Separation Pay Flashcards
Definition
-compensation given to an employee who is terminated from employment due to
authorized causes
Coverage
-applies to an employee in instances of authorized termination of employment covered by Art. 298 and 299 of the Labore Code
-entitlement depends on the reason for the termination of service
Amount:
1/2 month pay per year of service
•a fraction of at least 6 months being considered as one whole year
•any authorized causes:
-retrenchment to prevent losses
-closure or cessation of operation due to serious losses or financial reverses
-burden of proof is on the employer to provide financial statements that show that the establishment has been operating even through financial losses for a significant amount of time
-when employee is suffering from a disease not curable within a period of 6
months and their continued employment is prejudicial to their health or the health of others
-lack of service assignment of security guard for a continuous period of 6
months
-lack of service assignment of a worker in a contracting or subcontracting arrangement for a continuous period of 3 months
Authorized causes for separation pay include:
- Security guards who have not been assigned to work for 6 continuous months.
- Workers in contracting or subcontracting jobs who have not been assigned to work for 3 continuous months.
one-month pay per year of service
employee is entitled to separation pay equivalent to their one-month pay for every year of service
•at least 6 months being considered as on whole year
•authorized causes:
-installation of labor-saving devices
-redundancy (when the position of the employee has been found to be excessive or unnecessary in the operation of the enterprise)
-impossible reinstatement of the employee for reasons not attributable to
the fault of the employer:
-when reinstatement ordered by competent authority cannot be implemented due to closure
-when the position they are supposed to be reinstated to no longer exists and there is no substantially equivalent position
-lack of service assignment of security guard by reason of age
Computation (separation pay)
-computation shall be based on their latest salary rate
-it would be an error not to integrate the allowance with the basic salary. base salary + regular allowances = serparation pay
It would be a mistake not to include regular allowances when calculating separation pay. The separation pay should be based on the total of the basic salary plus any regular allowances the employee receives.
Notice of Termination
-termination of employment due to authorized causes may be done by serving a written notice on the employee and DOLE through its regional office at least 1 month before the intended date of termination
Coverage from Income Tax of Separation Pay
-any amount received as a consequence of separation due to death, sickness, or other
physical disability or for any cause beyond the control of the employee shall not be
included in the gross income and is therefore exempted from taxation
If an employee receives separation pay due to death, sickness, disability, or reasons beyond their control, that amount is exempt from taxes and will not be included in their gross income.
