Retirement Pay Flashcards
Definition
compensation given to a retiring employee
Coverage:
-retirement age ⇒ 60-65 years old
-compulsory retirement age ⇒ 65 years old
-must have served in the establishment for at least 5 years
-applies to all employees, except:
•government employees
•employees of retail, service and agricultural establishments regularly employing at most 10 employees
Amount
minimum pay is equivalent to 1/2 month salary for every year of service, 6 months
being considered as one whole year
Computation
•1/2 month salary includes:
-15 days salary based on latest salary rate
-cash equivalent of 5 days service incentive leave
-1/12 of the 13th month pay
•1/2 month salary = 22.5 days salary
•Formula: Daily rate x 22.5 x years in service
Retirement Benefit under CBA or Contract
•retirement benefits on CBA and contracts should not be less than that required by the Labor Code and if it is less than stipulated in the Labor Code, the employee must pay the deficiency
•If employee also contributes to the retirement fund, the employer’s total contributions and accrued interest should not be less than the total retirement benefit had there been no such retirement fund. If the total retirement benefit is lesser than the retirement fund, the employer must pay the deficiency
Retirement Benefit of Workers Paid by Results
•the basis for the salary for 15 days (1/2 month) shall be their average daily salary
-derived by dividing the total salary for the last twelve months from the date of
retirement by the number of actual working days in that particular period
For the retirement benefit of workers paid by results, the salary for 15 days (half a month) is calculated based on their average daily salary. To find this:
- Add up the total salary earned in the last 12 months before retirement.
- Divide that total by the number of actual working days in those 12 months.
This gives the average daily salary, which is then used to calculate the salary for 15 days.
Here’s an example to illustrate:
Let’s say a worker is retiring, and in the last 12 months, they earned a total of $36,000. The worker worked 240 days during this period.
-
Calculate the average daily salary:Total salary for 12 months = $36,000
Total number of actual working days = 240Average daily salary = $36,000 ÷ 240 = $150 -
Calculate the salary for 15 days:Salary for 15 days = Average daily salary × 15
Salary for 15 days = $150 × 15 = $2,250
So, the worker’s retirement benefit for 15 days would be $2,250.
Retirement Benefit of Part-time Workers
•they are also entitled to 1/2 month salary for every year of service, provided:
-there is no retirement plan between the employer and employee
-employee should be at least 60 years old and has rendered at least 5 years of service
Retirement Benefit of Underground or Service Miners
•reitrement age ⇒ 50-60 years old
•compulsory retirement age ⇒ 60 years old
•must have served for at least 5 years as a miner
Retirement Benefit of Racehorse Jockeys
•compulsory retirement age ⇒ 55
•must have served for at least 5 years as racehorse jockey and has paid additional
premium to SSS
Other Benefits upon Retirement
•retirement benefits in Labor Code are separate from those granted by SSS
•employee is also entitled to proportionate 13th month pay for the calendar year and cash equivalent of accrued leave benefits
Here’s a simpler explanation:
- Retirement benefits under the Labor Code are different from those provided by the Social Security System (SSS). So, employees get both types of benefits separately.
- In addition to the retirement benefits, the employee is also entitled to:
- Proportionate 13th-month pay: This means if the employee is retiring partway through the year, they will receive a portion of the 13th-month pay based on how long they worked that year.
- Cash equivalent of accrued leave benefits: This means the employee will receive payment for any unused vacation or sick days they have accumulated.
Coverage from Income Tax of Retirement Pay
-retirement benefits covered by Art. 302 are exempted
