[6] Statutory Monetary Benefits - Thirteenth Month Pay, Separation Pay, Retirement Pay

From St. Ven's notes

Thirteenth Month Pay

1/12 of the total basic salary earned by an employee within a calendar

Thirteenth Month Pay’s Coverage

• All employers are required to pay their rank-and-file employee 13th month pay regardless of the nature of employment

• Provided that employees worked for at least 1 month during a calendar year

• Managerial employee

  • Vested with powers to lay down and execute management policies

  • Power to hire, transfer, suspend, layoff, recall, discharge, assign, or discipline employees

• Rank-and-file employees

  • Those who do not fit the description of managerial employees

• Employers not covered by 13th month pay compliance

  • Government and any political subdivisions, except corporations operating as private subsidiaries of the government

  • Employers who are already paying employees with 13th month pay even before the Presidential Decree

  • Employers of household helpers and persons in personal service of another

  • Employers of commission-based employees

    • Where workers are paid on a piece-rate basis, the employer shall grant them 13th month pay

Managerial Employee

THIRTEENTH MONTH PAY’S COVERAGE

• Vested with powers to lay down and execute management policies

• Power to hire, transfer, suspend, layoff, recall, discharge, assign, or discipline employees

Rank-and-File Employees

THIRTEENTH MONTH PAY’S COVERAGE

Those who do not fit the description of managerial employees

Employers not Covered by 13th Month Pay Compliance

THIRTEENTH MONTH PAY’S COVERAGE

• Government and any political subdivisions, except corporations operating as private subsidiaries of the government

• Employers who are already paying employees with 13th month pay even before the Presidential Decree

• Employers of household helpers and persons in personal service of another

• Employers of commission-based employees

  • Where workers are paid on a piece-rate basis, the employer shall grant them 13th month pay

Thirteenth Month Pay’s Amount

• Not be less than 1/12 of the total basic salary earned by an employee in a calendar

• Basic Salary

  • Remunerations for services rendered

  • Excluding allowances and monetary benefits, which are not considered or integrated as part of basic salary

Thirteenth Month Pay’s Computation

Total basic salary earned during the year divided by 12 months

Thirteenth Month Pay’s Time of Payment

• Not later than December 24 of every year

• Employer may give half of the 13th month pay before the opening of the regular school year and the remaining half on or before December 24

13th Month Pay for Certain Types of Employees

• Employees paid on piecework basis are not entitled to 13th month pay

• Employees paid a fixed wage plus commission are entitled to 13th month pay based on earning during the calendar year

  • Computation only includes wage, not commission pay as these are considered additional pay

• Employees with multiple employers

  • Employees working on different enterprises (regardless if part-time or full-time) are entitled to 13th month pay regardless of their total earnings from each employer

13th Month Pay of Resigned or Separated Employee

Employees who resigned or were terminated at any time before the time of payment is entitled to 13th month pay proportionate to the length of time they worked during the year from the day they started up to their resignation or termination date

• e.g., a worker who worked from January to September is entitled to 13th month pay equal to 1/12 of total basic salary earned from that period

13th Month Pay of Employee on Maternal Leave

Salary differential shall be included as part of basic salary for computation of 13th month pay

Non-inclusion in Regular Wage

13th-month pay is not included in the regular wage of employees when computing for overtime and premium payments

Separation Pay

Compensation given to an employee who is terminated from employment due to authorized causes

Separation Pay’s Coverage

• applies to an employee in instances of authorized termination of employment covered by Art. 298 and 299 of the Labor Code

• entitlement depends on the reason for the termination of service

Separation Pay’s Amount

• ½ month pay per year of service

  • A fraction of at least 6 months being considered as one whole year

  • Any authorized causes:

    • Retrenchment to prevent losses

    • Closure or cessation of operation due to serious losses or financial reverses

      • Burden of proof is on the employer to provide financial statements that show that the establishment has been operating even through financial losses for a significant amount of time

    • When employee is suffering from a disease not curable within a period of 6 months and their continued employment is prejudicial to their health or the health of others

    • Lack of service assignment of security guard for a continuous period of 6 months

    • Lack of service assignment of a worker in a contracting or subcontracting arrangement for continuous period of 3 months

• One-month pay per year of service

  • Employee is entitled to separation pay equivalent to their one-month pay for every year of service

    • At least 6 months being considered as on whole year

    • Authorized causes:

      • Installation of labor-saving devices

      • Redundancy

        • When the position of the employee has been found to be excessive or unnecessary in the operation of the enterprise

