Labor 13th Month Pay And Separation Pay 235l6v

13 MONTH PAY Q: What is 13th month pay? A: 13th month pay is a form of monetary benefit equivalent to the monthly basic compensation received by an employee, computed pro-rata according to the number of months within a year that the employee has rendered service to the employer. Q: Who are required to pay the 13th month pay? A: All establishments regardless of the number of employees are required to pay their rank-and-file employees the 13th month pay. Q: Who are entitled to receive the 13th month pay? A: All rank-and-file employees regardless of the nature of their employment, and irrespective of the methods by which they are paid, provided they worked for at least one month during a calendar year. Q: How is 13th month pay computed? A: The 13th month pay is computed based on 1/12 of the total basic salary of an employee within a calendar year, or basic monthly salary for the whole year divided by 12 months. (So if you worked for 1 year in the same company, you get your 13th month pay equivalent to your salary for 1 month with deductions from Tax, SSS, Pag-ibig and PhilHealth) Q: What are the components of “basic salary”? A: “Basic salary” shall include all remunerations or earnings paid by an employer to an employee for services rendered, but does not include allowances and monetary benefits which are not considered, or integrated, as part of the regular, or basic, salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, , night differential and holiday pay. Basic salary includes cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if, by individual or collective agreement or company practice or policy, the same are treated as part of the basic salary of the employees. Q: Are maternity leave benefits included in the computation of 13th month pay? A: No. Maternity leave benefits are not included in the computation of 13th month pay. Q: When shall 13th month pay be paid? A: The 13th month pay should be paid not later than December 24 of each year.

Q: Are all employees entitled to 13th month pay? A: Only rank-and-file employees are entitled to 13th month pay. The Labor Code, as amended, distinguishes a rank-and-file employee from a managerial employee. A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to effectively recommend such managerial actions. All employees not falling within this definition are considered rank-and file employees. Q: Are there employers who are exempted from paying the 13th month? A: Yes. The following employers are exempted to pay 13th month under PD 851: (a) Government and any of its political subdivision, including governmentowned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government; (b) Employers already paying their employees 13th month pay or more in a calendar year or its equivalent at the time of this issuance; (c) Persons in the personal service of another in relation to such workers; and (d) Employers who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall grant the required shall grant the required 13th month pay to such workers. SEPARATION PAY  Separation pay has been defined as the amount that an employee receives at the time of his severance and is designed to provide the employee with the wherewithal during the period he is looking for another employment. However, this broad definition must not be taken at face value. There are only limited instances wherein separation pay can be granted. These instances are as follows: A. Termination is for any of the authorized causes under the Labor Code. Employment may be terminated for the following authorized causes under the Labor Code: 1. Introduction of labor-saving devices 2. Redundancy 3. Retrenchment 4. Closure or Cessation – 5. Disease the employee found to be suffering and whose continued employment is prohibited by law or is prejudicial to his health as well as the health of his co-employees. (Diba na-discuss na itong authorized causes sa inyo during the first half of the semester)

As such, separation pay must be paid when the termination is based on the above-mentioned authorized causes except when the closure of the company is due to financial losses (kapag financial losses kasi xempre wala ng pambayad si employer dahil nga wala ng kita and bankrupt na si company). For authorized causes, the law requires the employer to give written notices to both the worker and the Department of Labor and Employment 30 days ahead of the projected separation. (take note of this requirement imposed by the DOLE) B. Where there is illegal dismissal and reinstatement is no longer feasible An illegally dismissed employee is entitled to two reliefs, namely backwages and reinstatement. However, where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is granted. C. As a measure of social justice where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character In this instance, the Supreme Court coined separation pay as financial assistance and allowed as a measure of social justice and based on exceptional circumstances. Hence, courts, in their discretion may grant separation pay based on comionate justice taking into consideration the length of service of the employee, the amount involved, whether the act is the first offense, the performance of the employee, etc. However, the Supreme Court sternly warned that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. However, where the reason for the valid dismissal is habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, there is no need to invoke comionate justice 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. Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment. Thus, the elementary rule is that an employee who voluntarily resigns from employment is not entitled to separation pay, except when it is stipulated in

the employment contract or Collective Bargaining Agreement or based on established employer practice in the company. The computation of separation pay is based on the ground on which it is based. In case of termination due to the installation of labor saving devices or redundancy, the employee affected is entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses including termination of employment on the ground of disease, 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. In illegal dismissal cases, where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative. It must be emphasized that this payment of separation pay is in addition to payment of backwages. A fraction of at least six (6) months shall be considered as one (1) whole year.