In the Philippine labor landscape, the transition from active employment to retirement is governed primarily by Republic Act No. 7641, also known as the Retirement Pay Law. For an employee who chooses to resign at the age of 65, several legal nuances determine their entitlement to retirement benefits.

1. The Compulsory Retirement Age

Under Article 302 (formerly 287) of the Labor Code, as amended by RA 7641, the age of 65 years is designated as the compulsory retirement age.

When an employee reaches this age, the employer has the right to terminate the employment relationship based on retirement. If an employee "resigns" at 65, it is legally viewed as an act of retirement. At this stage, the employee is entitled to retirement pay provided they have met the minimum service requirement.

2. Eligibility Requirements

To qualify for statutory retirement pay, the following conditions must be met:

Age: The employee must be at least 60 years old (optional retirement) but not beyond 65 years old (compulsory retirement).
Length of Service: The employee must have served the establishment for at least five (5) years. This includes all periods of service with the same employer, regardless of whether the service was continuous or broken.

3. Computation of Retirement Pay

In the absence of a more favorable retirement plan or Collective Bargaining Agreement (CBA), the minimum retirement pay is calculated based on the following formula:

Retirement Pay = (1/2 Month Salary) × Years of Service

The "one-half month salary" is not merely 50% of the monthly pay. By law, it must include the following components:

15 days salary based on the latest salary rate.
5 days of Service Incentive Leave (SIL).
1/12 of the 13th-month pay.
Other components that may be agreed upon (e.g., COLA, if stipulated).

For calculation purposes, this effectively totals to approximately 22.5 days of salary for every year of service. A fraction of at least six (6) months is considered as one whole year.

4. Resignation vs. Retirement

It is a common misconception that "resigning" at 65 forfeits retirement benefits.

Voluntary Resignation: Usually implies leaving a job before reaching retirement age, often resulting in only the payout of earned wages and pro-rated 13th-month pay.
Retirement via Resignation: If an employee is 60–65 years old and has served for 5 years, their "resignation" is legally categorized as Retirement. The employer is mandated by law to pay the retirement benefits described above.

5. Tax Exemptions

Under Section 32(B)(6)(a) of the National Internal Revenue Code (NIRC), retirement benefits received by officials and employees of private firms are exempt from income tax, provided:

The retirement plan is registered with the Bureau of Internal Revenue (BIR).
The retiring employee has been in the service of the same employer for at least ten (10) years.
The employee is at least fifty (50) years of age at the time of retirement.
The exemption is availed of only once.

Note: Even if the specific BIR registration is absent, the RA 7641 statutory minimum (22.5 days per year) is generally treated as non-taxable upon the compulsory retirement age of 65.

6. Critical Exemptions

Not all employers are required to pay retirement benefits under RA 7641. The law does not apply to:

Retail, service, and agricultural establishments regularly employing not more than ten (10) employees.
Government employees (who are covered by the GSIS Law and Civil Service rules).
Domestic helpers or persons in the personal service of another (though recent laws like the Batas Kasambahay have provided separate frameworks).

7. Overriding Agreements

If an existing Collective Bargaining Agreement (CBA) or a specific Company Retirement Plan offers benefits higher than the 22.5 days per year formula, the more generous plan must prevail. Conversely, if a company plan offers less than the law, the employer must pay the difference to meet the legal minimum defined by RA 7641.