      • Impossible reinstatement of the employee for reasons not attributable to the fault of the employer:

        • When reinstatement ordered by competent authority cannot be implemented due to closure

        • When the position they are supposed to be reinstated to no longer exists and there is no substantially equivalent position

      • Lack of service assignment of security guard by reason of age

½ Month Pay per year of Service

SEPARATION PAY’S AMOUNT

• A fraction of at least 6 months being considered as one whole year

• Any authorized causes:

  • Retrenchment to prevent losses

  • Closure or cessation of operation due to serious losses or financial reverses

    • Burden of proof is on the employer to provide financial statements that show that the establishment has been operating even through financial losses for a significant amount of time

  • When employee is suffering from a disease not curable within a period of 6 months and their continued employment is prejudicial to their health or the health of others

  • Lack of service assignment of security guard for a continuous period of 6 months

  • Lack of service assignment of a worker in a contracting or subcontracting arrangement for continuous period of 3 months

One-Month Pay per year of Service

SEPARATION PAY’S AMOUNT

• Employee is entitled to separation pay equivalent to their one-month pay for every year of service

  • At least 6 months being considered as on whole year

  • Authorized causes:

    • Installation of labor-saving devices

    • Redundancy

      • When the position of the employee has been found to be excessive or unnecessary in the operation of the enterprise

    • Impossible reinstatement of the employee for reasons not attributable to the fault of the employer:

      • When reinstatement ordered by competent authority cannot be implemented due to closure

      • When the position they are supposed to be reinstated to no longer exists and there is no substantially equivalent position

    • Lack of service assignment of security guard by reason of age

Separation Pay’s Computation

• Computation shall be based on their latest salary rate

• It would be an error not to integrate the allowance with the basic salary.

  • base salary + regular allowances = separation pay

Separation Pay’s Notice of Termination

Termination of employment due to authorized causes may be done by serving a written notice on the employee and DOLE through its regional office at least 1 month before the intended date of termination

Coverage from Income Tax of Separation Pay

Any amount received as a consequence of separation pay due to death, sickness, or other physical disability or for any cause beyond the control of the employee shall not be included in the gross income and is therefore exempted from taxation

Retirement Pay

Compensation given to a retiring employee

Retirement Pay’s Coverage

• Retirement age - 60-65 years old

• Compulsory retirement age - 65 years old

• Must have served in the establishment for at least 5 years

• Applies to all employees, except:

  • Government employees

  • Employees of retail, service and agricultural establishments regularly employing at most 10 employees

Retirement Pay’s Amount

Minimum pay is equivalent to ½ month salary for every year of service, 6 months

being considered as one whole year

Computation of Daily Rate for Retirement Pay

Daily = Monthly Pay / No. of Workweek

Computation of Retirement Pay if SIL applies

Daily Rate * 22.5 * Years of service

Computation of Retirement Pay if SIL doesn’t apply

Daily Rate * 17.5 * Years of service

Retirement Benefit under CBA or Contract

• __________ on CBA and contracts should not be less than that required by the

  Labor Code and if it is less than stipulated in the Labor Code, the employee must pay

  the deficiency

• If employee also contributes to the retirement fund, the employer’s total contributions

  and accrued interest should not be less than the total retirement benefit had there been

  no such retirement fund. If the total retirement benefit is lesser than the retirement fund, the employer must pay the deficiency

Retirement Benefit of Workers Paid by Results

• The basis for the salary for 15 days (1/2 month) shall be their average daily salary

  • derived by dividing the total salary for the last twelve months from the date of retirement by the number of actual working days in that particular period

Retirement Benefit of Part-time Workers

• They are also entitled to ½ month salary for every year of service, provided:

  • There is no retirement plan between the employer and employee

  • Employee should be at least 60 years old and has rendered at least 5 years of service

Retirement Benefit of Underground or Service Miners

• Retirement age - 50-60 years old

• Compulsory retirement age - 60 years old

• Must have served for at least 5 years as a miner

Retirement Benefit of Racehorse Jockeys

• Compulsory retirement age - 55

• Must have served for at least 5 years as racehorse jockey and has paid additional premium to SSS

Other Benefits upon Retirement

• Retirement benefits in Labor Code are separate from those granted by SSS

• Employee is also entitled to proportionate 13th month pay for the calendar year and cash equivalent of accrued leave benefits

Coverage from Income Tax of Retirement Pay

Retirement benefits covered by Art. 302 are exempted