Retirement is a crucial stage in your career, signaling the shift from work to a deserved time of rest and contemplation. It’s important to grasp the details of retirement benefits laid out in the Labor Code.
What is retirement?
Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employees whereby the latter, after reaching a certain age, agrees and/or or consents to sever his employment with the former.
Who are entitled to retirement benefits under the Labor Code?
Any employee in the private sector upon reaching the retirement age, regardless of their position, designation, or status and irrespective of the method by which their wages are paid are covered.
An underground or surface mining employee shall also be entitled to all retirement benefits provided in Labor Code. They shall include part-time employees, employees of service and other job contractors and domestic helpers or persons in the personal service of another.
In what situation does retirement under Article 302 of the Labor Code apply?
It applies only in situations where:
- There is no CBA or other applicable employment contracts providing benefits for employees; or
- There is a CBA or other applicable employment contracts providing for retirement benefits for employees, but such benefits are below the requirements set by law.
What is the age requirement for the purpose of retirement?
The age requirement for the purpose of retirement are as follows:
- Under the Labor Code:
- Option retirement – 60 years old; and
- Compulsory retirement – 65 years old;
Note: the employee must have served the establishment for at least 5 years.
- Under a retirement plan, where the employers and employees are given free hand to determine and agree upon the terms and conditions of retirement, even less than 60 years of age.
Note: An underground or surface mining employee upon reaching the age of 50 years or more, but not beyond 60 years which is hereby declared the compulsory retirement age for both underground and surface mine workers, who has served at least 5 years as underground or surface mine worker may retire and shall be entitled to all the retirement benefits.
What is the amount the retiring employee is entitled to under the Labor Code?
A retiring employee is entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least 6 months being considered as 1 whole year. The term “one-month salary” in determining the minimum retirement pay due includes:
- Fifteen (15) days salary of the employee on his latest salary date;
- Cash equivalent of not more than 5 days of service incentive leave;
- One-twelfth (1/12) of 13th month pay due the employee or two and a half (2.5) days; and
- All other benefits that the employer and employee may agree upon that should be included in the computation of the employee’s retirement pay.
In conclusion, it is crucial for both employers and employees to understand retirement benefits in the Labor Code. Being well-informed as people near retirement ensures a smooth transition and the enjoyment of deserved benefits.
Source:
The Labor Code of the Philippines
Implementing Rules and Regulations of R.A. No. 7641
