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Severance Pay Computation for Redundancy

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1 Severance Pay Computation for Redundancy on Wed Jun 10, 2015 3:21 pm

pabloespanola


Arresto Menor
Hello. I would like to clarify an issue that's currently under arbitration.

Our company was acquired by another, and due to restructuring, we were let go under Redundancy. We were given our severance pay computed as our basic pay multiplied by the number of years in service. The DOLE handbook, however, states that allowances should be part of the separation pay.

We have regularly received an amount as allowance on top of our salary without any explicit conditions. Eg., transportation allowance was still given to employees even if they had their own cars. We also received meal and clothing allowances regularly without explicit conditions.

Are we correct in demanding that the allowances be included in our severance pay?

Thank you!

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LandOwner12


Reclusion Perpetua
wait natin c sir Council,

di ko kabisado to, sensya na sir

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pabloespanola


Arresto Menor
Thanks. Looking forward to a reply.

For those who are on the same boat as myself, here's the reference text from the DOLE HANDBOOK :
-----
E. Inclusion of Regular Allowance in the Computation

In the computation of separation pay, it would be error not to integrate the allowance with the basic salary. The salary base properly used in computing the separation pay should include not just the basic salary but also the regular allowances that an employee has been receiving.
-----

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council


Reclusion Perpetua
Supreme Court rulings have indicated in the past that only basic pay is computed in redundancy.

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pabloespanola


Arresto Menor
Hello council.

Thank you for your response. I admit my knowledge on the matter is limited but I'm interested to know more. Would you have a ruling I can refer to that touches on the topic?

In my limited understanding of legal matters, I have come to some assumptions about my case, and would appreciate your feedback.

1. "separation pay" is a generic term used when an employee leaves the company or is let go.
2. Depending on circumstances (eg., retirement, retrenchment, or Redundancy), the separation pay may differ in its formula
3. In seeking classification, the NLRC arbiter will use supreme Court decisions for jurisprudence.

As to the third point raised, my research pulled up the following SC rulings (for brevity, I only included the GR number, description, and salient points related to "separation pay"):

G.R. No. 110068

PHILIPPINE DUPLICATORS, INC., petitioner, 
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE DUPLICATORS EMPLOYEES UNION - TUPAS, respondents.

> 13th Month pay computation
> wages include commissions for employees engaged in selling
> basic salary does not include cola in computing 13th Month pay
---
G.R. No. 74191 December 21, 1987

THE INSULAR LIFE ASSURANCE COMPANY, LTD., and FGU INSURANCE GROUP, petitioners, 
vs.
NATIONAL LABOR RELATIONS COMMISSION

> illegal dismissal
> backwages include leaves and other allowances
---
G.R. No. 75510 October 27, 1987

RUFINA SORIANO, petitioner, 
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and KINGLY COMMODITIES TRADERS AND MULTI-RESOURCES, INC.,

> illegal dismissal/termination for just cause
> separation pay given with "living allowance"
---
G.R. No. 76721 September 21, 1987

LYDIA SANTOS, petitioner, 
vs.
NATIONAL LABOR RELATIONS COMMISSION and SECURITY BANK AND TRUST COMPANY

> illegal dismissal
> allowances included in separation pay
---
G.R. No. 160233

ROGELIO REYES
Petitioner,
- versus - 
Ynares-Santiago, J.(Chairperson), Austria-Martinez, Chico-Nazario, and NATIONAL LABOR RELATIONS COMMISSION

> retirement
> commissions for people not involved in selling are not included in final pay
---

None of these SC rulings cover cases where the termination of employment is due to Redundancy, and in some cases, allowances are awarded as part of the severance package.

Again, thank you for your help.

I apologize for the length of this reply, but I'd like to supply as much information as I can.

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