Computing Pay for Household Workers in the Philippines

Household workers—kasambahay such as yaya, househelp, cook, gardener, family driver, and similar workers in or for a household—have a distinct legal framework. Their pay and end-of-service benefits are governed primarily by the Batas Kasambahay (Republic Act No. 10361), with certain generally applicable employment concepts (like statutory retirement pay) filling gaps when consistent with the kasambahay setup.

This article focuses on (1) retirement pay and (2) separation/termination-related monetary entitlements, with practical, computation-ready guidance.

1) Core Pay Concepts You Must Identify First

Before computing anything, determine these basics:

A. “Basic wage” (cash wage) vs. “benefits/allowances”

For most computations (13th month, retirement pay base, indemnities), the key is the basic cash wage agreed in the contract. The value of meals, lodging, uniforms, and similar household-provided items is generally not treated as part of the basic wage for statutory computations, unless it is clearly structured as a cash-equivalent wage component in the contract and actually paid as such.

B. Monthly-paid kasambahay and the daily rate divisor

A common, practical approach for monthly-paid household workers is:

Daily Rate = Monthly Wage ÷ 30

This aligns with standard monthly-to-daily conversions used in many wage calculations. Use the contract and pay practice: if the kasambahay is truly monthly-paid, the 30-day divisor is typically used for day-based computations (like “15 days pay”).

C. Years of service and rounding rules

When a benefit uses “per year of service,” compute service from the start date to the relevant end date. For statutory retirement, a fraction of at least 6 months is treated as 1 whole year (explained below).

2) Retirement Pay for Kasambahay

A. Is a kasambahay entitled to retirement pay?

Statutory retirement pay is generally triggered when all of these are present:

Retirement age:
- Optional: at least 60 years old
- Compulsory: 65 years old
Minimum service: at least 5 years of service with the employer
No existing retirement plan providing equal or better benefits (rare in household settings)

Even if the kasambahay receives SSS benefits/pension, statutory retirement pay (when applicable) is conceptually separate from SSS. SSS is social insurance; retirement pay is an employer liability under employment standards (unless a valid plan replaces it).

Practical note: In many household arrangements, retirement is often handled informally. But if statutory retirement pay applies, the computation is not discretionary.

B. How to compute statutory retirement pay

Minimum retirement pay is:

Retirement Pay = (½ month salary) × (Years of Service)

The law’s definition of “½ month salary” is not simply “15 days.” It is composed of:

15 days salary, plus
1/12 of the 13th month pay, plus
Cash equivalent of up to 5 days service incentive leave (SIL)

For kasambahay, SIL exists (the kasambahay law recognizes leave benefits), so the standard “½ month salary” formula is typically used as a minimum benchmark.

1) Convert “½ month salary” into days

If you compute via daily rate, “½ month salary” is commonly expressed as:

15 days
+ 2.5 days (because 1/12 of 13th month ≈ 1/12 of monthly salary = 2.5 days when daily rate uses 30-day divisor)
+ 5 days (SIL component)

So:

½ month salary ≈ 22.5 days × Daily Rate

2) Years of service rounding

At least 6 months of a year counts as 1 year
Less than 6 months is disregarded (for statutory minimum retirement computation)

C. Retirement computation examples

Example 1: Simple retirement pay

Monthly wage: ₱6,000
Daily rate: ₱6,000 ÷ 30 = ₱200
Years of service: 10 years

Compute ½ month salary:

22.5 days × ₱200 = ₱4,500

Retirement pay:

₱4,500 × 10 = ₱45,000

Example 2: Service rounding

Service: 9 years and 7 months
Counted years = 10 years (because 7 months ≥ 6 months)

Retirement pay = (22.5 × Daily Rate) × 10

D. Common issues in kasambahay retirement computations

1) Live-in arrangements

Live-in status does not reduce statutory retirement pay. Board and lodging are typically not deducted from computed retirement pay unless the pay structure explicitly and validly treats something as wage (and even then, minimum standards must be met).

2) “No leave taken” vs. SIL component

The SIL component is part of the retirement pay minimum formula. Whether leave was actually used may affect separate final pay items (e.g., unused leave conversion), but the retirement “½ month” minimum already includes the SIL component as a standard part of the formula.

3) Partial years and breaks in service

If employment is continuous, count continuously. If there is a true termination and later re-hiring, treat them as separate engagements unless facts show continuity (this is heavily fact-specific).

3) Separation Benefits vs. Termination Pay: What a Kasambahay Actually Gets

In everyday language, people use “separation pay” to mean “money you receive when employment ends.” Legally, this must be separated into:

Final pay (always due): earned wages and accrued benefits; and
Separation/termination-related pay (due only in specific situations); and
Retirement pay (due only if retirement conditions are met).

A. Final pay items (commonly due upon any valid separation)

Even if the kasambahay resigns or is terminated for a valid reason, the employer generally must settle:

Unpaid wages up to last day of work
Pro-rated 13th month pay
Cash conversion of unused leave (if convertible/unused under the arrangement)
Refunds/return of deposits or undeducted amounts, if any, subject to lawful deductions
Proof of employment / records often requested in practice (and important for future employment)

Pro-rated 13th month computation

Standard computation:

13th Month Pay Due = (Total Basic Salary Earned During the Year) ÷ 12

If employment ended mid-year, compute from January 1 (or start date if later) up to separation date.

