How to Calculate Separation Payment in the Philippines - The Pinoy OFW (2023)

One of the most difficult things any employee can experience is not knowing when and how much they will receive in layoffs or severance pay, also known as redundancy.separation fee. The concept of severance pay in the Philippines is often surrounded by confusion, leaving many employees unsure of its mandatory nature and how it differs from prorated pay.Salary for 13 months.

Additionally, there are questions about whether probationary employees are eligible for severance pay. By analyzing this information, readers can better understand this key aspect of employment and make informed decisions about their rights and benefits. Keep reading to know more.


What is the Separation Payment?

Separation pay refers to compensation paid to employees when they arelegal separationfrom work due to certain circumstances. It serves as financial aid and recognizes the employee's years of service to the company.

Separation compensation is usually awarded in situations such asreduction,closing the dealLubfinfor legitimate reasons ofBENEFITsuch as the installation of labor-saving devices, layoffs or illness that prevents the worker from doing his job.

It is important to note that separation pay is different from prorated pay 13cz- monthly salary, which is a mandatory benefit paid to employees regardless of the reason for separation.


The difference between severance pay and 13czMonthly salary

separation paymentis calculated on the basis of one employeeService durationireason for separation, which is the equivalent of half (1/2) a month or one (1) monthly salary for a year of work, depending on the circumstances provided for inWork code.

On the other hand,Salary for 13 monthsEscompulsory subsidyIt is available to all employees, regardless of their employment status. Unlike severance pay, the 13-month pay is designed to give employees an extra financial boost during the holiday season.

Eligibility for Separation Payment

Severance pay is a key aspect of employee rights, ensuringfinancial assistancepeople whose employment relationship has been terminated under certain circumstances. To determine if you qualify for separation pay, consider the following tips:

Eligible Separation Pay Recipients:

  1. Installation of devices or machines that reduce labor consumption: Employees whose employment ends as a result of technological advances that reduce the need for labor may be entitled to severance pay.
  2. Going out of business due to bankruptcy or other adverse circumstances: When a business files for bankruptcy or other adverse circumstances leading to closure, employees affected by the closure may be eligible for severance pay.
  3. Reductions to avoid business losses: If an employer implements layoff measures to avoid significant losses or an economic downturn, laid off workers may be eligible to receive severance pay.
  4. An employee suffering from an incurable illness or an illness that is detrimental to co-workers.: If an employee is diagnosed with adiseaseincurable within a period of six months or endangering the health and safety of your co-workers, termination of employment due to this circumstance may entitle you to termination compensation.
  5. Cessation of plant operations: In cases where a business shuts down completely, resulting in the layoff of an employee, those affected by the closure may be eligible for severance pay.
  6. Redundancy or excessive manpower: When an employer determines that there is overstaffing in a particular position or department leading to layoffs, workers laid off in such situations may be eligible for severance pay.

Employees not eligible for severance pay:

  1. dereliction of duty: Employees who are terminated for neglect or breach of duty may not be eligible for severance pay.
  2. Insubordination: If you are fired for disobeying or refusing to follow your supervisor's instructions, you may not be eligible for severance pay.
  3. serious fault: Employees who are terminated for serious misconduct or a serious violation of company policy or ethics may not be eligible for severance pay.
  4. Commit fraud or breach of trust: People who are fired for engaging in fraudulent activity or for breach of trust placed in them by their employer may not be eligible for severance pay.
  5. Participation in a crime against an employer or authorized personnel: If an employee is terminated for their involvement in a crime committed against an employer or authorized personnel, they may not be eligible for severance pay.
  6. Other similar bases: Employees who are terminated for reasons similar to those listed above may not be eligible for severance pay.


  • Separation Compensation does not apply to employees who commit AWOL (absence without leave) that results in them leaving their duties without proper authorization.

