Quick answer
How much is separation pay in the Philippines?
Redundancy, labor-saving devices
1 month
Per year of service, at least 1 month
Retrenchment, closure, disease
½ month
Per year of service, at least 1 month
The 6-month rule
6+ months = 1 year
A fraction of at least 6 months rounds up
On a ₱20,000 monthly pay base, never less than 1 month's pay:
| Years of service | 1 month per year | ½ month per year |
|---|---|---|
| 1 | ₱20,000.00 | ₱20,000.00 |
| 2 | ₱40,000.00 | ₱20,000.00 |
| 3 | ₱60,000.00 | ₱30,000.00 |
| 5 | ₱100,000.00 | ₱50,000.00 |
| 10 | ₱200,000.00 | ₱100,000.00 |
| 15 | ₱300,000.00 | ₱150,000.00 |
| 20 | ₱400,000.00 | ₱200,000.00 |
Your position was declared redundant. Now what?
Getting a notice that your job is being cut is hard enough. Then HR hands you a computation, and you have a week to sign. You need to know two things quickly: are you entitled to separation pay at all, and is the amount right?
The answer depends on one line in your notice: the reason. The law pays 1 month per year for some reasons, half a month per year for others, and nothing for a few. Then the years are counted with a rounding rule that works in your favor. This calculator applies all of it to your salary and dates.
How to use the calculator
Step 1
Choose the reason in your notice
Pick the exact reason your employer gave: redundancy, retrenchment, closure, labor-saving devices or disease. If you won an illegal dismissal case and reinstatement isn't possible, choose that.
Step 2
Enter your pay
Enter your latest monthly salary. Add regular allowances or commissions you receive every month, because the Supreme Court has included them in the pay base.
Step 3
Enter your dates
Enter your start date and your last day. The result shows your service, the years counted, and the separation pay.
Separation pay by reason
| Reason | Separation pay | Legal basis |
|---|---|---|
| Redundancy | 1 month per year, at least 1 month | Art. 298 |
| Installation of labor-saving devices | 1 month per year, at least 1 month | Art. 298 |
| Retrenchment to prevent losses | ½ month per year, at least 1 month | Art. 298 |
| Closure not due to serious losses | ½ month per year, at least 1 month | Art. 298 |
| Disease | ½ month per year, at least 1 month | Art. 299 |
| Closure due to serious business losses | None required | Art. 298 |
| Resignation, or dismissal for a just cause | None required | Arts. 297, 300 |
"At least 1 month" means the minimum is 1 month's pay even if you worked less than a year. Under retrenchment, closure or disease, you get whichever is higher: 1 month's pay, or half a month for each year of service.
The 6-month rule
A fraction of at least 6 months counts as one whole year. So 4 years and 6 months is 5 years. 4 years, 5 months and 29 days is still 4. That one rule can be worth a full month's pay, so check your dates carefully.
Service is counted from your first day to your last day, including the day itself. If your notice says your separation takes effect a month after you receive it, that month counts too.
What counts as "1 month pay"
The law says "pay", not "basic salary". In Santos v. NLRC, Soriano v. NLRC and Planters Products v. NLRC, the Supreme Court included regular allowances, like transportation and living allowances, in the base. In Songco v. NLRC, it included regular sales commissions. But in Millares v. NLRC, allowances that weren't regular, given only for certain assignments or reimbursable expenses, were left out.
So if you receive an allowance every month as part of your pay, add it to Regular allowances. One-time bonuses and reimbursements don't count.
Example: redundancy after 4 years and 7 months
Let's say you started on March 1, 2022, and your position was declared redundant effective October 30, 2026. You earn ₱20,000 a month with no regular allowances.
Service: 4 years, 7 months and 30 days → 5 years
Redundancy: ₱20,000 × 1 × 5 = ₱100,000
Retrenchment instead: ₱20,000 × ½ × 5 = ₱50,000
If you'd only worked 5 months, you'd still get 1 month's pay, ₱20,000, under either reason. And if you also get a ₱2,000 monthly allowance, the redundancy pay becomes ₱110,000.
Is separation pay taxed?
No, when it's because of a cause beyond your control. The Tax Code exempts amounts received because of separation due to death, sickness or other physical disability, or any cause beyond the employee's control. Redundancy, retrenchment, closure, labor-saving devices and disease all qualify. Separation pay you get under a voluntary resignation program is a different case, so check with your employer.
Your final pay, meaning your last salary, prorated 13th month and leave conversion, is separate. Use the Final Pay Calculator to see the whole amount.
Before you sign
- Check the reason in your notice. It decides whether you get 1 month or ½ month per year.
- For redundancy, retrenchment, closure or labor-saving devices, you should get written notice at least 1 month before the effective date, and DOLE should be notified too.
- Compare your years of service, including the 6-month rule, with the company's computation.
- Ask whether regular allowances were included in the base.
- Read the quitclaim before signing. A quitclaim for less than what's due can be questioned.
Questions about separation pay
How do I compute separation pay?
Multiply your monthly pay by 1 or ½, depending on the reason, and by your years of service, counting a fraction of 6 months or more as a full year. For authorized causes, it is never less than 1 month’s pay.
How much is separation pay for redundancy?
1 month’s pay for every year of service, or 1 month’s pay, whichever is higher. On ₱20,000 a month after 5 years, that is ₱100,000.
How much is separation pay for retrenchment?
½ month’s pay for every year of service, or 1 month’s pay, whichever is higher. On ₱20,000 a month after 5 years, that is ₱50,000.
Do I get separation pay if I resign?
Not by law. Separation pay is for authorized causes like redundancy, retrenchment, closure, labor-saving devices and disease. Your contract or company policy may still give it.
Are allowances included in separation pay?
Regular allowances you receive every month have been included by the Supreme Court in the pay base, as have regular commissions. Allowances that are not regular, like reimbursements, are not.
Is separation pay taxable?
Not when the separation is for a cause beyond your control, such as redundancy, retrenchment, closure, labor-saving devices or disease, under Section 32(B)(6)(b) of the Tax Code.
Is separation pay different from final pay?
Yes. Final pay is everything owed when you leave: last salary, prorated 13th month, leave conversion and other benefits. Separation pay is added to it only if your reason qualifies.
What if I worked less than a year?
For authorized causes, you still get at least 1 month’s pay. If you worked 6 months or more, it also counts as 1 full year.
Related calculators
- Final Pay Calculator
Last salary, prorated 13th month, leave and separation pay together.
- Retirement Pay Calculator
22.5 days per year of service if you're retiring.
- Leave Conversion Calculator
The cash value of your unused leave.
- 13th Month Pay Calculator
Your prorated 13th month for this year.
Sources
- Labor Code of the Philippines, Articles 298 and 299 (formerly 283 and 284)
- Santos v. NLRC (1987); Soriano v. NLRC (1987); Planters Products v. NLRC (1989); Songco v. NLRC (1990); Millares v. NLRC (1999): pay base for separation pay
- National Internal Revenue Code, Section 32(B)(6)(b): separation pay for causes beyond the employee's control is excluded from gross income