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retrench, rotation, termination

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1 retrench, rotation, termination on Wed Jun 29, 2011 4:28 pm


Arresto Menor
as much as we don't want to, we are planning to terminate 5 employees for reasons of redundancy, further losses or closure of company,(which we don't want to happen).
1. we are weighing options of rotation of employees (for the reason we dont want them to be uemployed)- how do we go about this rotation?
2. most of them had been 10yrs in the co. this will also cause more heavy financial burden upon payment of their separation pay, but we have to pay them as this is due them. can we pay it is staggered payments for their sep pay?
i hope you can enlighten us. thank you

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2 Re: retrench, rotation, termination on Wed Jun 29, 2011 5:54 pm

Rotation of employees can be done; however, you should be reminded that it should not diminish the salary and benefits due them. Under the labor code,there is a prohibition against non-diminution of benefits which means that any schemes which would lessen the salary and benefits which have been regularly given to the employees are unlawful. If rotation would be done simply to maximize energy e.g. electricity then this can be allowed. However, if this will reduce say the working hours or days which ultimately affect their salaries, then this is a violation of the labor code.

There is no specific rule that either allows or disallows payment of separation pay in staggered basis. As long as the employees agree in writing and the scheme is not disadvantageous and shocking to the moral conscience,then, it will be allowed.

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3 Re: retrench, rotation, termination on Wed Jun 29, 2011 5:55 pm

i mean minimize energy.

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4 Re: retrench, rotation, termination on Thu Jun 30, 2011 10:55 am


Arresto Menor
thank you very much for the advice Atty. understood the concern.

there is another issue i would like to clarify.
the separation pay is based on their present salary? or based from the minimum salary that is prevailing?

thank you are a great help to those who are sadly not well versed with what is appropriate Very Happy

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5 Re: retrench, rotation, termination on Thu Jun 30, 2011 12:12 pm

The Labor Code provides:

ARTICLE 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be 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, 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. A fraction of at least six (6) months shall be considered one (1) whole year.

The basis of the payment is the salary of the affected workers at the time of their separation. It cannot be the minimum wage as this is violative on the rule on non-diminution of benefits.

Your welcome. Smile

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