Lawful Termination of Managers for Poor Performance in the Philippines: A Due-Process Checklist

This article explains how to lawfully end the employment of managerial employees in the Philippines for poor performance, with a step-by-step due-process checklist, templates, and risk notes. It is written for HR leaders, in-house counsel, and founders. (General information only—not legal advice.)

1) First principles: security of tenure, grounds, and standards of proof

Security of tenure. Philippine employment is not at-will. An employer may dismiss only for a lawful cause and with due process.

What legal “cause” fits poor performance?

Just causes (Labor Code, Art. 297 [old Art. 282]):
- “Gross and habitual neglect of duties,” and
- “Other causes analogous to the foregoing.”
- Inefficiency/incompetence/poor performance typically falls under the analogous causes bucket, or—if the facts show repeated failure to perform essential duties despite guidance—under gross and habitual neglect.
Authorized causes (restructuring, redundancy, retrenchment) under Art. 298 [old Art. 283] are not performance-based and have different procedures. Don’t relabel a performance case as redundancy to “avoid” the hearing; that invites liability.

Managers vs. rank-and-file. Managers are also covered by security of tenure. The separate ground of loss of trust and confidence applies more readily to managers, but that is different from poor performance. Don’t mix them unless your facts squarely fit trust-and-confidence doctrine (e.g., willful breach).

Burden and quantum of proof.

Employer bears the burden to prove lawful cause and compliance with procedure.
Quantum: substantial evidence—relevant evidence that a reasonable mind might accept as adequate. In practice, well-kept KPI records + PIP documents + contemporaneous memos usually decide cases.

Procedural due process (“twin-notice” rule).

1st notice: written Notice to Explain (NTE) detailing facts, policies/standards, and possible penalties; give a reasonable period (jurisprudence: at least 5 calendar days) to submit a written explanation; inform of the right to counsel and a hearing.
Opportunity to be heard: hearing or conference (especially where facts are disputed).
2nd notice: written Notice of Termination stating the facts, the specific legal ground, and why defenses were rejected.

Damages for defective procedure.

If cause exists but procedure is defective, courts award nominal damages (landmark rulings set ₱30,000 for just-cause dismissals; ₱50,000 for authorized-cause cases). Don’t “save time” by skipping notices—you’ll likely pay and may still lose.

2) Substantive law: when “poor performance” is a valid just cause

You need more than low scores. Courts look for:

Reasonable, objective, and communicated standards (targets/KPIs, job descriptions).
Persistent or substantial failure to meet material targets (one-off misses seldom suffice).
Causation and fault: failures traceable to the manager (not to market shocks, missing resources, or conflicting directives).
Fair process before discipline: coaching, performance feedback, and a documented Performance Improvement Plan (PIP).
Consistency: standards applied uniformly; no singling out.

Typical evidentiary set that wins cases:

Signed job description and KPI plan (with baselines).
Quarterly/Monthly performance dashboards and calibration minutes.
Emails/memos noting performance gaps and deliverables.
A PIP (SMART targets, support/resources, dates) and PIP review notes.
NTE, hearing minutes, and termination decision aligned with the documents.

Red flags that often defeat dismissals:

Vague standards (“be proactive,” “show leadership”) with no metrics.
Moving the goalposts mid-cycle without notice.
No PIP or coaching record.
Penalizing a manager for failures caused by headcount freezes, budget denial, or inter-departmental blockers outside their control.
Performance targets that are clearly unrealistic given conditions.

3) Procedural due process: the checklist

A. Pre-termination groundwork (substance)

Define and communicate standards.
- Written KPIs, target ranges, and evaluation method given at engagement or at cycle start.
Measure and record.
- Keep dated reports/scorecards; capture missed milestones and business impact.
Coach and support.
- Hold feedback sessions. Confirm in email. Offer tools/training/clarity.
Implement a PIP (best practice).
- Duration: 30–90 days (role-dependent).
- SMART goals, interim checkpoints, owner of support actions, and consequences of failure, all in writing and acknowledged.

While the law doesn’t literally require a PIP, it is the single strongest proof that failure is gross/habitual rather than trivial or subjective.

B. Formal due process (procedure)

Step 1 — First Written Notice (NTE). Include:

Statement of acts/omissions with dates, figures, and documents (attach exhibits).
Cited standards/policies (job description clause, KPI memo, PIP provisions).
Legal ground (Art. 297: gross and habitual neglect / analogous cause—inefficiency).
Directive to explain in writing within at least 5 calendar days.
Info on the right to a hearing and to be assisted by counsel or a representative.
Proposed hearing date or a window to request one.

