Tag - separation pay

Employee Benefits in Case of “Bankruptcy” or Liquidation of the Company

“Bankruptcy” is a commonly terms by business owners in the event of non-viability of their business. Such term is not used in Philippine setting although there is an equivalent concept which is insolvency. However, Article 110 of the Labor Code recognizes the scenario of “bankruptcy” is so claimed by the employer. This is discussed in the context of liquidation. Technically, bankruptcy in the US contemplates three different scenarios. They are found in Chapters 7, 11, and 13 of the United [...]

Resigned Employees are not Entitled to Separation Pay

Resignation is provided under Art. 300 of the Labor Code. There is nothing in such article that mandates the payment of separation pay to resigned employee. In a case of Italkarat 18, Inc. vs. Gerasmio, (G.R. No. 221411, September 28, 2020), the Supreme Court held that as a general rule, the law does not require employers to pay employees that have resigned any separation pay, unless there is a contract that provides otherwise or there exists a company practice [...]

Separation Pay Cannot be Awarded to Employee Dismissed for Gross and Habitual Neglect of Duty; Other issues on this ground

Gross and habitual neglect of duty is one of the grounds for dismissal under Article 297 of the Labor Code, as amended. In certain termination, employee is entitled to payment of separation pay. This applies to grounds found under Article 298 of the Labor Code such as installation of labor saving devices, redundancy, retrenchment, and closure. But this does not apply to dismissal due to the fault of the employee like those grounds in Article 297. In one case, in view [...]

Separation Pay of Retrenched Employees Should Include Basic Salary and Regular Allowances

Separation pay is mandated to be paid to employees who were retrenched from service. Under Article 298 of the Labor Code, in case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of [...]

Separation Pay Cannot be Granted to an Employee Dismissed for Serious Misconduct

Separation pay is a benefit granted under Article 298 of the Labor Code for termination of employees due to authorized cause. These authorized causes are termination due to installation of labor-saving devices, redundancy, retrenchment, and closure not due to losses. Separation is also granted for employees retrenched or terminated after the company has taken bonafide suspension of operations under Article 301 of the Labor Code. The same is given to an employee terminated due to disease under Article 299 [...]

Separation Pay Cannot be Awarded to Validly Dismissed Employee

Separation pay is awarded based on Labor Code or was ordered to be granted by the Court, as follows: Separation pay as provided in Articles 298 and 299 of the Labor Code. Separation pay in lieu of reinstatement. Separation pay as a form of financial assistance pursuant to any agreement, practice or policy of the company. Separation pay based on equity or social justice. (See page 346, Guide to Valid Dismissal of Employees, 2nd Edition by Atty. Villanueva) Separation pay based on equity [...]

Redundancy Pay Computation Based on NCR Minimum Wage of P537.00

Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as over hiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. (See p. 221, Guide [...]

Separation Pay Received for Redundancy, Retrenchment, or Cessation of Business, Beyond the Control of Employee is Non-Taxable

Separation pay is mandated to be given to employee who is terminated due to redundancy as set forth under Article 298 of the Labor Code, as amended. In general, this applies to retrenchment and termination due to cessation or closure of business. There is an exception as held in the cases of North Davao Mining vs. NLRC (G.R. No. 112546, March 13, 1996.) and Reahs Corporation vs. NLRC (G.R. No. 117473, April 15, 1997). (See discussion of said cases on pp. [...]

Final Pay, Separation Pay, Back Pay, Backwages, Severance Pay, Separation Package, Retirement Pay, Terminal Pay, and Financial Assistance: What’s the Difference?

Final pay is often confused with separation pay. These two concepts are different. To clarify the pay given to employees at the end of employment, for whatever reason that he was separated, I will discuss the difference among these terms and many others that workers normally use when they end their employment. Final pay is a loose term used by companies, more particularly HR department, to refer to the salary and benefits to which the employee who was separated is [...]

Separation Pay Rules and How To Properly Compute If Termination Is Due To Redundancy, Retrenchment, Or Closure

Separation pay is one of those items mandated to be given by law to employees under certain situation. Article 298 [formerly 283] of the Labor Code (get a copy of the re-numbered Labor Code 2018 Edition by Atty. Villanueva), the employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the [...]

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