so the second category is One month's worth of pay for every year of service (with minimum as 1 month), If the ground for authorized termination is: installation of labor-saving device... Robot.
Next is redundancy and next is impossible reinstatement of the employee. Okay. Okay so let's be careful because you might think that it's just one rate, there are 2 depending on the situation and you can always go to the labor code for that (Art 298-299). So one half or one month per year of service. Now you said for every year of service, Attorney Erwin, what if the employee was... There is a gap. They were separated at let's say five years and three months. There's a gap. Five years and seven months. What the law is did they divided it in half. If it passes six months consider it one year, but if it doesn't pass beyond six months, it is not counted.
Think it's fair because you won't be able to please everyone. But I think it's a fair solution. I am good at math... So it is not going to be like one half month times five-point something... The law said let's not complicate things. Let's not make things complicated Okay. All right. Sounds good. Okay. But attorney, what if you already clarified okay, only for authorized causes. And the things that we said, right?
Now what if, Maybe I don't know the law, but I wanted to give some money even if they stole from me... But I still want to give some sort of separation pay, that's a good person, Maybe I'm afraid of DOLE. Just to end the whole thing, no more cases. I will just give "separation pay" Even if they were terminated for just cause. And let's add resignation as an example even if they are not entitled to it. Maybe you still wanted to give something. Right. Okay. I want to raise two points here.
There is no problem in giving because that's part of management prerogative. There's nothing preventing you, but there is one thing I want you to keep in mind. If you are going to give, you use the proper term. The reason most Filipinos are confused is, when giving additional amounts like this it's not legally considered separation pay. Right? You saw what's the legal definition of separation pay. But they still call it separation pay. That's why people get confused. And they even say, "Hey where is my separation pay?" They demand too much. Precisely because they thought that if you are separated, then employers have to pay. So if you're going to go above and beyond and give something that is not required but discretionary, call it something else. My suggestion: call it "Financial assistance"
That's just a suggestion. If you want to call it any other term, that's fine. Can I term it "pampalubag loob" You'll reflect it on the payroll as... "pampalubag loob" But not separation pay. Not separation pay, because you will be confusing it with the actual term which has legal effects. By calling it another name, you're basically stressing the point that it's voluntary, it's not required and it's not demandable.
At least it's clear and then when you give this amount, I would suggest that you say this to the employee. Give them an orientation such as, "Mr. or Ms. Employee, this is not separation pay. This is financial assistance and it's being given voluntarily. I hope it helps you out." I like that last part. I hope it helps you out. Okay Attorney Erwin, so thank you so much for clarifying this very awesome issue. So what did we talk about today? We talked about what is separation pay.
Recap
So we talked about basically it's a "pampalubag loob". Am I the right attorney Erwin? And you get one way of thinking about it. But you won't find that in the labor code. You won't find that there. We also talked about violators whether or not they should get separation pay, and our answer is no. The law doesn't say that you should. You can if you want to. That's what Attorney Erwin said a while ago.
Another thing we talked about was how much should we pay? So Attorney Erwin said it's one half one or one month, depending on the authorized cause. Be aware of the two rates. You have to know where you will fall. Per year of service. Remember a year of service and then there are six months to check if there's a gap or it's in a whole year. Okay. And lastly, Attorney Erwin talked about. what if we want to give extra even if it's not required by law?
Can we do that? The answer is yes. But please let's call it something else. That's not calling it "separation pay". If it's not separation, it's not separation pay. Let's not confuse the world. Okay, and let's use the proper terms. Am I right Attorney Erwin? Yes. Alright. For most of you, this video was more than enough, and if it makes your life easier then you're welcome.
But there are those of you who will watch this video and end up asking more questions such as attorney how do we hold guilty employees accountable? How do you create the legal documents needed to terminate? Or attorney, how do you create policies that protect the company in the first place? So this doesn't happen. If that's you then I invite you to check out "The Complete Employee Discipline System" book where we teach you a road map handling employee discipline cases from start to finish.
Additional Resources
Get the book at info.legalguide.ph/discipline today. To add to that. If you want us to tackle your question in our show as we did for Leilan, go to www.legalguide.ph and click the Submit topic button. Next of course we'd like to know what's your biggest takeaway from today's video, so please write it down in the comments and let's talk about it. Last, if you feel we've earned a good rating, please give us a like and subscribe because it gives us feedback that we're doing a good job and it encourages us to do more videos.
One last thing... You will encounter people who have no idea what separation pay actually means. You will see them apply it to non-applicable situations or even "demand" it even if they don't qualify. Don't get mad. They are not being difficult, they just don't understand the legal meaning behind the legal term. Now that you know better, approach it from a place of compassion and educate them instead so they understand what you now know about separation pay. That way, misunderstandings will be reduced and employees who are entitled to it will receive the separation pay when the law says that they should get it.
So wasn't that simple? Now go make better choices.
