Below is a comprehensive discussion of the rules on separation pay and 13th month pay when an employee transfers from one Philippine company to another. While this overview is based on Philippine labor laws and relevant Department of Labor and Employment (DOLE) issuances, please note that individual circumstances can vary, and this information should not be taken as formal legal advice. For specific questions, consulting a qualified labor lawyer or the DOLE is always advisable.

1. Overview of Governing Laws and Regulations

Labor Code of the Philippines – Primarily governs the terms and conditions of employment, including causes for termination, separation pay, and employees’ rights.
Presidential Decree (PD) No. 851 (13th Month Pay Law) – Establishes the mandatory 13th month pay for rank-and-file employees.
DOLE Department Orders and Advisories – Provide clarifications on computation and entitlement, and highlight procedural rules for implementation.

2. Separation Pay in Philippine Labor Law

2.1. General Rule

Under the Labor Code, separation pay is generally owed to an employee only under specific circumstances, often referred to as “authorized causes,” such as:

Retrenchment to prevent losses
Redundancy
Closure or cessation of operations not due to the fault of the employee
Diseases or health conditions certified by a competent public health authority as prejudicial to the employee’s or co-workers’ health, if no reasonable accommodations can be made

Unless an employee is terminated for a reason recognized by law (i.e., authorized cause), separation pay is ordinarily not required—most notably in cases of:

Voluntary resignation
Termination for just cause (e.g., serious misconduct, willful disobedience, gross negligence, fraud)
Expiration of a fixed-term contract (unless otherwise stipulated)

2.2. Rate of Separation Pay

When separation pay is legally mandated, the typical statutory rates (subject to adjustments by DOLE or by the courts) are:

One (1) month pay per year of service (or at least one month’s pay) for redundancy or closure/cessation of business not attributable to the employee’s fault
One-half (1/2) month pay per year of service for retrenchment or disease

“Pay per year of service” usually takes into account the employee’s basic pay and, if applicable, allowances or benefits that form part of regular compensation (depending on company policy or as interpreted by the courts).

2.3. Effect of Transfer on Separation Pay Entitlement

If an employee voluntarily transfers from one company to another—especially when there is no actual termination due to an authorized cause—no separation pay is typically due from the first employer. A few key scenarios:

Transfer Within the Same Group of Companies
- Sometimes considered a continuation of service if the move does not involve a formal termination. In such cases, the employee remains effectively employed under the group umbrella, and no separation pay is triggered.
- However, if the original employer formally terminates the employee for an authorized cause (e.g., redundancy in that specific entity) and then rehires them in a sister company, separation pay may be due. This would depend on how the documentation for termination was effected and whether it qualifies under an authorized cause.
Transfer to an Unrelated Company
- Typically, if the employee resigns from Company A to move to Company B without any authorized cause from Company A, no separation pay is due from Company A.
- The new tenure (length of service) restarts under Company B. Unless there is an arrangement or agreement explicitly stating that the original employer will pay separation benefits, none is required by law.
Bridging of Tenure
- In some cases, a new employer (especially if part of the same group) may “bridge” or recognize prior years of service for the computation of future benefits (including eventual separation pay).
- This arrangement is not automatic under the law; it must be expressly stated in the employment contract, collective bargaining agreement, or a special memorandum of agreement.

3. 13th Month Pay

3.1. Definition and General Coverage

Under Presidential Decree No. 851, all rank-and-file employees in the private sector are entitled to receive a 13th month pay, regardless of their position, designation, or employment status, so long as they have worked for at least one month within a calendar year.

3.2. Computation

13th month pay is computed as 1/12 of the total basic salary earned by an employee within the calendar year. For instance: [ \text{13th Month Pay} = \frac{\text{Total Basic Salary Earned During the Year}}{12} ]

Important details:

Overtime pay, holiday pay, night shift differential, and other allowances are generally excluded from “basic salary” unless employer policy, collective bargaining agreements, or repeated company practice includes them in the base for the 13th month computation.
For employees who work less than the full year, the 13th month pay is prorated. This often happens with resignations, transfers, or new hires mid-year.

