Retirement Pay Law in the Philippines

Employee Discipline and Termination, Employee Wages and Benefits 2014-02-21

Retirement Age
Retirement is one of the modes of termination of employment. By retirement, the employment is
terminated when the employee has reached a certain age, or after he has completed a certain
number of years of service.
Under the Labor Code (Art. 287), an employee may be retired upon reaching the retirement age
established in the collective bargaining agreement (CBA) or other applicable employment
contract. In the absence of such agreement, the employee may retire upon reaching the age of
60 or more, but not more than 65, provided he has served at least 5 years or more in the same
establishment. The age 60 or more, but below 65, is considered as the voluntary retirement age.
Sixty-five is considered as the compulsory retirement age.
A company may have CBA or employment contract setting a retirement age different (higher or
lower) from that fixed by law. For example, the CBA may fix the retirement age at 50.
The CBA or employment contract may also establish a retirement age based on years of service
of the employee. For example, it may provide that the employee may be retired after 20 years of
service.
The retirement age may also be established based on the combination of the age and tenure of
the employee. For example, the contract may provide that the employee may retire upon
reaching the age of 50, or after 20 years of service, whichever comes earlier.
For underground mining employees, the voluntary retirement age under the Labor Code is 50
years or more, but not beyond 60. The compulsory retirement age is set 60.
It is important to note that the company cannot unilaterally fix the retirement age of employee.
Retirement age may be established only by a valid CBA or employment contract, or in the
absence of both, by the law.
Another thing, the retirement age fixed by law applies only when no CBA or employment
contract setting the retirement age exist. If there is such agreement or contract, the retirement
age fixed by law wont apply.
Retirement Pay
If the establishment has a CBA or employment contract providing for a retirement plan or
benefits to employees, the employee shall be entitled to receive the benefits as provided in the
said CBA or contract. However, such benefits must not be less than that provided under the
Labor Code.
Under the Labor Code, the retirement pay is equivalent to at least one-half month salary for
every year of service, a fraction of at least six months being considered as one whole year. The

term one-half month salary shall mean 15 days plus 1/12 of the 13th month pay and the cash
equivalent of not more than 5 days of service incentive leaves.