How to Compute Separation Pay

Many people have lost their job due to COVID. That is why many people are struggling to finance their daily expenses. Being jobless is hard, but don’t lose hope. As long as you are determined to survive, you can do it. Even though you are unemployed, there’s still a lot of sidelines you can do to earn money. In addition, you can also build your own business to earn money. If you’re thinking about the capital for business, you can use your separation pay for your business capital. If you want to know how much separation pay you will get, here’s a guide on how to compute separation pay.

Here’s a Guide on How to Compute Separation Pay

What does separation pay consist of?

  • Pro-rated 13th month pay
  • Last salary
  • Income tax claims for excess WHT
  • Unused sick leave
  • Unused vacation leave
  • Commission and compensation as mentioned in your employee’s contract

Who are qualified to get it?

If you have been terminated due to the following reason:

  • Health risk to the employee or to his/her co-employee due to disease
  • Closing of the establishment
  • Retrenchment to prevent losses
  • Installation of labor-saving devices

Persons who have been terminated due to the following reasons will not be qualified to get separation pay:

  • Neglect of your duties
  • Fraudulent acts
  • Willful breach of trust
  • Serious misconduct
  • Willful disobedience of lawful orders

How to compute separation pay?

If you’ve been terminated due to redundancy or installation of labor-saving devices, your separation pay will be equivalent to your one-month basic pay multiplied by the number of years of service. Here’s the computation:

For example:

One month salary = Php 15,000
Years of service = 2 years

One month salary x years of service: Php 15,000 x 2

Total separation pay amount: Php 30,000

If you have been terminated is due to the closure of business because of severe financial losses, retrenchment, or due to you suffering from an illness, you will be entitled to receive a separation pay that is equivalent to one-month basic salary or at least one-half of your monthly basic pay for every year of service, whichever is higher.

For example:

One month salary = Php 15,000
Years of service = 3 years

Half month salary x years of service: Php 7,500 x 3

Total separation pay amount: Php 22,500

If you haven’t got your separation pay, you should get it as soon as you can and use it as capital to earn more money. Being jobless can be stressful but always remember that if you are determined, nothing can stop you.

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