More than ever, an employee must take special care in finding an employer he/she would want to serve with. If I were an employee, the ECQ would have been an eye opener.
Not only does it shed light to the type of lifestyle I am having — whether I’m too magastos or kuripot for my own good — but it also tells me the type of employer that I currently have. From the ECQ alone, you would know if your employer is pamatagalan, or pang good time lang.
From the ECQ and the post ECQ, I can see if this employer is a ship I should latch myself on. For many people who are risk averse, working and staying for a stable company is something most people are comfortable are doing. Given that you would have to be dependent on your employer to sustain your livelihood, it is even more important to make the right choice on where to work in.
For example, you can really see from the ECQ if your employer truly loves its people. You can see how barat or generous they are to its staff. From the way they plan the ECQ, you can see whether your employer takes the long view, or have no clue what they’re really doing. You can also see if the company is financially stable, or is fueled by debt. Sa totoo lang, the ECQ was such an awesome learning experience. Both employer and employee can learn a lot from each other.
This is why Employees should Pick and Choose a Good Employer Post ECQ
This is the reason why its’ crucial that you pick a good employer.
Since you’re going to invest years into a company, and thus incurring opportunity costs in staying with that employer, might as well pick an employer na pamataggalan.
Stop job hopping at every chance you get just because there’s a better offer out there. If there’s anything that the ECQ has taught me, is that there is value to staying put at a job.
One, the ECQ was not kind to those who were newly hired. Take SBWS for example, if you just started in February 2020, chances are, you won’t be eligible for the SBWS grant. It’s not the fault of the company or the SSS. That’s still Php 16,000 na sayang just because you are new.
Two, many businesses gave more financial assistance to people who have stayed longer. Which by the way, is tama lang.
The biggest draw of bad luck during ECQ were people who were employed in Company A for decades. Since Company B gave them a better offer, they moved to Company B in February or March. However, because they resigned, they did not get any separation pay. And when COVID-19 hit, they got nothing from DOLE CAMP or SBWS. And was first to be fired if some deep retrenchment is needed. So in the end, Company A saved a lot of money, while Company B did not have to pay them anything because they are probationary employees.
Whether You Can Reach Retirement Age in a Company is a Key Factor in Determining Where to Work
If you’re going to choose an employer, choose a company where you can see yourself serving for years, and retire. Employees are qualified for retirement once they reach a certain age and has served at least 5 years of service in that employer.
Source: Atty. Pol Sangalang, Updates on Labor Law and Jurisprudence
The condition for Retirement is Simple:
- If aged 60 to 64 years old, retirement is optional
- If aged 65 years old and above, retirement becomes compulsory
- Staff needs minimum of 5 years service to be entitled to Retirement Pay
- If there’s a favorable plan generated by CBA, then this is applied.
Here’s the RA 7641, An Art that Provides Retirement Pay to Qualified Private Employees in the Absence of any Retirement Plan:
What does this mean?
If the company does NOT have an existing retirement plan, then, they must adhere to the Retirement Pay Law.
60 years old is EMPLOYEES’ preference and 65 years old is EMPLOYERS obligation. If a company wants to retire staff once they are older, they MUST have a retirement plan in place. Retirement Pay shall be paid on both instance if the the employee had served at least 5 years.
Stay in a Company for as Long as You Can
There’s definitely a big difference in the amount of money a company has to pay for a if the Employee is Retrenched or Retired.
Let us assume 35-year old Joyce started at the company in 1995 for Php 8,000.00. She started as a mere rank-and-file employee, but through years and experience, she was promoted to Finance Manager and is now earning Php 40,000 a month.
At the end of her 25th year, Joyce is now earning Php 40,000. She has proven her worth to her boss. By this time, Joyce is now 60 years old and based on her company’s policy, is now qualified for early retirement.
Check out how much Joyce is making if she’s retired after 25 years, vs. if she’s retrenched:
There is a Php 362,619.80 payout difference if Joyce is retired, vs. if she’s retrenched, even if it’s both calculated using 25 years of service. No matter how you spin it, retirement pay is still at least 72.5% higher than retrenchment pay, due to the extra days paid per year of service. Joyce gets 72% more money from her employer if she’s retired, than if she’s retrenched.
Personally, I would never say no to money, especially if it’s Php 865,000 in today’s currency.
Couple this with the SSS pension that an employee can get, it’s very easy for employees to be insta-millionaires just by staying in one company. If you work for a company today, your salary today will still increase due to inflation. No matter how you spin it, that money you get during your retirement — assuming you’re working for a good employer who will not cheat you of this pay — can be huge. Definitely bigger than the Php 8,000 starting salary that Joyce had when she first started.
