Executive summary

Statutory retirement pay under Philippine law generally requires two things: (1) you are at least 60 (but not beyond 65), and (2) you have at least five (5) years of service with the same employer.
If you have less than five years, you are not entitled to the minimum retirement pay mandated by law—unless a company retirement plan, CBA, or contract gives you a better (more liberal) benefit.
Retirement pay is different from separation pay (redundancy, retrenchment, etc.) and from SSS retirement benefits—which follow separate rules.

Legal framework (private sector)

Labor Code (Article 302, formerly 287) as amended by the Retirement Pay Law (R.A. 7641).
- Applies to private-sector employees not already covered by an equal or better employer plan or CBA.
- Eligibility for optional retirement pay:
  - Age: at least 60 (optional) but not beyond 65 (compulsory age in the Labor Code, unless a valid plan sets a different compulsory age).
  - Service: at least five (5) years of service with the establishment (need not be continuous; broken service may be tacked).
- Exclusions: Government employees; domestic workers; and employees of retail, service, and agricultural establishments that regularly employ not more than ten (10) employees (unless a company/CBA plan grants retirement).
Employer retirement plans / CBAs / employment contracts.
- Employers may adopt plans that improve on the law (e.g., lower service requirements, higher benefits, earlier retirement ages)—those supersede the statutory minimum insofar as they are more beneficial.
- Plans can also impose vesting schedules (e.g., pro-rata or cliff vesting) that determine your benefit if you leave before five years.
Special sectors
- Private school faculty and staff and some special industries may have distinct plan rules if a valid plan or CBA exists; absent that, the Labor Code rule (60–65 and 5 years) controls.

The five-year rule in practice

What counts toward “five years”?

Service “with the establishment”: employment credited under the same employer (including absorbed service if the plan or law so provides; mergers/spin-offs often addressed by plan rules).
Broken service: generally allowed to be aggregated unless a plan says otherwise.
At least six months in a given year is typically counted as a full year for computation once eligibility is met.
Probationary, casual, part-time, project/seasonal service counts toward tenure if performed as an employee of the establishment. (Independent contractors are not employees.)

If you are 60 but have < 5 years of service

No statutory retirement pay under Article 302.
Check these possible routes:
1. Company retirement plan/CBA: You may be vested pro-rata or subject to a reduced service requirement (e.g., 3 years).
2. Contractual promise: Your employment contract or handbook might grant retirement or ex-gratia benefits even without five years.
3. Separation pay (not retirement): If the employment ends for authorized causes (redundancy, retrenchment, closure not due to serious losses, disease), you may qualify for separation pay, which is a different benefit with different formulas and no age requirement.
4. SSS retirement benefits: Separate from employer retirement pay. At age 60, you may claim SSS retirement if you have the minimum number of paid monthly contributions (typically 120 months for a monthly pension; fewer contributions may entitle you to a lump-sum). This does not require five years with the same employer.

Computation of statutory retirement pay (when eligible)

If (and only if) you satisfy both age (≥60) and service (≥5 years):

Minimum benefit: One-half (1/2) month salary for every year of service, fraction of at least six months = one whole year.
“1/2 month salary” is legally defined as:
- 15 days of basic salary
- + 1/12 of the 13th-month pay (≈ 2.5 days)
- + 5 days of service incentive leave pay
- = 22.5 days per year of service (minimum)
Daily-paid or piece-rate workers: compute the daily equivalent of their average basic pay consistent with DOLE rules.
If a plan/CBA gives more (e.g., 1 month per year), the more favorable formula applies.

Key point: With less than five years, the above computation never triggers under the statute—unless a plan/CBA/contract says otherwise.

Retirement vs. separation vs. resignation

Retirement: Ends employment because the employee reaches the retirement age (60–65 or plan-defined) and satisfies the plan or law’s service requirement.
Separation: Ends employment due to authorized causes (redundancy, retrenchment, closure not due to serious losses, disease). No age or five-year requirement; different statutory formulas (e.g., ½ month or 1 month per year of service, depending on cause).
Resignation: Voluntary exit; no statutory pay (except final pay/benefits already earned), unless a plan grants a vested or pro-rata retirement benefit.

