Are You Qualified To Receive A Separation Pay From Your Company?

Not everyone who resigns or is removed from his or her employment is qualified to receive a separation pay from their employer. In today’s blog, I will feature the reasons why an employee may be granted or denied the separation pay, depending on the reasons for his removal from work.

Read on.

The Separation Pay is an amount given to an employee that is not his final pay, prorated 13th month pay, or monetized unused leave credits. The last three I mentioned are monetary benefits due the employee regardless of the cause of separation. The separation pay is additional compensation from his or her employer, like a “bonus”, to help the employee get by while he is in-between jobs.

But not everyone is entitled to a separation pay. In fact, if you voluntarily resign from your job, you will not be granted the separation pay, unless your company offers to give you one (depends on your contract and your employer’s generosity). Suffice it to say, if you were removed because of gross misconduct, you can kiss any chance of getting a separation pay goodbye.

Are you qualified for separation pay?

There are three basis to check if an employee is qualified or at the most, entitled, to receive a separation pay. These are:

  • Based on the Labor Code
  • According to the Supreme Court
  • According to DOLE Regulations
  1. Labor Code
    • Installation of labor-saving devices – this means that a machine, a program, or a device was purchased, installed, and operated to deliver the same job that was once performed by an employee. This is often done to cut on business costs and increase speed and efficiency.
    • Redundancy – Functions, job descriptions, and roles that are no longer required to operate the business. This is synonymous to, or maybe an offshoot of, installation of labor-saving devices.
    • Retrenchment – Cost reduction and management as a response to economic challenges.
    • Business closure
    • Employee’s health condition – when the employee could no longer continue working due to an incurable disease.
  2. According to the Supreme Court
    • Reinstatement is no longer possible – the position that the employee used to have no longer exists (redundancy) and the employee’s skill set is no longer relevant to the business; no other role or position is available for him or her.
    • Strained relations – when the employee is not necessarily qualified for dismissal but in some ways, has become a nuisance. Maybe to put it mildly, the working environment is no longer desirable and separation pay is more favorable for the employee.
    • Author’s note: I am not sure if a court proceeding is necessary for the above two conditions. You may check with a labor lawyer or go over your employment contract and handbook.
  3. According to DOLE Regulations (additional authorized causes provided by the DOLE)
    • Lack of service assignment of security guard
      • for a continuous period of six months.
      • by reason of age
    • Lack of reassignment of deployed personnel after three months.

Who does not qualify to a separation pay?

An employee who is terminated from his employment due to just causes (as prescribed under the Labor Code) shall not be entitled to a separation pay.

Just causes to terminate an employee include:

  1. Serious misconduct
  2. Willful disobedience of a lawful order
  3. Gross and habitual neglect of duty
  4. Fraud
  5. Willful breach of trust
  6. Commission of a crime against the employer, his family, or authorized representatives.
  7. Similar causes as the above.

If an employee resigns voluntarily from his job, he is not entitled to a separation pay. Only the government-mandated final pays as mentioned earlier.

I hope these information helped clear up questions about separation pays and other benefits we “hope” to receive after we resign from our jobs. If you have other questions, you can send me a message and I will try to find the best answers for you.


Published by MasterCitizen

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