This is the reason why I always tell my staff to not quit — the money they will make sticking with me is better than the salary they will get jumping from one bad employer after another. Plus, long tenured employees get really really expensive. If you count it, the retirement pay is similar to getting almost a 14th month pay using the most current salary amount for every year of service!
Retirement Pay in the Philippines is 22.5 x Years of Service x Monthly Salary
Retirement Pay only counts the staff’s current year of salary in computation. In short, it does not matter how much was your salary when you first started. What matters is how much you earn today when you are retired:
To compute for the retirement pay, the information we need are the following:
- Monthly Salary at the Time of Retirement:
- Years of Service:
The law says, “In the absence of a retirement plan… an employee upon reaching an age of 60 years or more, but not beyond 65 years which is hereby declared the compulsory retirement age, who has serviced at least 5 years in the said establishment, may retire… The retirement pay is equivalent to at least 1/2 month salary for every year of service, a fraction of at least 6 months being considered as one whole year.
This means if you served with increments of 1 month to 5 months, you round down. And if it’s increment of 6 months and up, you round up.
This means that if you’re in the company for 10 years and 2 months, that’s counted as 10 years. And if it’s 10 years and 6 months, that’s already counted as 11 years. Get it?
The longer you stay in a company, the higher the Retirement Pay. Since the factor is 22.5 days for every year of service, a Retired Staff gets almost a 14th month pay for every year of service. Not bad just for sticking by one employer.
This is the jurisprudence on why it’s 22.5 days:Thank you to Ms. Cristina Reclamado for the clarification. 🙂
If Joyce fights with her employer and voluntarily resigns, she gets ZERO. The same goes if Joyce steals from her employer. If she was caught and fired, Joyce will never get a single cent of retirement or separation pay if terminated due to Just Causes. This is the same no matter how long you have been with the company
In summary, there is a difference in pay between the money you get for Retirement than if you got Retrenched, Resigned or if your contract ended.
Retirement or Separation Pay Calculator
Anyway, I’ve taken an Excel course the last week. And because I know a lot of you hate Math, I’ve done this simple Excel sheet to help readers compute for the Estimated Retirement or Separation Pay. You only need to input your 1) Reason for Termination, 2) Daily and Monthly Wages, and 3) No. Years and Months of Service and the calculator should do the work for you.
You can download the Excel below for free:
Download the Excel Here: Final Retirement Pay Calculator (TinainManila.com)
Mind you, I’ve only started tinkering with Excel recently so there may be some bugs or corrections needed on the sheet. If there’s any corrections, please let me know so I can make changes to the formula.
If anyone knows how to embed an Excel table onto WordPress, even better. I’ve tried Calconic but I can’t embed it. While I try my best, I’m just not good at IT.
Last Point — Pick an Employer Who Can Pay for your Separation/Retirement Pay
There are many employers right now who are trying not to get away with paying retirement or separation pay. “We already ran out of money,” they said. “We cannot afford to pay our people their separation pay.” Or, “These people are agency hired staff. They are not our problem.”
Legally, both points are true:
- Bankrupt companies can maneuver their way from paying separation or retirement pay.
- Agency hired employees are employed by the agency, not the Principal. And hence, any “pay” should be shouldered by the agency.
Regardless, good employers should at least do their part in trying to pay what is right for their employees. Especially when the reason why they don’t want to pay — which is business losses —- are not really true, and all they want to do is save the expense from firing a staff.
Yes, bankrupt companies can escape from paying the full separation pay. Saan sila kukuha ng pera if wala na talaga? However, they cannot prevent the employees from going to DOLE or NLRC to air out their grievances. And in the end, if they lied about being bankrupt and the termination is in bad faith, then they will still be liable in paying a larger amount of money.
What’s more, while it is true that agency hired employees are not the Principal’s problem, this relationship has a lot of gray areas as well. For example, during Christmas, were the agency hired employees invited and participated in the raffle?
Did anybody from the Principal provide them with a memo and disciplined them on the spot? If so, it may not be that the agency hired employees are truly agency hired, but the principal is violating DO-174.
The regular 10% fee the agency charges per payroll does not include the price for retrenchment. To be fair, companies have never retrenched in such a grand scale and never at the same time so there is no need for the agency to collect such fee. Historically, the money a principal gives to the agency only contains the agency fee, pro-rata 13th month pay, and the employer share of benefits, among others. Since most employees chose to resign out of their own free will, there is no need to pay them any separation pay. And for upcoming senior citizens, both the business and the agency can plan ahead for such expense years before. So, the financial cost is not a big problem for all parties.