Employees who are absent without leave, meaning they are absent from work without permission or for good cause, are generally not eligible for severance pay. This is because AWOL is consideredbreach of employment contract, and termination resulting from such actions is not eligible for severance pay.

  • Employees who voluntarily resigned are generally not eligible for severance pay. However, there may be exceptions if the separation rate is explicitly stated in the employment contract or if it is standard practice within the company.

In most cases, when an employee voluntarily resigns from their position, they are not entitled to severance pay.

The decision to resign is considered a personal choice, and severance pay is typically reserved for employees who have been terminated against their will.

(Video) End of Service Benefits Calculation sa Saudi Arabia | Paano i compute? Saudi Labor Law

However, there may be cases where severance pay is included in the employment contract, or if the company has the usual practice of paying severance pay to employees who voluntarily opt out.

In such cases, the employee may be entitled to severance pay under the terms of the contract or company policy.

For secure funds, be sure to read up on employment laws and regulations or seek legal advice to understand their details.lawsand severance pay rights!

How is severance pay calculated?

Nowfun part: We'll find out how you can determine the amount of severance pay you'll receive based on the information below.


  • Salary for 1/2 month x year(s) of service = severance pay

Note that this formula only applies to employees terminated on the basis ofreduction,closing or termination of businessLubsevere disease.

  • One month's salary x year(s) of service = Severance Pay

Please note that the above formula applies only to employees terminated on the basis ofinstallation of labor saving devices,redundancy,reductionLubimpossibility of reincorporation to the previous position for important reasons.

Important:The Severance Pay amount calculated may not match the employee's current rate of pay. In accordance with the law, the worker shall have the right to receive callsgreater amountbetween the calculated severance fee and your current rate of payment.

sample calculations

  1. Salary for 1/2 month x year(s) of service = severance pay
  • Employee: Eden
  • Monthly salary: PHP 15,000
  • Years of service: 5
  • Reason for separation: Resignation


(Video) Mag kano Nakuha ko na SEVERANCE FEE sa Apat na taon.?|| FINISH CONTRACT

Separation fee = 1/2 x PHP 15,000 x 5

Separation fee = PHP 7,500 x 5

Separation fee =37 500 PHP

  1. One month's salary x year(s) of service = Severance Pay
  • Employee: David
  • Monthly Salary: PHP 22,000
  • Years of service: 7
  • Reason for separation: installation of labor saving devices

Severance fee = PHP 22,000 (monthly salary) x 7 (years of service)
Separation Fee = PHP154 000

Tips for calculating benefits in the Philippines

  1. Familiarize yourself with employment laws and regulations.: Stay up-to-date with the latest employment laws, such as the Philippine Labor Code, and learn about specific benefit guidelines, such as severance pay, vacation pay, overtime pay, and more. This will ensure that the benefits are calculated correctly.
  2. See the eligibility criteria: Each benefit has specific eligibility criteria. Make sure you are aware of qualifying conditions, such as length of service, reasons for termination, or special eligibility circumstances. This will help you determine who is eligible and avoid miscalculations.
  3. Consult with legal experts or specialists: Seek the advice of legal experts or professionals with experience in employment law. They can provide guidance on how benefits are calculated and help you navigate any complexities or unique situations that may arise.
  4. Keep accurate records: Maintain accurate and up-to-date records of employee information, including employment start dates, salary details, leaves, absences, and other relevant data. Accurate records are essential for an accurate calculation of benefits.
  5. Use standard calculation methods: Follow standardized methods and formulas when calculating benefits to ensure consistency and fairness. Familiarize yourself with the formulas provided by labor laws or defined benefit regulators. Check your calculations carefully to minimize errors.
  6. If in doubt, seek clarification: If you encounter complex scenarios or have questions about the calculation of benefits, do not hesitate to seek clarification from the relevant authorities, such as the Department of Labor and Employment (DOLE) or lawyers. This will ensure that you follow the correct guidelines.
  7. Review and update benefit calculations regularly: Labor laws and regulations may change over time. Be proactive by regularly reviewing and updating your benefit calculation methods. This will help you meet the latest requirements and avoid discrepancies.

