Issues on separation pay | Inquirer Business
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Issues on separation pay

Last week, Labor Secretary Silvestre Bello III said in a public briefing that, in the wake of the new coronavirus disease (COVID-19) pandemic, 2,068 establishments had closed down and led to the displacement of 69,022 workers.That figure is expected to rise as more businesses reopen and their owners decide whether the conditions in the “new” normal would be worth remaining in operation.

Although the Department of Labor and Employment has suggested several ways to mitigate the adverse effects of the pandemic, thousands more employees are expected to lose their jobs in the coming months.Under the Labor Code, retrenched employees shall be entitled to a separation pay equivalent to at least one-month pay or one-month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one year.

Note, however, in case the employee’s contract or the collective bargaining agreement (if any) provides for a higher separation pay, their terms shall apply.


For businesses with ample financial resources or whose owners have deep pockets and are willing to fund that pay despite incurring losses, complying with the payment obligation may not be a problem.


They can look at the separation pay as an expression of their appreciation and gratitude for the employees’ services to the business.

In giving the separation pay, it is essential the concerned employees be required to individually sign a “release and quitclaim” form that basically states they received their separation pay (less any unpaid or outstanding obligations or liabilities) and that they do not have any other claims or causes of action against the employer for unpaid employment benefits.This document should be written in a language or dialect the employee is familiar with and, if feasible, signed in the presence of one or two witnesses.This way, the employee cannot later claim—after he or she has spent the money—that his or her employer failed to pay the separation pay due him or her.


In case such a claim is later made, the witnesses could attest the employee received the subject amount and freely signed the release and quitclaim form.

There is no dearth of ambulance-chasing labor law “specialists” who, in spite of the fact the employees received the appropriate separation pay and signed a “release and quitclaim,” would egg them to file complaints for unpaid separation pay and say they did not understand the contents of that document.

Although it’s advisable that this document be prepared by a lawyer, employers who cannot afford professional service can search the internet for templates or samples of it written by Filipino lawyers.

But what if the employer has become bankrupt or has been financially devastated by the pandemic and the consequent lockdown that it has no choice but shutter the business and let go of its employees without giving them separation pay?This situation would apply to micro and small-sized enterprises, or mom-and-pop businesses, whose operational costs are defrayed from their daily or weekly earnings.

Are these employers still obliged to comply with the requirement on separation pay despite their inability to do so?

Yes, they are. The labor law states that any violation of its provisions, which includes payment of separation pay to retrenched employees, would result in the imposition of fines and penalties, such as imprisonment up to three years.

True, the principle of dura lex sed lex (the law is hard but it is the law) applies to financially distressed employers or businesses, but is that fair and just under the present circumstances?

It is not their fault that a bunch of Chinese nationals feasted on exotic animals and caused the COVID-19 pandemic that wreaked havoc on the world’s economy, including theirs, and ruined their businesses.

Without that medical crisis, they’d probably still be in operation and providing gainful employment to their employees.

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The pandemic is not their fault. It was beyond their control. Equity demands they should not be penalized if they are unable to give separation pay to their retrenched employees. INQ

TAGS: Business, separation pay

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