Separation Pay (Philippines)
Updated November 2026 · Free · No sign-up
Calculate separation pay — the Labor Code’s authorized-cause scale: one month per year of service (redundancy, labor-saving devices) or half a month per year (retrenchment, closure, disease), minimum one month, tax-exempt when involuntary.
Quick answer: Separation pay by authorized cause: redundancy / labor-saving devices → 1 month’s pay per year of service; retrenchment / closure (not due to serious losses) / incurable disease → 1/2 month per year — in both cases at least one month’s pay; a fraction of 6+ months counts as a whole year. Involuntary separations: income-tax-exempt.
The Legal Grid
| Cause (Art. 298-299) | Rate |
|---|---|
| Installation of labor-saving devices | 1 month per year |
| Redundancy | 1 month per year |
| Retrenchment to prevent losses | 1/2 month per year |
| Closure/cessation (not from serious losses) | 1/2 month per year |
| Disease (incurable within 6 months, certified) | 1/2 month per year |
| Closure due to SERIOUS financial losses | None required (proof burden on employer) |
| Just-cause dismissal (misconduct etc.) | None (financial-assistance jurisprudence aside) |
Rules: minimum ONE month’s pay; 6+ months of a year rounds UP to a whole year; "one month’s pay" uses the latest salary rate (jurisprudence includes regular allowances in some lines — compute both). Procedure: 30-day written notice to BOTH the employee and DOLE — skipping it adds nominal damages even when the cause is real.
Worked Example
₱28,000, 6.7 years (→7), redundancy: 7 × 28,000 = ₱196,000, tax-exempt — plus the final-pay stack (prorated 13th month, leave conversions, last salary) within DOLE’s 30-day release guidance.
Beyond the Formula
Separation pay also appears as the reinstatement substitute in illegal-dismissal cases (1 month/year when reinstatement is unviable — ON TOP of backwages) and in some CBAs/company plans at enhanced rates. Quitclaims signed for less than the legal minimum are voidable — compute before signing; NLRC/DOLE SEnA handles disputes, money claims within 3-4 year windows by theory.
Frequently Asked Questions
How much is separation pay?
One month’s pay per year of service for redundancy/labor-saving devices; half a month per year for retrenchment, closure, or disease — minimum one month either way, with 6+ months rounding up to a year.
Is separation pay taxable?
No — separation due to authorized causes or circumstances beyond the employee’s control is income-tax-exempt under the NIRC.
When is NO separation pay owed?
Just-cause dismissals (serious misconduct, etc.) and closures forced by proven serious financial losses — the employer carries the proof burden on losses.
What procedure must employers follow?
Thirty days’ written notice to the employee AND the DOLE regional office — procedural lapses add nominal damages even with a valid cause.
Should I sign the quitclaim?
Only after checking the math — quitclaims for less than the statutory amount are voidable; SEnA conciliation at DOLE is free and fast.
✓ Formula verified • Last updated: November 3, 2026