Video: How to Calculate Your Severance Pay / Philippine Labor Code / Tagalog

Here is a short video on how to calculate separation pay in the Philippines. You will know the circumstances provided for in labor legislation that give you the right to receive severance pay. It is very important to know what they are and how to calculate your estimated salary to maximize your benefits as an employee of your company.

Frequent questions

1. How is severance pay calculated in the Philippines?

Severance pay is calculated based on the employee's length of service and the reason for termination. As of April 2020, it may be the equivalent of half (1/2) month or one (1) month of salary for one year of work, depending on the specific circumstances provided for in the Labor Code.

2. What are the eligibility criteria for separation pay in the Philippines?

Employees who are laid off for reasons such as the installation of labor-reducing devices, layoffs, plant closures, company bankruptcy, or suffering from an incurable disease that is detrimental to co-workers may be eligible for payment by separation.

3. Are all workers entitled to severance pay in the Philippines?

No, not all employees are entitled to severance pay. Employees who are terminated for dereliction of duty, insubordination, gross misconduct, fraud, involvement in crimes against the employer, or similar reasons may not be eligible for severance pay.

(Video) Long service payment and severance pay for Hongkong Ofw updates

4. Can probationary employees receive separation pay?

Yes, employees on probationary period can receive compensation for termination of employment for causes specified in the Labor Code. The calculation will be made based on their seniority.

5. What happens if the calculated severance pay is greater than the employee's rate of pay?

Under Philippine law, an employee is entitled to receive a greater amount between the calculated separation pay and his or her current rate of pay.

6. Can an employee receive a cash equivalent if they voluntarily resign?

As a general rule, workers who voluntarily resign are not entitled to severance pay. However, there may be exceptions if the separation rate is explicitly stated in the employment contract or if it is standard practice within the company.

7. Is the severance pay equal to the thirteenth month's pay?

No, the separation payment and the thirteenth month payment are different. The severance pay is paid in the event of termination of employment for specific reasons, while the 13-month pay is a mandatory benefit for all employees regardless of their employment status, calculated at the rate of one twelfth (1/12) of salary full basic. salary earned in a given calendar year period.

8. Where can I find more information on how to calculate severance pay in the Philippines?

For detailed information and to ensure compliance with labor law, it is recommended to consult the Philippine Labor Code or consult legal experts versed in labor law. In addition, the Department of Labor and Employment (DOLE) provides resources and assistance related to labor issues in the country.


In short, understanding severance pay is essential for both employers and employees in the Philippines. An important aspect of employment is the provision of financial support to people whose employment has ended under certain circumstances.

By clearing up common misconceptions and answering eligibility questions, such as including probationary workers, people can confidently navigate the complexities of separation pay. By gaining knowledge on this topic, employees can ensure a fair wage and employers can meet their legal obligations. Being well informed allows both parties to make informed decisions and promotes a more harmonious work environment.

CONTINUE READING:20 signs it's time to quit your job


How to Calculate Separation Payment in the Philippines - The Pinoy OFW? ›

In general, separation pay in the Philippines is equivalent to one-half (1/2) month or one (1) month's salary for every year of service, depending on the authorized cause. Additionally, it is calculated based on the employee's most recent salary, including regular allowances.

Are helpers entitled to separation pay? ›

Domestic helper severance payment

You should pay severance payment to the helper if: the helper is dismissed or the contract is not being renewed* by reason of redundancy; and. the helper has not less than 24 months of employment with the same employer immediately prior to the termination.

How much is standard separation pay in the Philippines? ›

An employee is entitled to separation pay equivalent to one-month pay or at least one-month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered as one whole year.