Example Monthly wage ₱6,000; worked January–June (6 months), fully paid:

Total basic salary earned = ₱6,000 × 6 = ₱36,000
13th month due = ₱36,000 ÷ 12 = ₱3,000

B. “Separation pay” in the Labor Code sense is not the same thing here

Classic Labor Code separation pay (e.g., redundancy, retrenchment, closure, authorized causes) is typically discussed in an enterprise/employer setting. Household employment is governed by a special law with its own termination rules and remedies.

So, for kasambahay, the more relevant end-of-service monetary remedy is usually:

Indemnity/compensation for improper termination or failure to follow required notice, and/or
Monetary awards in illegal dismissal disputes, depending on the facts

4) Termination Under the Kasambahay Framework and the Money Consequences

A. Termination with cause (just/valid grounds)

When the employer terminates for valid grounds recognized in the kasambahay framework (e.g., serious misconduct, willful disobedience, gross neglect, fraud, commission of a crime, and similar serious reasons), the worker is typically still entitled to final pay (earned wages and accrued benefits), but not additional indemnities purely because termination occurred.

B. Termination without cause / improper termination

If the employer ends the employment without a valid ground or without observing the required process/notice applicable to the situation, the employer may owe:

Final pay, plus
An indemnity commonly expressed as a set number of days of pay (often treated in practice as a “15 days pay” measure in kasambahay terminations)

Because household work is relationship-based and reinstatement is often impractical, disputes frequently focus on cash outcomes rather than return-to-work.

Indemnity computation (day-based)

If the indemnity is expressed as “15 days pay”:

Indemnity = 15 × Daily Rate

Example Monthly wage ₱9,000 Daily rate = ₱9,000 ÷ 30 = ₱300 Indemnity = 15 × ₱300 = ₱4,500

C. Resignation by kasambahay

When a kasambahay resigns, final pay is still due (unpaid wages + accrued benefits like pro-rated 13th month, etc.). If resignation is abrupt and violates agreed notice requirements without a valid reason, disputes may involve claims for damages/indemnity—though, in practice, this is highly fact-driven and typically resolved informally.

5) Step-by-Step “Final Pay + Retirement/Indemnity” Computation Template

Use this checklist whenever employment ends.

Step 1: Compute unpaid wages

If last pay period is incomplete:
- Unpaid Wage = Daily Rate × Days Worked Since Last Pay

Step 2: Compute pro-rated 13th month pay

13th Month Due = (Total basic salary earned in the calendar year up to separation) ÷ 12
- If you only have monthly wage and full months worked:
  - Total = Monthly Wage × Number of months fully worked (plus partial month wages, if any)

Step 3: Compute unused leave conversion (if applicable)

Unused Leave Pay = Daily Rate × Unused Leave Days
- Only if the leave is convertible under the agreement/practice or required conversion applies.

Step 4: Add termination indemnity (only if applicable)

Indemnity = 15 × Daily Rate (if that measure applies to the case)

Step 5: Add retirement pay (only if eligible)

If age + service qualify:

Retirement Pay = (22.5 × Daily Rate) × Years of Service
- Count partial year ≥ 6 months as 1 year

Step 6: Apply lawful deductions (carefully)

Deductions must be lawful and properly documented. Typical lawful deductions include employee-share contributions (if not yet remitted/handled) and other authorized deductions, but deductions cannot be used to reduce pay below minimum standards or to impose arbitrary penalties.

6) Worked Comprehensive Example

Facts

Monthly wage: ₱8,000
Daily rate: ₱8,000 ÷ 30 = ₱266.67
Employment ended on June 20
Last salary paid up to May 31
Worked June 1–20 = 20 days unpaid
Worked January–June in the same year (ending June 20)
Employer terminates without valid ground and owes 15-day indemnity
Not a retirement case (either under 60 or less than 5 years, etc.)

A) Unpaid wages

20 × ₱266.67 = ₱5,333.40

B) Pro-rated 13th month Assume basic salary earned from Jan 1–Jun 20:

Jan–May full months: 5 × ₱8,000 = ₱40,000
June 1–20 wages (already computed as earned): ₱5,333.40
Total earned this year = ₱45,333.40
13th month due = ₱45,333.40 ÷ 12 = ₱3,777.78

C) Indemnity (15 days)

15 × ₱266.67 = ₱4,000.05

Total due (before lawful deductions)

₱5,333.40 + ₱3,777.78 + ₱4,000.05 = ₱13,111.23

(Then add any unused leave conversion if applicable.)

7) Practical Documentation Tips That Prevent Pay Disputes

Use a written kasambahay contract stating:
- monthly wage, pay schedule, rest day, leave terms, and any special benefits
Keep wage records and receipts (even simple signed acknowledgments).
Track 13th month computations annually or upon separation.
Write down start date clearly; retirement and per-year computations depend on it.
Clarify leave convertibility (whether unused leave is paid out) to avoid mismatch between expectations and practice.

8) Key Takeaways

Retirement pay, when applicable (age + 5 years service, no better plan), is computed at minimum as: (22.5 × Daily Rate) × Years of Service (with ≥6 months counted as 1 year).
What many call “separation pay” for kasambahay is usually final pay plus indemnity for improper termination/notice violations, not the classic enterprise-style Labor Code authorized-cause separation pay.
Final pay almost always includes unpaid wages and pro-rated 13th month; leave conversion depends on the governing rule/contract/practice.