termination of employment in The Philippines: laws & severance policies

Legal Grounds for Termination of Employment in the Philippines

Terminating employment in the Philippines is permissible for 'just' or 'authorized' causes, with the employer required to prove the lawfulness in a proper forum. Authorized causes necessitate written notice from the employer.

Just Causes for Termination:

 
• Serious misconduct
 
• Willful disobedience
 
• Gross and habitual neglect of duties
 
• Fraud or willful breach of trust
 
• Commission of a crime or offense against the employer or their family members
 
• Other analogous causes

Authorized Causes for Termination:

 
• Installation of labor-saving devices
 
• Redundancy
 
• Retrenchment to prevent losses
 
• Closure or cessation of business operations
 
• Disease not curable within six months as certified by a competent public health authority

Employment Laws and Severance Policies in the Philippines

Notice Period in the Philippines

Notice periods differ depending on whether termination is based on "just" or "authorised" cause:

• For dismissals based on a 'just' cause, the employer is required to provide the employee with two written notices and an opportunity for a hearing before termination.
• In cases of 'authorized' causes, the employer must give both the employee and the Department of Labor and Employment (DOLE) written notice 30 days before the termination takes effect

Severance Pay in the Philippines

Employees terminated for authorized causes are entitled to separation pay as follows:

 
• Redundancy or installation of labor-saving devices: One month's pay or one month's pay per year of service, whichever is higher.
 
• Retrenchment, business closure, or incurable disease: One month's pay or half a month's pay per year of service, whichever is higher.

Employees dismissed for just causes are generally not entitled to separation pay.

Probation Period in the Philippines

In the Philippines, permanent employees undergo a mandatory probationary period of six months. During this time, employers assess the employee's performance and suitability for regular employment. Termination during the probationary period must still be based on just or authorized causes, and due process must be observed.

Process for Ending Employment in the Philippines

 
• Identify the grounds for termination (just or authorized cause).
 
• Provide the required notice to the employee and, if applicable, to DOLE.
 
• Conduct a hearing (for just cause terminations) to allow the employee to present their side.
 
• Issue a final notice of termination after due process is observed.
 
• Settle all due compensation, including separation pay if applicable, and provide necessary documentation.

Employee Rights During Termination in the Philippines

Unfair Dismissal Protections

Unfair dismissal, or illegal dismissal, occurs when an employee is terminated without just or authorized cause, or when due process is not followed. Employees have the right to security of tenure, and any termination must comply with legal grounds and procedures.

Grievance Procedures

Grievance procedures are formal processes that allow employees to raise concerns or disputes regarding workplace issues, including termination. These procedures are crucial for resolving conflicts amicably and ensuring fair treatment.

Final Pay and Benefits

Upon termination, employers are responsible for settling the employee's final pay, which includes:

 
• Unpaid wages
 
• Pro-rated 13th-month pay
 
• Unused leave credits
 
• Separation pay (if applicable)

Final payments should be made promptly, adhering to legal timelines and company policies.

What Termination Documentation Is Required by Law?

Employers are legally obligated to provide the following documents upon termination:

 
• Notice of Termination: A written document stating the reason for termination and the effective date.
 
• Final Payslip: Detailed computation of the employee's final pay, including all earnings and deductions.
 
• Certificate of Employment: A document stating the employee's tenure and position held.
 
• Clearance Forms: Documents confirming the employee has settled all accountabilities with the company.

These documents should be provided within a reasonable timeframe to ensure compliance with legal requirements and to facilitate the employee's transition.

How to Stay Compliant as An Employer in the Philippines

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.