Computation of Retirement Pay for Kasambahay Under RA 10361 (Domestic Workers Act) — Philippine Legal Guide

This is a general explainer based on the Labor Code (retirement benefits), RA 7641 (Retirement Pay Law), and RA 10361 (Kasambahay Law). It’s not a substitute for legal advice on specific facts.

1) Are kasambahay entitled to statutory retirement pay?

Yes, as a rule. In the absence of a superior employer-provided retirement plan, the minimum statutory retirement benefit under the Labor Code (as amended by RA 7641) applies to private-sector employees, which includes domestic workers (kasambahay) covered by RA 10361.

Exception: If the employment contract or an employer plan/CBA grants a retirement benefit equal to or better than the statutory minimum, the more favorable scheme governs.

2) Who qualifies — the two basic thresholds

You are entitled to statutory retirement pay if:

Age: You retire at 60 (optional) up to 65 (compulsory); and
Service: You have rendered at least five (5) years of service with the same employer (usually interpreted as continuous or broken service totaling 5 years).

If the kasambahay is separated before reaching retirement age (e.g., resignation, dismissal, or authorized cause), the retirement benefit normally does not accrue, unless the employer’s plan allows early retirement. (Separation pay, if any, is a different concept.)

3) The statutory minimum formula (no employer plan)

The minimum retirement pay is one-half (½) month salary for every year of service, with a fraction of at least six (6) months counted as one (1) whole year.

By law, “one-half (½) month salary” is a composite amount:

15 days of basic pay; plus
2.5 days (representing 1/12 of the 13th-month pay); plus
5 days (cash equivalent of service incentive leave, if the employee is entitled).

Are kasambahay entitled to the 5-day leave component?

Yes. RA 10361 grants kasambahay at least 5 days service incentive leave with pay per year. Because they are entitled to SIL, that 5-day cash equivalent is included in the computation of the ½-month salary.

Therefore, for kasambahay the ½-month salary = 22.5 days of the daily rate.

4) “Daily rate” and what salary base to use

Use the last basic salary rate at the time of retirement (not an average), excluding in-kind perks (e.g., board and lodging) and excluding allowances not part of basic pay.
For monthly-paid kasambahay, a conservative and widely used conversion is: Daily Rate = Monthly Basic Salary / 30. (If the written contract consistently uses a different divisor, e.g., 26, apply it consistently across all benefits.)

Important: RA 10361 allows board and lodging as part of overall compensation only up to certain caps and by written agreement; however, for 13th-month and retirement pay, compute using cash basic wage (do not include the notional value of board and lodging).

5) Putting it together — the step-by-step computation

Determine the qualifying Years of Service (YOS): Count each full year; count ≥6 months as one (1) year; ignore <6 data-preserve-html-node="true" months.
Find the Daily Rate (DR): DR = (Monthly Basic Salary) ÷ 30 (or the consistent divisor in the contract).
Compute the ½-month salary equivalent: ½-month salary = 22.5 × DR (for kasambahay).
Apply years of service: Retirement Pay = (22.5 × DR) × YOS.

Shortcut using monthly salary (when dividing by 30)

Because 22.5 ÷ 30 = 0.75, you can compute: Per-year retirement credit ≈ 0.75 × Monthly Basic Salary. Thus: Retirement Pay ≈ 0.75 × Monthly Salary × YOS.

6) Worked examples

Example A — Simple case

Monthly basic salary: ₱7,000
Service: 10 years, 2 months ⇒ 10 years (2 months < 6 months)
Per-year credit = 0.75 × ₱7,000 = ₱5,250
Retirement Pay = ₱5,250 × 10 = ₱52,500

Example B — Fraction rounds up

Monthly basic salary: ₱8,500
Service: 7 years, 7 months ⇒ 8 years (≥ 6 months rounds up)
Per-year credit = 0.75 × ₱8,500 = ₱6,375
Retirement Pay = ₱6,375 × 8 = ₱51,000

Example C — Contract uses a 26-day divisor

Monthly basic salary: ₱6,000
DR = ₱6,000 / 26 ≈ ₱230.77
½-month salary (22.5 days) = 22.5 × ₱230.77 ≈ ₱5,192.33
Service: 5 years, 6 months ⇒ 6 years
Retirement Pay ≈ ₱5,192.33 × 6 ≈ ₱31,154.00

7) Common issues & clarifications

A) Can SSS/PhilHealth/Pag-IBIG contributions replace retirement pay?

No. Government-mandated social insurance (SSS pension, etc.) is separate. Employer contributions do not substitute for statutory retirement pay.

B) What if there is an employer retirement plan?

If a plan (or consistent practice) yields equal or better benefits than the statutory minimum, that plan governs. If the plan yields less, the employer must top up to reach the statutory floor.

C) Can retirement pay be waived?

A prospective waiver of statutory minimum retirement benefits is generally invalid. After the amount becomes due, a quitclaim may be recognized only if voluntary, for a reasonable consideration, and without deception or coercion.

D) Can a kasambahay get both separation pay and retirement pay?

Generally no double recovery for the same period/event. If two different benefits are arguably due (e.g., authorized cause separation vs. retirement at age), the rule of thumb is the more advantageous or applicable benefit is paid — unless a contract/plan explicitly allows both.

E) What happens if there were salary increases?

Use the last salary rate at retirement for the entire computation (unless a plan says otherwise).

F) Part-time/live-out arrangements

Kasambahay status depends on the nature of work (household service) rather than living arrangements. The basic salary actually paid (excluding in-kind) remains the base for computation.

G) Tax treatment

Statutory retirement benefits paid at age 60–65 with ≥5 years of service are generally tax-exempt under Philippine tax rules for retirement benefits pursuant to law (distinct from separation benefits). When in doubt, withhold nothing and document the legal basis; consult your payroll/tax adviser for updates.

8) Documentation the household employer should prepare

Employment contract (RA 10361 requires a written contract in a language understood by the kasambahay).
Payroll records showing monthly basic salary (cash), separate from in-kind perks.
Service record indicating start date, any breaks, and retirement date.
Computation sheet showing divisor used (30 or 26), DR, 22.5-day factor, YOS rounding.
Release and quitclaim (optional but recommended) after full payment.
Government remittance records (SSS/PhilHealth/Pag-IBIG) — separate from retirement but useful for closure.

9) Quick compliance checklist (for employers)

Confirm the kasambahay meets age and 5-year service thresholds.
Identify the last basic salary (cash only).
Decide on a consistent divisor (30 recommended for monthly-paid).
Compute Retirement Pay = 22.5 × Daily Rate × YOS (≥6 months = 1 year).
Prepare a computation sheet and pay in legal tender.
Issue a certificate of employment and, if used, a quitclaim.
Keep records for at least 3–5 years.

10) Bottom line

For kasambahay who retire between 60 and 65 with at least 5 years of service, the statutory minimum retirement benefit is ½ month salary per year of service, which for kasambahay equals 22.5 days per year based on the final basic salary, with ≥6 months rounding up to a whole year. Use the cash basic wage (exclude board/lodging), keep the paper trail clean, and when in doubt, apply the more favorable interpretation to the kasambahay consistent with Philippine labor standards.