Step 2 — Hearing/Conference.

Present the records; allow questions and defenses.
Permit counsel/representative.
Keep minutes (who attended, issues discussed, exhibits marked, employee’s position).

Step 3 — Evaluation & Decision Memo.

Weigh the explanation vs. records.
If mitigation exists (e.g., structural blockers), consider non-termination sanctions or PIP extension.
Draft a reasoned decision referencing the specific evidence.

Step 4 — Second Written Notice (Decision).

Finding of facts (not conclusions), legal basis, and penalty.
Effective date; instructions on final pay, clearance/turnover, and certificate of employment (COE).

Service & recordkeeping.

Serve notices personally with acknowledgment, by courier, or to the employee’s last known address. Keep proof of service.
Maintain a discipline file (index + copies) for 5 years+.

4) Special situations

Probationary managers

You may end employment for failure to meet reasonable standards made known at hiring.
Still observe due process (at minimum, a notice stating the grounds; best practice: twin-notice + conference).
If standards were not clearly disclosed, termination usually fails.

Performance vs. loss of trust and confidence (LOTC)

LOTC is a separate just cause, often invoked for willful acts undermining confidence (e.g., falsified reports, self-dealing).
Do not rebrand ordinary underperformance as LOTC; courts look for specific, work-related acts showing intentional breach, not mere ineptitude.

Health, pregnancy, discrimination, and accommodation

If underperformance links to temporary illness, pregnancy, or disability, consider reasonable accommodation and leave rights before discipline. A rush to terminate risks illegal dismissal and discrimination claims.

Constructive dismissal risks

Demotions, drastic pay cuts, or humiliating “benching” without process can be deemed constructive dismissal. Use the PIP path or lawful authorized-cause routes.

5) Post-termination obligations (administrative wrap-up)

Final pay & COE. Issue the Certificate of Employment upon request and release final pay (wages due, pro-rated allowances/benefits, monetizable leave per policy) within 30 days of separation unless company policy or CBA sets an earlier date.
Separation pay? Not required for just-cause dismissals (poor performance). Ex-gratia “financial assistance” is discretionary; courts disfavor awarding it where the cause involves serious misconduct, but inefficiency is sometimes treated more leniently. Do not promise it unless you intend to grant it.
13th-month/bonuses. Statutory 13th-month rules mainly protect rank-and-file; many firms contractually extend to managers—follow your policy/contract. Prorate if applicable.
Property/IT offboarding. Recover assets, disable access, remind of confidentiality/IP duties; document turnover.
Government reporting. Usual payroll and records compliance; prepare for potential DOLE/NCMB/Single-Entry (SENA) conferences or NLRC cases.

6) Litigation exposure: what happens if you lose

If the dismissal is ruled illegal:

Reinstatement (or separation pay in lieu if reinstatement is no longer viable),
Full backwages from dismissal to actual reinstatement/decision finality,
Possible moral/exemplary damages and attorney’s fees.

If cause exists but procedure was defective:

Dismissal is upheld, but employer pays nominal damages (benchmark amounts set by Supreme Court jurisprudence). It’s still cheaper—and safer—to do it right.

7) Manager-focused Due-Process Checklist (one-page)

Before the NTE

Written job description + KPIs shared and acknowledged.
Performance data (missed targets with dates/figures).
Coaching emails/1:1 notes.
PIP issued (30–90 days), SMART goals, resources, check-ins documented.
Consider external factors (budget, headcount, dependencies).

First Notice (NTE)

Specific acts/omissions with dates and attached exhibits.
Cited standards/policies violated.
Legal ground (Art. 297—inefficiency/neglect).
≥5 calendar days to explain; inform right to counsel.
Hearing schedule or window to request.
Proper service with proof.

Hearing/Conference

Attendance sheet; allow counsel/representative.
Mark exhibits; allow questions; record defenses.
Minutes signed by the panel.

Decision

Written evaluation matching evidence to each allegation.
Consideration of defenses/mitigating facts.
Penalty fits gravity; alternatives considered.

Second Notice

Clear findings, legal ground, and effective date.
Instructions: clearance, final pay timing, COE.
Proof of service.

After

Final pay and COE released on time.
Offboarding checklist (assets/access/confidentiality).
Archive the discipline file.