What is separation pay equivalent to? ›

Separation pay should be equivalent to either one-half (1/2) month or one (1) month pay for every year of service wherein a fraction of at least six (6) months is considered one (1) whole year.

How is resigned employee back pay calculated in the Philippines? ›

The computation formula for back pay is: Back pay = (daily rate x number of days) + (13th month pay/12) + unpaid wages/salaries + overtime/holiday pay + commission/bonus+ separation pay+retirement pay+Other incentives or incomes.

How is domestic helper termination payment calculated? ›

Severance Payment Calculation: Last Monthly wage x 2/3 x reckonable years of service, service of incomplete year should be calculated on pro-rata basis.

How much is the minimum wage for house helper in the Philippines? ›

Pensoy of the Department of Labor and Employment (DOLE-XI) bares that the new monthly minimum wage for domestic workers or “kasambahay” is now set at Php4,500.

What is the sample computation of separation pay in the Philippines? ›

Separation Pay Computation: Termination due to Redundancy or Installment of Labor-Saving Devices. You'll get a separation pay equal to your monthly basic pay or your monthly basic pay multiplied by the number of years you've served the company, whichever is higher.

Is separation pay mandatory in the Philippines? ›

As a general rule, employees who are terminated from their employment due to just causes (e.g. serious misconduct, willful disobedience, gross and habitual neglect of duty, etc.), are not entitled to separation pay, as these employees are at fault. However, there are exceptions as discussed below.

How much is family separation pay per month? ›

FSA is payable at the rate of $250 per month (pro-rated to $8.33 per day for periods less than a month). To apply for FSA, you should submit a completed DD Form 1561, Statement to Substantiate Payment of Family Separation Allowance (FSA), to your servicing personnel office.

What are the different types of separation pay? ›

There are two types of military separation pay- full and half. Full pay is based on the number of years you have served, while half pay is based on other factors.

How do you negotiate separation pay? ›

How to negotiate your severance package
  1. Understand the components of a severance package. ...
  2. Wait before signing paperwork. ...
  3. Read everything carefully. ...
  4. Get an expert opinion. ...
  5. Understand your priorities. ...
  6. Negotiate for more than money. ...
  7. Decide on a reasonable request. ...
  8. Leverage your success.
Dec 5, 2022

How much is half separation pay? ›

It is calculated by multiplying monthly base pay x 12 x 10% x years of service. Half Involuntary Separation Pay is half of full Involuntary Separation Pay, and can be given to veterans who have an honorable or general discharge.

Can I get separation pay if I resign in the Philippines? ›

In view of the foregoing, an employee is not entitled to separation pay when he is terminated based on just causes. Pertinently, he is also not entitled to separation pay when he tenders his resignation.

What is final pay after resignation Philippines? ›

Under the Labor Advisory, all employers are advised to release the final pay to its employees within 30 days from the date of separation or termination of employment, unless a more favorable company policy, or individual or collective agreement exists.

Are separation pay taxable in the Philippines? ›

Involuntary Resignation Due to Retrenchment

Moreover, tax services in Manila share that the Tax Code states that any amount received by employees from employers for their separation because of death, sickness, physical disability, or any cause that is beyond the control of the employee shall be exempted from tax.

What is the basic computation of separation pay? ›

Separation Pay = (Basic monthly salary) * Number of years in service or Separation pay- (Basic Monthly Salary) / 2 * Number of years in service.

How much is domestic helper monthly salary? ›

The minimum domestic helper salary is set to HK$4,730 per month, while food allowance is at HK$1,196 per month. This applied to all foreign domestic helper contracts signed on or after 1 October, 2022.

What is the maximum annual leave for domestic helper? ›

A domestic worker is entitled to a paid annual leave after every 12 months with the same employer. The first 2 years, the number of holidays are 7, after which one more day is added, with the maximum days capped at 14.

How much is the monthly salary of kitchen helper in the Philippines? ›

What can I earn as a Kitchen Assistant? The average monthly salary for Kitchen Assistant jobs in the Philippines ranges from ₱12,000 to ₱14,000.

