Overseas Filipino Workers (OFWs) are often referred to as the country’s modern-day heroes. However, the legal complexities surrounding their employment can be daunting, especially when a contract ends prematurely or after years of dedicated service.
Under Philippine law and the standard employment contracts mandated by the Department of Migrant Workers (DMW)—formerly POEA—OFWs have specific rights regarding separation pay and benefits.
1. Separation Pay vs. Service End Benefits
In the Philippine context, "Separation Pay" and "Long Service Benefits" are often confused but stem from different legal triggers.
Separation Pay
This is a statutory payment due to an employee whose employment is terminated for authorized causes. It is intended to provide a financial cushion for workers who lose their jobs through no fault of their own.
Long Service Benefits (Gratuity)
This is typically a contractual benefit. Unlike domestic workers in the Philippines, OFWs often operate under the laws of the host country. Many Middle Eastern jurisdictions (like the UAE or Saudi Arabia) mandate an "End of Service Gratuity" based on the number of years served.
2. Legal Grounds for Separation Pay
Under the Labor Code of the Philippines, which applies supplementally to OFW contracts, an OFW is entitled to separation pay if terminated for the following reasons:
- Retrenchment: To prevent serious business losses.
- Redundancy: When the worker’s position is no longer necessary.
- Closure of Establishment: Provided the closure is not due to serious financial losses.
- Disease: When the worker has an illness that is prohibited by law or prejudicial to their health/colleagues.
- Illegal Dismissal: If a court or the NLRC finds the worker was terminated without just cause and reinstatement is no longer possible.
Note: If an OFW is terminated for Just Cause (e.g., serious misconduct, neglect of duty, or commission of a crime), they are generally not entitled to separation pay.
3. Calculating the Amount
The computation depends on the reason for the separation:
| Reason for Separation | Formula |
|---|---|
| Redundancy | 1 Month Pay per year of service. |
| Retrenchment / Disease / Closure | 1/2 Month Pay per year of service. |
| Illegal Dismissal | Full backwages plus 1 Month Pay per year of service (as indemnity). |
A fraction of at least six (6) months is considered as one (1) whole year for these calculations.
4. Long Service Benefits (Host Country Law)
For many OFWs, the "Long Service" benefit is governed by the Standard Employment Contract and the labor laws of the destination country.
- Saudi Arabia (KSA): Article 84 of the Saudi Labor Law entitles workers to an end-of-service award: half a month's wage for each of the first five years, and a full month's wage for each year thereafter.
- UAE: The UAE Labour Law provides for a "Gratuity" for workers who complete at least one year of continuous service.
These benefits are enforceable in the Philippines through the National Labor Relations Commission (NLRC) if the foreign employer has a local manning or recruitment agency.
5. The "Solidary Liability" Rule
One of the strongest protections for OFWs is the principle of Solidary Liability. Under Republic Act No. 8042 (Migrant Workers Act), the local recruitment agency is "jointly and severally" liable with the foreign employer for all monetary claims arising from the employment contract.
This means if your foreign employer refuses to pay your separation pay or long service benefits, you can legally demand the full amount from the local agency in the Philippines.
6. How to Claim: Step-by-Step Process
Step 1: Documentation
Gather all evidence of employment, including:
- The original Employment Contract (DMW-verified).
- Payslips and proof of remittances.
- The Termination Letter (if applicable).
- Passport copies with visa stamps showing duration of stay.
Step 2: SEnA (Single Entry Approach)
Before filing a formal lawsuit, the law requires Mandatory Conciliation. You must go to the nearest Regional Arbitration Branch of the NLRC or a DMW office to file a request for assistance. A mediator will try to help you and the agency reach a settlement.
Step 3: Formal Filing
If conciliation fails, you will file a Formal Position Paper before a Labor Arbiter at the NLRC. This is a legal proceeding where both sides submit their arguments and evidence.
Step 4: Execution of Judgment
If the Labor Arbiter rules in your favor, the agency is ordered to pay. If they refuse, a Writ of Execution can be issued to garnish the agency's cash bond posted with the DMW.
7. Important Prescriptive Periods
Time is of the essence. Under Philippine law:
- Money claims arising from employer-employee relations must be filed within three (3) years from the time the cause of action accrued.
- Claims for illegal dismissal must be filed within four (4) years.