Edge cases and FAQs

1) I’m 60 with 3 years of service. Do I get retirement pay? Statutory: No. Possible under a company plan/CBA—check if you’re vested or if the plan lowers the five-year threshold.

2) I’m 62 with 4 years of service but our handbook mentions “management-discretion retirement.” That could be an ex-gratia grant. It’s not mandated, but if granted or contractually promised, it becomes enforceable according to its terms.

3) I’m a project/seasonal employee age 60 with accumulated service of 5+ years across multiple seasons with the same firm. If your aggregated credited service with the same employer reaches 5 years, you can qualify for statutory retirement upon hitting age 60, unless excluded or better covered by a plan.

4) I work for a micro retail shop with 8 employees and I’m 60 with 6 years of service. Article 302 does not apply to retail/service/agricultural establishments with ≤10 employees. You’ll only get retirement pay if a plan/CBA/contract says so (or via separation pay if you’re terminated for authorized causes).

5) I’m 60 with 20 years total experience, but only 2 years with my current employer. The five years must be with your current employer (unless a plan recognizes prior service with affiliates). Statutory retirement doesn’t apply yet.

6) Are managerial employees covered? Yes—rank-and-file and managerial employees are covered by Article 302 unless excluded (government, domestic workers, or small retail/service/agricultural establishments with ≤10 employees) or already covered by a better plan.

7) Tax treatment (high-level, practical):

Statutory retirement pay under the Labor Code and qualified benefits under a BIR-registered private benefit plan may be tax-exempt if legal conditions are satisfied.
Non-qualified/ex-gratia benefits may be taxable. Always confirm with your HR/payroll or a tax professional based on the exact plan and current BIR rules.

How to protect your rights (and what to ask HR)

Ask for the retirement policy documents: the company plan, CBA provisions, or handbook pages.
Confirm vesting: Is there pro-rata or early-retirement vesting below five years?
Check exclusions: Are you in a small retail/service/agri establishment (≤10 employees) or otherwise excluded?
Compute scenarios:
- If you hit five years soon, see how much the statutory/computed benefit would be if you retire at 60–65.
- If you won’t hit five years, ask HR whether a discretionary or plan-based benefit exists.
Consider timing: Some plans increase vesting at certain anniversaries (e.g., 3rd or 5th year).
Coordinate with SSS: Check your posted contributions and whether you qualify for pension or lump-sum at age 60—this is independent of employer retirement.
Document communications: Keep written HR confirmations and plan excerpts.

Sample scenarios

A. 60 years old, 2 years’ service, no company plan
- No statutory retirement pay.
- Check SSS eligibility; consider whether any separation scenario applies if employment ends.
B. 60 years old, 4 years’ service, company plan with 3-year vesting
- Possible retirement benefit under the plan (even though statutory five-year test isn’t met). Review the plan formula.
C. 59 turning 60 next year, 4 years and 6 months’ service
- At 60, you’ll have ≥5 years (because a fraction of at least six months counts as a full year for computation once eligible). You would then meet the statutory requirements.
D. 62 years old, 7 years’ service, employer has ≤10 workers in a retail shop
- Statutory retirement law doesn’t apply. Any benefit must come from a plan/CBA/contract or be discretionary.

Key takeaways

Less than five years of service at age 60 = no statutory retirement pay.
Always check for a company plan/CBA that may grant earlier or pro-rata benefits.
Retirement pay is distinct from separation pay and SSS retirement—you may still receive SSS benefits even if you don’t qualify for employer retirement pay.
Small retail/service/agricultural employers with ≤10 employees are outside the Labor Code’s mandatory retirement coverage.
Keep an eye on plan vesting and timing as you approach five years or age 60–65.

Need a personalized read?

If you share (a) your age, (b) exact service dates, (c) employer size/industry, and (d) any plan/CBA/handbook text, I can run the computations and map your best path—including SSS options and possible separation scenarios.