How much is the salary of kitchen helper in Philippines per month? ›

Average ₱12,917 per month.

How much is the salary of helper in the Philippines 2023? ›

The average helper salary in Philippines is ₱ 420,000 per year or ₱ 168 per hour. Entry-level positions start at ₱ 420,000 per year, while most experienced workers make up to ₱ 1,047,150 per year.

What is the difference between separation pay and retirement pay in the Philippines? ›

Payment of Both Retirement Pay and Separation Pay

Retirement pay and separation pay are two distinct benefits granted under the law. Retirement pay is paid by reason of retirement, while separation pay is required in case an employee's services is terminated by reason of authorized causes as identified under the law.

How much tax is deducted from separation pay Philippines? ›

The Tax Code, as amended, provides that any amount received by employees or their heirs from the employer as a result of separation due to death, illness or other physical disability or for reasons beyond the employee`s control is exempt from tax.

How to calculate severance pay calculator? ›

  1. When deciding how this type of pay is determined for your company, you'll also need to carefully consider your organization's financial resources. ...
  2. Below, you can find the severance pay formula to use:
  3. [Employee's weekly salary] x [Number of weeks](Number of years) = Total severance allowance.
May 8, 2023

How many months is legal separation in the Philippines? ›

An action for legal separation may be finished from 10 months or several years depending on various factors like the complexity of the case (e.g. properties and custody, support, etc.

Is legal separation in the Philippines doesn t allow you to marry again? ›

Legal Separation doesn't allow you to remarry in the Philippines. This and Judicial Separation of Property deal more specifically with dividing Marriage Property.

Is separation the same as annulment in the Philippines? ›

What is the difference between Legal Separation and Annulment in the Philippines? Legal Separation does not end the marriage while Annulment (or Declaration of Nullity of Marriage) does end a marriage.

Who qualifies for family separation pay? ›

Family Separation Allowance (FSA) is payable to Soldiers with dependent Family members when the Soldier is required to be away from their permanent duty station for more than 30 continuous days in a TDY status and their dependents are not residing at or near the temporary station.

Who qualifies for family separation? ›

FSA is payable to Service members who are married to another Service member in receipt of basic pay regardless of any other dependency status - when assigned to duty conditions described above, provided the married couples were residing together immediately before the separation.

What is the family separation allowance overseas? ›

Family Separation Allowance is an additional pay given to service members whose family members cannot live with or near them at their permanent duty station. FSA can be provided at locations both inside and outside the United States. FSA compensates service members for added expenses because the family was separated.

What are the 4 types of separation? ›

Mixtures can be physically separated by using methods that use differences in physical properties to separate the components of the mixture, such as evaporation, distillation, filtration and chromatography.

How is medical separation pay calculated? ›

Formula for computing

Disability Severance Pay is a one-time, lump sum payment and is computed as follows: 2 x basic pay for applicable grade x years of service (subject to minimum three or six years) not to exceed 19 years.

What is a normal severance package? ›

Typical severance packages offer one to two weeks of paid salary per year worked. Continuation of insurance benefits, assistance finding another job, and other perks can be negotiated. You usually have 21 days to accept a severance agreement, and once it's signed–seven days to change your mind.

What good is a separation agreement? ›

A separation agreement dictates how spouses handle their affairs during separation. Its terms usually divide property and debts, indicate who lives in the marital home, provide schedules for child custody and visitation and determines spousal and child support.

How much is medical discharge pay? ›

DoD Disability for Medical Separations

All medically separated service members receive a single lump-sum severance payment for their DoD Disability. This payment is equal to 2 months of basic pay for each year of military service they gave.

Is separation pay taxed? ›

Key Takeaways

Severance pay is money employers pay to employees following job terminations, such as layoffs. Severance pay is taxable, just like regular wage or salary income, in the year of payment. Like regular income, federal and state taxes on severance pay are usually withheld by the employer.

