Is separation pay required for resignation after 20 years of service?
In the Philippines, separation pay is a statutory benefit provided to employees under specific conditions as outlined by the Labor Code. However, resignation from employment is not one of those conditions. Separation pay is generally granted to employees whose termination is not due to voluntary resignation, but rather under certain circumstances that are legally recognized as valid grounds for receiving such a benefit.
When is Separation Pay Required?
Under Philippine law, separation pay is required in the following situations:
Retrenchment or Redundancy – If the company needs to reduce its workforce due to financial losses or the position being made redundant, the employee is entitled to separation pay.
Closure of Business – If the employer permanently closes or ceases operations, employees are entitled to separation pay unless the closure is due to serious financial losses.
Disease – If an employee contracts a disease that cannot be cured within six months and is detrimental to the health of the employee or their co-workers, they may be entitled to separation pay.
Other Authorized Causes – Separation pay may also be granted in cases of installation of labor-saving devices, or other justifiable causes, as determined by the law.
No Separation Pay for Resignation
For employees who voluntarily resign, separation pay is typically not mandated by law. Resignation is considered a voluntary act initiated by the employee, and as such, does not fall under the statutory conditions that require separation pay. However, there are exceptions:
Contractual or Company Policy – Some companies may have provisions in their employment contracts or policies that grant separation pay to employees who resign, especially those with long tenures, such as 20 years. If the company policy or contract stipulates this, the employee may receive separation pay despite the resignation.
Retirement Pay – For employees who have served for an extended period, such as 20 years, retirement pay may be an alternative benefit. Under Republic Act No. 7641, also known as the Retirement Pay Law, employees who meet the qualifications for retirement may be entitled to receive compensation upon retirement.
In summary, separation pay is generally not required for employees who voluntarily resign, even after long periods of service such as 20 years, unless provided by company policy or contractual agreement. For other cases involving termination or redundancy, separation pay is a right protected by law.