This second half of 2020 is a special time where companies are retrenching or retiring large numbers of people. Given there’s too many people terminated at too short of time, both the companies and the agency will find it hard to pay the separation pay altogether, especially if the company has been in existence for more than 20 years.
Personally, either you pay now…. or you pay later. Either way, you still pay.
If you don’t pay the correct separation or retirement pay, the employee will and should complain. This is an additional hassle that companies don’t want to have since they’re winding up a business. At the end of the day, if it’s proven that the company still has money and is not really bankrupt, the company and owner will eventually pay more. Not only do you have to pay for the separation pay, but you may also be liable for the 30-day notice period plus backwages, since the staff was illegally terminated on the guise of a retrenchment.
Save yourself the trouble — Use the Calculator if you want. Call your accountant or lawyer to double check the numbers. And once you have set the correct amount, pay for your peace of mind.
Download the Excel Here: Final Retirement Pay Calculator (TinainManila.com)
Calconic Calculator can be Found HERE
Yes, the amount may hurt you a little bit. And yes, it may put a big dent to the savings account. But at least you sleep better knowing wala kang kasalanan sa mundo, and you’ve fired people in good faith without trying to escape your responsibilities. Because at the end of the day, somebody WILL pay. And no matter how much we run away from our accountability, it will still be us. So better, pay now properly na lang para wala nang masabi, and wala nang problema.
Happy weekend everyone!
17 thoughts on “HR Talk: Why Do We Need to Pick our Employers Well? And How to Compute for Retirement (And Separation Pay)”
Hi Tina, Thank you for emailing me, this is very helpful reference for a company. Best regards, Myrth
Thank you Myrth! Para at least, iwas sa Math na lang hindi ba? The computation is very simple. Just a matter of understanding why we pay and how to pay it. Happy weekend!
Hi Miss Tina Thank you for the info.
Thanks Irene so much for leaving a note!
Hi, Tina—this is a very interesting post. I think the ECQ had changed everyone’s plan where employment is concerned. It has been a “custom” for employees to “jump the fence” during the first quarter of the year since they had already gotten their entire 13th month. But no one had expected that the Q’s will leave them witj a lose-lose situation.
During my HR days (and even beyond) many people were sucked by bonding activities more than long-term ones (they try to humblebrag by posting pictures of company outings, mini-parties) and employers love doing this bc these made their employees happy and does not cost much as compared to a raise for deserving employees (or to motivate other employees as well). Also many monetary rewards, though motivating, do not last long.
My advice then (maybe even now) while waiting to be interviewed: check their bulletin board (to know their rules and policies), observe the people in the office (you’ll know how the “veterans” work and move. Are there many of them? Many means low turnover) don’t be afraid to ask questions (within reasonable range) and don’t forget to check the permit, BIR stuff and that business plaka on the most visible place (usually by the reception area).
I think that what’s happening right now would make people hold on their jobs more. Mahirap kumita ng pera.
I just hope that businessmen will not use this Q period as an excuse to abuse their employees.
Yes!!! People always leave after getting their bonuses.
Actually katawa nga. 25% of my sales force resigned in February after getting a great incentive for Christmas sales. Then COVID-19 hit. Nakatipid pa kami ng malaki because 25% of our force were new. Yung nag resign, their new jobs kicked them out and they all became unemployed. Nahirapan din sila.
Hope this will teach employees not to jump ship every 6 months. And to pick an employer not based on how great the Christmas parties are, but on how employers take care of their employees during times of need.
Thanks for all the relevant information as always. May question lang ako, if a person resign from me pero more than 10 years na sya nagwowork for my company, may obligation ba kami to pay her/him seperation pay? Kasi sabi ng friend ko , basta nagwork na ng 10 years sayo, maski voluntary resignation sya, talaga need mo pa din magbigay ng sepeartion pay which is 13 DAYS a year? I have a bad employee kasi na nag siside line and 5-6 inside office gusto ko nalang kausapin mabuti and ask him/her to resign. Kaso, ayaw ko magpay kasi feeling ko may kasalanan sya, mabigat sa loob ko magpay. Pero ayaw ko din lumaki yun issue so kakausapin ko nalang sana mabuti. Thanks
1. No, voluntary resignation = no separation pay. Anything you give is gracia.
2. If you don’t want employee to sideline, NTE her re: sideline and ask her to stop. You can’t really make her resign. But you need to document na you’ve given her a direct order to stop. If she can’t stop, NTE- admin hearing then Notice of Termination.
Hi Mam Tina, thanks for the concise and clear presentation of retirement and separation pay especially with the diagrams and pictures. This would be easier for our staff to understand. By the way for clarification Mam, when we say monthly wage of employee for the separation during retrenchment, does this includes allowances(daily meal allow, transportation allow, etc) or just the basic monthly salary? The said allowances are included on the persons payroll per pay day. Thank you and hoping to hear from you mam regarding this.
