Separation Pay: One Month or Half a Month a Year
Department of Labor and Employment · benefits
Quick answer
Separation pay is one month per year of service for labor-saving devices and redundancy, and one-half month per year for retrenchment, closure and disease. In every case it is that amount or one month pay, whichever is higher, and 6 months counts as a whole year.
Every figure on this page is from official published documents: Official Gazette and DOLE.
Last verified 2 sources, listed below
Official Gazette | Presidential Decree No. 442, Labor Code of the Philippines1 · DOLE | Labor Advisory No. 06, Series of 20202. PHGuides is independent and not affiliated with DOLE.
Separation pay is not one formula. It is two rates, selected by the ground for termination, and then a floor that overrides both.
The two rates
Article 298 (Article 283 before the renumbering) covers termination for business reasons. It splits the authorized causes into two groups paying different rates.
| Ground | Rate per year of service |
|---|---|
| Installation of labor-saving devices | 1 month pay |
| Redundancy | 1 month pay |
| Retrenchment to prevent losses | 1/2 month pay |
| Closure not due to serious business losses | 1/2 month pay |
| Disease, under Article 299 | 1/2 month pay |
The split is not arbitrary. The first two are decisions the business makes while solvent, and the second two are responses to losses.
The floor that catches most people
Both limbs of Article 298 end the same way: the entitlement is that per-year amount or one month pay, whichever is higher.
That phrase does real work at short tenures. On the half-month ladder, one year of service produces half a month by the formula, so the floor pays instead.
At a monthly pay of ₱20,000.00:
| Years of service | 1 month a year | 1/2 month a year |
|---|---|---|
| 1 | ₱20,000.00 | ₱20,000.00, the floor |
| 2 | ₱40,000.00 | ₱20,000.00 |
| 3 | ₱60,000.00 | ₱30,000.00 |
| 5 | ₱100,000.00 | ₱50,000.00 |
| 10 | ₱200,000.00 | ₱100,000.00 |
| 20 | ₱400,000.00 | ₱200,000.00 |
Every figure is this site’s arithmetic on the statutory formula, and each one is the output of the separation pay calculator.
The floor binds at 1 year on the half-month ladder and stops binding at 2 years, where the per-year amount reaches ₱20,000.00 and the two limbs meet exactly. Above that the formula always wins.
Six months rounds up, five months does not
Article 298 adds that a fraction of at least six (6) months shall be considered one (1) whole year. Article 299 repeats it for disease.
Only the trailing fraction is tested against the threshold:
| Service | Creditable years | Half-month ladder at ₱20,000.00 |
|---|---|---|
| 4 years 0 months | 4 | ₱40,000.00 |
| 4 years 5 months | 4 | ₱40,000.00 |
| 4 years 6 months | 5 | ₱50,000.00 |
| 4 years 11 months | 5 | ₱50,000.00 |
One month of service, from the fifth to the sixth, is worth ₱10,000.00 here. It is the single largest step in the whole calculation, and it is why a resignation date a few weeks either side of an anniversary is worth checking.
3 years 7 months credits as 4 years. 3 years 5 months credits as 3.
The notice requirement is two notices
Article 298 requires a written notice served on the workers and the Department of Labor and Employment at least one (1) month before the intended date.
Both recipients are named in the statute. Telling the employee and not DOLE does not satisfy it.
Disease has its own article and its own condition
Article 299 allows termination where an employee suffers from a disease whose continued employment is prohibited by law, or prejudicial to the employee’s own health or that of co-employees. The rate is one-half month per year of service, or one month, whichever is greater, with the same six-month rounding.
What it is not
Separation pay is not final pay, and the two are frequently conflated. Final pay is owed regardless of the cause of termination and covers nine components, one of which is separation pay where it applies. The final pay guide covers the whole list and the 30-day release deadline.
It is also not the SSS unemployment benefit, which comes from your contributions rather than your employer, and it does not affect your 13th month pay, which is due on the basic salary you actually earned in the calendar year whatever ends the employment.
Where this goes wrong
Reading the rate as the whole rule. The rate is half the formula. “Whichever is higher” is the other half, and it changes the answer at 1 year of service.
Assuming half a month means half. At 1 year on the half-month ladder the entitlement is a full month, because ₱20,000.00 beats ₱10,000.00.
Rounding 5 months up. The threshold is six months. Five months adds nothing.
Applying the rounding to the whole tenure. It applies to the trailing fraction only, not to the total service expressed as a decimal.
Expecting separation pay after resigning or being dismissed for cause. Articles 298 and 299 list employer-initiated authorized causes. Neither is one.
Serving notice on the employee only. The statute names DOLE separately, and one month before the intended date.
Related
The final pay guide covers the nine components released within 30 days, and the certificate of employment guide covers the document due within 3 days of your request, whatever the ground for separation.
Frequently asked questions
- How much separation pay am I entitled to?
- It depends on the ground. Installation of labor-saving devices and redundancy carry at least one month pay for every year of service. Retrenchment to prevent losses, closure not due to serious business losses, and termination for disease carry at least one-half month per year. In both cases the statute adds 'or one month pay, whichever is higher'.
- What does 'whichever is higher' actually change?
- It sets a floor of one month pay. On the half-month ladder an employee with 1 year of service is entitled to one full month, not half a month, because the floor beats the per-year figure. The floor stops mattering once the per-year amount overtakes it, which on the half-month ladder happens at 2 years.
- How are partial years counted?
- A fraction of at least six months is considered one whole year. Only the trailing fraction is tested, so 3 years 7 months is 4 creditable years and 3 years 5 months is 3. At a ₱20,000.00 monthly pay on the half-month ladder, 4 years 5 months pays ₱40,000.00 and 4 years 6 months pays ₱50,000.00.
- Do I get separation pay if I resign?
- Not under these articles. Articles 298 and 299 attach separation pay to specific employer-initiated grounds. Resignation is not one of them, though a company policy or collective agreement may still provide for it. Your final pay is a separate entitlement and is owed regardless of the cause of termination.
- Do I get separation pay if I am dismissed for cause?
- Not under these articles. They cover the authorized causes: labor-saving devices, redundancy, retrenchment, closure, and disease. Dismissal for a just cause such as serious misconduct sits under different provisions and carries no separation pay under Articles 298 and 299.
- What notice is the employer required to give?
- A written notice served on both the workers and the Department of Labor and Employment at least one month before the intended date. Notice to the employee alone does not satisfy Article 298, which names DOLE separately.
- Can an employer close down and pay nothing?
- Only where the closure is due to serious business losses or financial reverses. Article 298 gives the half-month rate for closures 'not due to serious business losses', which is the carve-out. The article also states that a closure for the purpose of circumventing the law is not a valid ground at all.
- Is separation pay the same as the SSS unemployment benefit?
- No. Separation pay is owed by the employer under the Labor Code. The unemployment benefit is paid by SSS from your contributions. They are separate entitlements with separate tests, and receiving one does not bar the other.