What is the special separation benefit? ›

What is SSB? Special Separation Benefit (SSB) was offered as an incentive for military members in certain career fields to leave active duty. This incentive was designed to drawdown or reduce the active duty force. The use of SSB was discontinued December 31, 2001.

What rights do domestic helpers have? ›

In respect of termination of employment contracts, foreign domestic helpers enjoy the same protection as any employees under the Employment Ordinance. For example, he/she is entitled to receive: all outstanding wages; wages in lieu of notice (if applicable);

Is separation pay the same as severance pay? ›

Upon termination, severance pay and separation pay are interchangeable terms. Although some companies may distinguish between separation pay and severance pay packages, the distinction is not universally applied.

What are employee separation benefits? ›

A separation benefit is a one-time, lump-sum payment consisting only of employee contributions, additional contributions (if applicable), and accumulated interest. The decision to take a separation benefit now, instead of waiting to take a retirement benefit, has significant financial, insurance, and tax consequences.

How many days of annual leave does a domestic helper get? ›

A domestic worker is entitled to a paid annual leave after every 12 months with the same employer. The first 2 years, the number of holidays are 7, after which one more day is added, with the maximum days capped at 14.

What a domestic helper should not do? ›

A domestic helper should avoid staying overnight outside the employer's house during her day-offs or holidays. Do not use the telephone, except during emergencies and when absolutely necessary. Do not chat with your friends on the telephone and never ring them, unless with your employer's consent.

What is the difference between domestic worker and domestic helper? ›

Domestic workers and domestic helpers are very often people with two different titles performing the same jobs. However, sometimes people helping families with daily chores are classified as helpers, whereas people who do more of the cleaning are called domestic workers.

What is a good reason for termination of domestic helper? ›

The valid reasons to terminate your domestic helper

Your domestic helper has gone missing. In such a case, if you notice that her belongings are gone too, it certainly indicates that her departure was planned.

Who are entitled to separation pay Philippines? ›

Separation pay shall be paid by the employer to an employee terminated due to installation of labor-saving devices, redundancy, retrenchment, closure or cessation of operations not due to serious business losses or financial reverses, and disease.

What is the process for separation pay? ›

For example, if an employee has been separated from their job due to redundancy, their separation pay may be calculated as follows: Separation Pay = (Basic monthly salary) * Number of years in service or Separation pay- (Basic Monthly Salary) / 2 * Number of years in service.

Is separation the same as retirement? ›

What is the difference between the separation date and the retirement date? A. Your separation date is your last day on pay status as an employee and your retirement date is the effective date from which the retirement system starts paying you.

What is the effective date of separation? ›

The effective date of a separation is the day after the last day worked on the job except in the following circumstances. In the following cases, the effective date of separation is the day after the end of these events: death. an absence caused by an injury on the job.

What is an example of separation of employment? ›

Dear ABC, We regret to inform you that your employment with (add company name) shall officially get terminated on (add date). The reason for termination of employment and the details of your severance benefit and compensation are mentioned in the attached document. The decision is final and irrevocable.

How do you calculate leave balance? ›

For a basic calculation of leave allowance, multiply the number of days you work on average each week by 5.6. For example, if you work a five day week, you would be entitled to 28 days' annual leave a year.

How many leave credits are there in the Philippines? ›

There are five (5) service incentive leave credits given to an employee who has rendered at least 12 months of service. The leave credits may be used for whatever reason. The employer is required to pay the cash equivalent of the unused leave credits. The service incentive leave credits replenish yearly.

Can domestic helper become permanent resident? ›

Unlike most other persons who are admitted to Hong Kong for employment, foreign domestic helpers are not entitled to become permanent residents after 7 years residence. Section 2(4) of the Immigration Ordinanceexcludes domestic helpers and certain other occupational categories.


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