Separation Pay Calculator Philippines 2026
Computes DOLE-compliant separation pay under Labor Code Articles 298–299 for all 5 authorized causes. Includes the 6-month rounding rule, minimum 1-month guarantee, and BIR tax treatment — so you know exactly what you should receive.
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Your separation pay
Separation Pay Due
₱150,000.00
Redundancy — 1 month per year × 5
Computation Breakdown
The 5 Authorized Causes + Their Rates
Redundancy 1 month/yr
Position no longer needed (e.g., role merged, function automated, restructuring). Whichever is HIGHER: 1 month basic OR 1 month basic per year of service, minimum 1 month.
Installation of Labor-Saving Devices 1 month/yr
Position eliminated due to new machinery/automation. Same rate as redundancy: 1 month basic OR 1 month per year, whichever higher. Minimum 1 month.
Retrenchment ½ month/yr
Cost-cutting to prevent business losses. Employer must prove imminent losses with audited financials. ½ month basic per year of service, minimum 1 month basic pay.
Closure NOT due to losses ½ month/yr
Voluntary closure of business (owner retires, business model change). ½ month basic per year of service, minimum 1 month basic. If closure IS due to serious losses, NO separation pay required.
Disease (with medical cert.) ½ month/yr
Employee has disease prejudicial to coworkers or untreatable within 6 months (Art. 299). Requires certification from a public health authority. ½ month basic per year, minimum 1 month.
Closure due to serious losses None
If the business closure is proven through audited financial statements to be due to serious and substantial losses, no separation pay is legally required. Burden of proof is on the employer.
The 6-month rounding rule
Under Art. 298, a fraction of at least 6 months is counted as ONE FULL YEAR for separation pay computation. Examples:
- 5y 5mo → counted as 5 years
- 5y 6mo → counted as 6 years ✓
- 9y 11mo → counted as 10 years ✓
- 2y 0mo → counted as 2 years
If you’re at 5 months and 28 days, push to reach 6 months if you can — it adds a full year’s worth of separation pay.
Tax treatment (BIR)
Separation pay due to causes BEYOND the employee’s control is 100% tax-exempt under Section 32(B)(6)(b) of the Tax Code:
- Tax-EXEMPT Redundancy, retrenchment, closure, labor-saving devices, disease, death, sickness
- Taxable Voluntary resignation (if employer pays anything ex-gratia)
If employer withholds tax on tax-exempt separation pay by mistake, you can refund-claim it via your annual BIR 1700 or 2316 reconciliation.
Notice requirements
Under DOLE rules, you must receive a 30-day written notice before the effective date of separation. Notice must also be filed with DOLE for closures and retrenchments. If your employer fails to give notice:
- You’re entitled to your separation pay PLUS
- 30 days of additional pay in lieu of notice (nominal damages under Jaka Food Processing v. Pacot, 2005)
- You can file a complaint at the DOLE Regional Office or NLRC
What separation pay does NOT replace
On top of separation pay, your employer must also release in your FINAL PAY:
- Unpaid salary up to last day worked
- Pro-rated 13th month pay for the current year
- Cash conversion of unused vacation/sick leave (per company policy)
- Last earned commissions/bonuses
- SSS, PhilHealth, Pag-IBIG benefits (you can claim separately)
- BIR Form 2316 within 30 days of last day