In the Philippine employment landscape, there is often a misunderstanding regarding the financial entitlements of an employee who voluntarily leaves their post. While many equate any form of "leaving a job" with a "severance package," the Labor Code of the Philippines draws a sharp distinction between voluntary resignation and involuntary separation.
The General Rule: No Separation Pay for Resignation
Under Philippine law and established jurisprudence (notably CJC Logistics, Inc. vs. Mundo), the general rule is clear: A regular employee who voluntarily resigns is not entitled to separation pay.
Separation pay is legally mandated only when the termination of employment is initiated by the employer for authorized causes, such as:
- Redundancy
- Retrenchment to prevent losses
- Closure or cessation of business (not due to serious losses)
- Disease (when continued employment is prohibited by law or prejudicial to health)
Because voluntary resignation is a discretionary act by the employee to sever the employer-employee relationship, the law does not compel the employer to provide "goodbye money."
Exceptions to the Rule
While the law does not mandate it, an employee may still receive separation pay during a voluntary resignation in the following specific scenarios:
1. Provision in the Employment Contract
If the signed employment agreement specifically states that the employee will receive a certain amount or "separation benefit" upon resignation after a specific number of years, that contract becomes the law between the parties.
2. Collective Bargaining Agreement (CBA)
For unionized workplaces, the CBA may contain provisions granting separation pay or "retirement/resignation gratuities" to members who resign voluntarily.
3. Established Company Policy or Practice
If the employer has a written policy or a long-standing, consistent practice of giving separation pay to resigning employees, this may ripen into a demandable right. To be considered a "company practice," the grant must be:
- Consistent and deliberate.
- Practiced over a long period.
- Not a product of error or mere "one-time" generosity.
4. Resignation for Just Cause (Constructive Dismissal)
Under Article 300 [285] of the Labor Code, an employee may resign for "just cause," such as serious insult, inhuman treatment, or the commission of a crime against the employee by the employer. If the resignation is forced because the work environment has become unbearable (Constructive Dismissal), the court may treat it as an illegal dismissal, thereby entitling the employee to separation pay in lieu of reinstatement.
Separation Pay vs. Final Pay (Terminal Pay)
A common point of confusion is the difference between "Separation Pay" and "Final Pay." Even if an employee is not entitled to separation pay, they are always entitled to their Final Pay (Terminal Pay).
According to DOLE Labor Advisory No. 06, Series of 2020, Final Pay includes:
- Unpaid earned salary (up to the last day of work).
- Pro-rated 13th-month pay.
- Cash conversion of unused Service Incentive Leaves (SIL), provided the employee has at least one year of service.
- Tax refunds (if applicable).
- Any other benefits stipulated in the contract.
Summary Table: Entitlements Upon Resignation
| Entitlement | Entitled? | Basis |
|---|---|---|
| Separation Pay | No | General Rule (Labor Code) |
| Final/Terminal Pay | Yes | Earned wages/benefits |
| 13th Month Pay | Yes | Pro-rated based on months worked |
| SIL Conversion | Yes | If employee has >1 year of service |
Conclusion
In the Philippine context, voluntary resignation is viewed as a personal choice rather than a loss imposed by the employer. Consequently, unless there is a specific contract, union agreement, or proven company tradition to the contrary, a regular employee is not legally entitled to separation pay. Employees should meticulously review their employment contracts and company manuals before submitting a resignation letter to manage their financial expectations accurately.