Separation pay after closure of business
"The company I have been working with for five years notified all of its workers, including myself, that it will be closing by the end of the year. In a meeting, the company President explained to us that the company no longer wants to continue with its operations because of minimal profit. In fact, the company originally intended to immediately close but was only prevented from doing so due to its commitments to its clients. In the individual notices given to us, the company offered to pay us our one-half month salary for every year that we have been with the company. However, I don’t think the separation pay that I would be getting is sufficient until I find a new job. Can I demand from the company to give me a higher separation pay instead?
We regret to hear that the company you have been working with will be closing soon. From your letter, it appears that the reason for your termination from employment is due to the closure or cessation of business operations of your employer. We also noticed that it doesn’t seem as if the company is suffering from serious business losses because it still makes profit and can still extend its operations until the end of the year. The Labor Code of the Philippines allows the cessation of business operations subject to payment of separation pay. Article 283 of the said law provides:“The employer may  terminate any employee due to  the closing or cessation of operation of the establishment or undertaking… [I]n cases of closures or cessation of operations of establishments 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 at least six (6) months shall be considered one (1) whole year.”
From the above quoted provision of the Labor Code of the Philippines, it is clear that an employer who closes shop or ceases its operation is required to pay its employees a separation pay which is equivalent to one (1) month pay or one-half (1/2) month pay for every year of service, whichever is higher. From your letter, it appears that your employer will comply to the said requirement as they offered to give you a separation pay which is equivalent to one-half (1/2) month salary for every year that you have been with the company.While there is no law which prohibits you from nicely asking from your employer if it would be possible to give you a higher separation pay however, it is also important to highlight that your employer is not legally required to give you more than what is stipulated in the Labor Code.
Further, it is also worth emphasizing that in the computation of your separation pay, a fraction of six months of work or service is equivalent to a whole year of employment. Thus, if you have been employed for five years and six months, you are entitled to six times your one-half month salary because a fraction of six months of work or service is equivalent to one whole year.We hope that we were able to answer your queries. Please be reminded that this advice was based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to "
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"Separation pay after closure of business"
was written by Mary
under the Legal Advice
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comments. The article was created on 15 September 2021
and updated on 15 September 2021