3.3. 13th Month Pay Upon Transfer

When an employee leaves Company A and joins Company B in the same calendar year:

Company A’s Obligation
- Company A must pay the prorated 13th month pay based on the actual length of service within that calendar year, from January 1 (or the employee’s start date if later) up to their last day with Company A.
- It is common that Company A includes this prorated amount in the employee’s final pay upon separation or soon thereafter.
Company B’s Obligation
- Company B is responsible for the prorated 13th month pay based on the period from the employee’s start date at Company B through December 31 (or the remainder of the year).
- The 13th month pay in Company B is typically computed and released with the rest of its workforce, which, as per DOLE guidelines, must be no later than December 24 of each year. If the employee is still employed by Company B on that date, they will receive their share. If the employee resigns from Company B before the end of the year, they are entitled to that prorated share as part of final pay.
Bridging of Tenure for 13th Month Computation
- As with separation pay, bridging is not automatic. Each employer is usually only obligated to cover the portion of 13th month pay corresponding to the period of actual employment under them.
- If both companies are under a single group and decide to continue an employee’s “tenure” for benefits computation, it must be explicitly agreed upon. Otherwise, the standard rule of prorated payment by each employer applies.

4. Practical Considerations and Common Issues

Final Pay Settlement
- Upon termination (whether by resignation or authorized cause), an employer is mandated to release final pay, which may include unpaid wages, prorated 13th month pay, and any other unpaid benefits.
- DOLE typically encourages employers to release final pay within 30 days from the last day of employment unless a different period is prescribed by company policy or an agreement.
Documentation
- Clarity in separation or transfer documentation is crucial to avoid disputes. If the movement is purely a “transfer” without a break in service under a single group, it should be set out in writing to ensure the employee’s service record is continuous.
- If the departure is a formal resignation from one entity and hiring by a separate legal entity, the employee’s separation from the first company is processed just like a normal resignation case.
Company Policy and CBA Provisions
- Some employers offer separation benefits even if not legally mandated (e.g., upon resignation). Others have specific policies or Collective Bargaining Agreements (CBA) that are more generous than the Labor Code minimum.
- In these instances, the rule on separation pay and bridging may differ from the statutory bare minimum, provided those policies or CBAs do not fall below legal standards.
Documentation of Authorized Causes
- For an employee to receive separation pay under an authorized cause (e.g., redundancy), the employer must provide substantial proof and follow procedural due process (e.g., 30-day written notice to both the employee and DOLE).
- If the transfer is being used to circumvent termination processes (e.g., forced transfer as a form of constructive dismissal), an employee may challenge the arrangement before labor authorities.
Voluntary Resignation vs. Constructive Dismissal
- If an employee resigns voluntarily to transfer to a new employer, no separation pay is due from the old employer absent a more favorable policy.
- If the resignation is coerced (the employee was forced to transfer), it may be considered constructive dismissal. In that case, the employee might have grounds to claim separation pay or other damages, but this is a fact-specific inquiry and must typically be resolved in formal labor proceedings.

5. Key Takeaways

No Automatic Separation Pay for Voluntary Transfers
- Unless there is a legal or contractual obligation, an employee who simply resigns from one company to transfer to another is generally not entitled to separation pay.
Each Employer Covers Its Portion of 13th Month Pay
- For a mid-year transfer, the former employer pays a prorated 13th month for the time employed during the calendar year; the new employer covers the period from the start date with the new company through the end of the year.
Possible Bridging of Tenure
- Bridging tenure (for future separation pay or future 13th month calculations) may happen if the companies are under a single group or if expressly agreed upon. However, it is not automatic under the Labor Code.
Authorized Causes and Procedural Due Process
- Actual separation pay is mandated only for specific, legally recognized reasons. If the employee is terminated due to these authorized causes, they must be paid separation pay according to legal requirements and in compliance with the notice requirements.
Documentation and Policies
- The specific employment contract, company policies, and any CBAs in effect play a crucial role in final pay and benefit determinations.

6. Conclusion

When transferring from one employer to another in the Philippines, an employee’s entitlement to separation pay and the mechanics of 13th month pay largely depend on:

Whether the termination is for an authorized cause under Philippine law
Whether the employee’s departure is a simple, voluntary resignation
Whether bridging of tenure is recognized within a group of companies
The specific terms of any applicable contracts, CBAs, or company policies

While the general rules under Philippine labor law provide broad guidance, each case can vary based on the facts and the employer’s internal arrangements. Employees and employers who face more complex scenarios are encouraged to seek professional legal counsel or approach the Department of Labor and Employment for authoritative clarifications.

Disclaimer: This article provides a general overview and should not be considered legal advice. For specific cases and interpretations, always consult with a qualified labor lawyer or the DOLE.