Only the basic pay —- Termination of employment is due to retrenchment or closure of business operations not due to severe business losses or financial reverses, the employee should receive a separation pay equivalent to one-month basic BASIC PAY. Fringe benefits and bonuses are not included.
Hi, I hope you could shed some light regarding my predicament.
We (Company A) are being transferred to another sister company (Company B) which will be eventually bought by another company (Company C).
Right now they’ve given us a “conditional offer” to transfer to Company B with the same compensation and benefits. I have no issues with this but due to personal preference, I’m not comfortable with Company C who will be taking over so I wanted to decline the said offer.
The company said that declining the said offer does not warrant separation pay since there is no lost of employment due to the offer and the retained tenure. Is this legal? (Company A would close few months after the transfer of employees to Company B).
Would Company A consider my declining of the offer as resignation or insubordination?
Every decision carries with it consequences.
To answer your most important question, NO. Declining the offer is NOT resignation or insubordination, don’t worry.
If you switch to Company B, your role, salary and tenure SHOULD continue as Company A. If you get retrenched later on in Company B, you can always argue (Make sure you have documentation) that you should be paid Separation Pay for total tenure of A+B since you DID Not resign in Company A, and you merely continued your tenure in Company A sa Company B.
However, if you don’t switch to Company B, you might be caught in a sinking, loss-making ship (Company A) who potentially might not have enough money to pay you separation just in case they go bankrupt. A long shot but it’s highly possible. Pag walang pera ang company, walang pera din sa pambayad.
You take a risk that Company A will close. Tiis tiis until its last dying day with the hopes you get paid Separation Pay, which is 1/2 month pay per year of service. Pero if the company has zero money, they won’t be able to pay anyway. DOLE’ing them is useless since company has no money anymore. Company A is all but an empty shell.
The final decision of course is up to you.
Thanks for this. Quite informative. I would like to clarify a few things on retirement
– the advisory states that staff should have rendered atleast 5 years of service to be entitled to retirement pay. Is this independent regardless of whether you are between 60-65yrs old? Basically what am asking is by law can you be eligible to retirement pay as long as you have rendered minimum 5yrs in the establishment?
My name is Mark, an employee and I have a question and I hope you can help me out.
I worked for a year and 3months from my previous company as an HR Specialist.
I recently resigned, rendered 30 days with an effectivity date of March 31, 2021.
I processed my clearance for my final pay but unfortunately, they informed me that my Quarterly performance bonus for Q4 of 2020 was not approved because I was considered as a separated employee. I’m frustrated since my 2020 Q4 bonus should’ve been given last January 2021 but since our bonuses are always delayed, I waited.
My colleague, who also resigned 6 months earlier than me, addressed the same concern but he was granted his eligibility of two (2) quarter bonuses, and was added on his final pay. This is unfair on my part. I finished two quarters before I left ( 2020 Q4 and 2021 Q1) My previous HR Manager was even able to discuss to me my performance for 2020 Q4 and was advised later that my my performance bonus was pending for approval. During my exit interview, I was given an expectation that my performance bonus will be given to since it was due to me. I have been patient in waiting for my bonus but getting news of “ineligibility” is so unfair and unacceptable.
I hope you can help me what are the labor laws I can use or what are my rights regarding this matter.
Thank you and keep safe!
I know it sucks, Mark.
It is easy to expect and call it unfair, but by definition, an employee can only demand compensation that’s written in the contract. Performance bonuses by definition are what we call gracia —- While you may expect it, company is not obliged to give it. Kung mayroon, good. Kung wala, good din.
It’s like a kid who expects an extra prize because he had perfect attendance in school and listened to the teacher. You may want to get extra rewards, but technically, going to school religiously and listening to teacher are PART OF THE JOB. Unless it’s part of your contract or policy, bonuses are still optional and given on the basis of management prerogative.
My guess is your tenure is too short to justify a bonus. The fact that you resigned properly and rendered 30 days notice do not guarantee you a bonus. This is expected for any professional employee. You don’t get a reward for rendering properly.
So mope and sulk, but smile and move on. Take the long term view. And if you want a more guaranteed bonus, work really well and stay for more than a year. Kasi if you’re a short term employee, masmahirap maging eligible for bonuses kasi parang ginamit mo lang ang company as training ground then after you finished training, jumped ship on the next opportunity. Sayang din ang investment sayo ng company to train you.
Hope this helps! Good luck!
Hi, Ms. Tina. Do we need to pay retirement pay + final pay for the retiring employee? Thanks!