Separation pay

Dear Atty. Joji,

I have been working with my current employer for five months now and I am thinking of resigning. Some says there’s a separation pay, some says there isn’t. Could you please enlighten me. Thank you.



Dear Jeff,

To answer your question, not all resigned employees are given a separation pay. According to the Labor Code of the Philippines (Presidential Decree 442, as amended), separation pay may be awarded only when the termination of employment is due to installation of labor-saving devices, redundancy, retrenchment, closing or cessation of business operations, disease of an employee and his continued employment is prejudicial to himself or his co-employees, or when an employee is illegally dismissed but reinstatement is no longer feasible (Hanford Philippines Inc. and Victor Te vs Shirley Joseph, GR 158251, 31 March 2005, Ponente: Associate Justice Angelina Sandoval Gutierrez).

Please be guided also by the decision of the case entitled Del Rio vs DPO Philippines Inc. et al. (GR 211525, 10 December 2018), where the Supreme Court through Associate Justice Jose Reyes Jr., stated:

“Suffice it to say, an employee who voluntarily resigns from employment is not entitled to separation pay, except when it is stipulated in the employment contract or the CBA (Collective Bargaining Agreement), or it is sanctioned by established employer practice or policy. The cited exceptions do not obtain in this case. As correctly found by the CA (Court of Appeals), there was no employment contract, much less a CBA, which contained the stipulation that would grant separation pay to resigning employees. Neither was there a company practice or policy that was proven to exist in the instant case. In his attempt to prove that there was a company practice of giving separation pay to resigning employees, petitioner presented the payslips of Martinez and Legaspi showing that they received separation pay after they resigned. We are not convinced.”

“To be considered a company practice, the giving of the benefits should have been done over a long period of time, and must be shown to have been consistent and deliberate. As records would show, the giving of the monetary benefit by respondents in favor of Legaspi and Martinez is merely an isolated instance. From the beginning of respondents’ business and up until petitioner’s resignation took effect on 7 October 2009, there was no showing that payments of such benefit had been made by respondents to their employees who voluntarily resigned. The first and only instance when such a benefit was given to resigned employees was on or after 15 November 2009 — not because it was a company practice but only to pave the way for Legaspi and Martinez’s graceful exit, so to speak.”
Hope this helps.

Atty. Joji Alonso

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