8) Templates (edit to fit your facts)

A) Notice to Explain (NTE)

Subject: Notice to Explain – Alleged Poor Performance To: [Name], [Title] Date: [________]

This is to require you to explain in writing why no disciplinary action should be taken against you for poor performance, which may constitute [gross and habitual neglect of duties / cause analogous to inefficiency] under Article 297 of the Labor Code.

Allegations:

FY Q2 Revenue Target Miss – Target: ₱[]; Actual: ₱[]; Variance: []%, despite committed actions in PIP dated []. (See Exh. A–C.)

Project Alpha Slippage – Milestone M3 due [date]; delivered [date]; downstream impact: [brief]. (See Exh. D–E.)

PIP Non-Compliance – Missed check-ins on [dates]; action items [list] not completed. (See Exh. F.)

Policies/standards involved: Job Description (Sec. ), KPI Memo dated [], PIP dated [__].

You have at least five (5) calendar days from receipt to submit your written explanation. You may be assisted by counsel or a representative. A hearing/conference is scheduled on [date/time] at [venue/video link]; you may request a different reasonable schedule within the reply period.

Possible sanctions include termination of employment.

[Employer Representative] [Title]

B) Hearing Minutes (extract)

Date/Time: [] | Venue: [] | Attendees: [names/titles] Issues: Allegations 1–3 per NTE dated []. Proceedings: Employer presented Exh. A–F; Employee admitted []/denied [__]; raised defenses: [summary]. Panel asked clarifying questions. Closing: Parties confirmed no further evidence to present. Minutes read and signed.

C) Notice of Termination (Decision)

Subject: Notice of Termination – Poor Performance To: [Name], [Title] Date: [__]

After evaluating your written explanation dated [], the hearing on [], and the records (Exh. A–F), we find that you persistently failed to meet essential KPIs and PIP commitments without sufficient justification. These acts constitute [gross and habitual neglect / analogous cause of inefficiency] under Article 297.

Accordingly, your employment is terminated effective [date]. Please complete clearance and turnover of all company property by [date]. Your final pay will be released on or before [date], and your Certificate of Employment will be made available upon request.

[Employer Representative] [Title]

D) Performance Improvement Plan (PIP) (outline)

Period: [Start] to [End] (e.g., 60 days)
SMART Goals:
1. Increase [metric] from [x] to [y] by [date].
2. Deliver [project] M3 by [date] with [quality metric].
Support/Resources: [tools, budget approvals, added headcount, executive sponsor].
Check-ins: Weekly on [day/time].
Consequences: Failure to meet goals may result in termination for poor performance.
Acknowledgment: Employee/Manager signatures.

9) Practical tips that prevent illegal dismissal findings

Tie everything to numbers/timeframes. Courts dislike vague “leadership” critiques without metrics.
Put blockers in writing early. If the manager complains of resource gaps, respond in writing (approve/deny) so causation is clear later.
Don’t chase the person—fix the role. If the KPI is structurally impossible, redesign targets rather than “document to terminate.”
Mind privacy. Performance files contain personal data; restrict access and observe data-minimization principles.
Consistency check. If peers also missed the same KPI under the same conditions but only one person is disciplined, expect trouble.
Offer a dignified exit. When facts are borderline, a mutual separation agreement (with a clean reference and modest consideration) is often cheaper than litigation.

10) Quick FAQ

Q: Do I have to run a PIP before terminating a manager for poor performance? A: Not strictly by statute, but it’s the best evidence that deficiencies are real, material, and persistent—and that you acted in good faith.

Q: Is a hearing mandatory? A: The employee must be given a meaningful chance to be heard. If facts are contested, hold a hearing. When in doubt, do it—and keep minutes.

Q: Can we pay separation pay to “avoid a case”? A: You can offer ex-gratia consideration in a quitclaim/waiver (properly drafted). For just-cause cases, the law does not require separation pay.

Q: What timeline is safe? A: As a guide: Day 0 NTE served → Day 0–5 reply window → Day 6–10 hearing and evaluation → Day 10–15 decision and second notice. Keep it reasonable and documented.

11) One-page manager performance termination toolkit

Forms: NTE, Hearing Minutes, Decision Notice, PIP.
Evidence pack: Job Description, KPI plans, PIP, dashboards, emails, attendance/leave, resource requests and responses.
Process map: Draft → Legal/HR review → Service with proof → Hearing → Decision memo → Second notice → Offboarding.
Post-case file: Proof of final pay, COE log, clearance, asset checklist, IT offboarding, quitclaim (if any).

If you want, tell me your industry, KPIs, and org size, and I’ll tailor the PIP and NTE templates to your context—sales, operations, product, finance, or tech leadership.