Navigating Employee Termination and Notice Periods in the Philippines

Unlike jurisdictions with at-will employment, the Philippines operates under a structured legal framework that provides significant protection for employees. Termination must be based on valid grounds, and employers bear the burden of proving the legitimacy of their actions.

Philippine labor law recognizes two primary categories for employment termination: just causes and authorized causes. Employees dismissed for just causes typically receive no separation pay, while those terminated under authorized causes are entitled to compensation equivalent to at least half a month's or one month's salary per year of service, depending on the specific circumstances such as redundancy, retrenchment, or business closure.

Understanding Notice Period Requirements

Employers must provide reasonable notice before terminating an employee's contract. The required notice period varies based on the employee's length of service:

Less than 6 months of service: Minimum 1 month notice
6 months to 1 year of service: Minimum 2 months notice
More than 1 year of service: Minimum 3 months notice

Employers may opt to provide payment in lieu of notice, which can be particularly useful in sensitive termination situations. For specialized roles or senior positions, parties may negotiate extended notice periods through mutual agreement.

Separation Pay Calculations and Exceptions

Separation pay serves as financial cushion for employees affected by termination due to authorized causes. The standard calculation follows this structure:

Less than 1 year: Half month's salary
1-2 years: 1 month's salary
2-3 years: 1.5 months' salary
3-4 years: 2 months' salary
Additional 0.5 month's salary for each additional year

Payment must be made within 30 days of termination. However, exceptions exist where separation pay may not be required, including termination for just causes such as serious misconduct, willful disobedience, or gross negligence.

Retirement Benefits Framework

Employees reaching retirement age (optional at 60, mandatory at 65) with at least five years of service are entitled to retirement benefits equivalent to at least half month's salary per year of service. The calculation includes 15 days' pay, cash equivalent of unused leave credits, and 1/12 of the 13th month pay. Companies with collective bargaining agreements or superior retirement plans must provide benefits that meet or exceed statutory requirements.

Termination Process Best Practices

Proper termination procedures are essential for compliance and risk management. Key steps include:

Documenting valid termination grounds thoroughly
Providing written notice and opportunity for explanation
Conducting formal hearings for due process
Calculating and processing final payments accurately
Issuing required employment certificates
Reporting to the Department of Labor and Employment when required

Unemployment Benefits Eligibility

The Social Security System administers unemployment benefits for qualified individuals who experience involuntary separation. Eligibility requirements include:

Age restrictions (generally under 60, with exceptions for hazardous occupations)
Minimum 36 months SSS contributions
No previous unemployment benefit claims within three years
Valid involuntary separation reasons

Applications must be submitted within one year of separation through the My.SSS online portal. SailGlobal's HR experts can provide guidance on navigating these complex requirements while ensuring full compliance with Philippine labor regulations.

Philippines Employee Termination Guide: Notice Periods & Separation Pay