(Private sector focus, with government-sector notes)

1) What “mandatory retirement” means in Philippine labor law

In the private sector, the baseline rule is:

Optional retirement: at age 60 (employee may retire, if qualified)
Mandatory retirement: at age 65 (employer may retire the employee, if qualified)

This baseline applies unless a company retirement plan, collective bargaining agreement (CBA), or employment contract provides a different retirement age or more favorable terms, subject to legal limits and reasonableness.

For private employment, the minimum statutory retirement framework is found in the Labor Code provision on retirement (commonly cited as Article 287; renumbered in later compilations) as amended by Republic Act No. 7641 (Retirement Pay Law).

In the government, “compulsory retirement” is generally 65, with optional retirement commonly at 60 if service requirements are met, but the benefits structure is primarily governed by GSIS law and agency rules, not the Labor Code.

2) The big picture after mandatory retirement: what continues, what stops

Mandatory retirement in the private sector is, as a general rule, a termination of the employer–employee relationship by operation of retirement policy/law. That triggers two big consequences:

A. Salary after retirement

Regular salary does not continue after the effective date of retirement because employment ends.
Any pay released afterward is typically final pay (back wages due, prorated benefits, leave conversions, etc.) or retirement pay—not “continuing salary.”

B. Benefits after retirement

Employment-based benefits usually stop at separation (e.g., active HMO coverage, allowances tied to employment, accrual of leave credits), unless the company plan/policy expressly provides post-retirement coverage.
Social insurance/pension benefits (SSS/GSIS) may begin or continue depending on eligibility, even though employment ends.

The only way for “salary” and employment-type benefits to continue after mandatory retirement is if the retiree is re-employed under a new arrangement (more on this in Section 9).

3) Immediate entitlements at retirement: “final pay” vs. “retirement pay”

When a worker is mandatorily retired, two buckets are commonly involved:

(1) Final Pay (Final Wages/Final Settlement)

“Final pay” is the catch-all for amounts earned but unpaid up to the last day of work, commonly including:

Unpaid salary/wages up to last day worked
Pro-rated 13th month pay (up to the retirement date)
Cash conversion of unused leave credits, if convertible under company policy/CBA or law
Other company benefits due and already earned (e.g., incentives with already-met conditions, commissions earned, reimbursements due)

Final pay is not the same as retirement pay.

(2) Retirement Pay

This is the benefit specifically paid because of retirement, either:

Under the statutory minimum (Labor Code/RA 7641), or
Under a company retirement plan/CBA, whichever is more favorable or applicable

4) Statutory minimum retirement pay (Private sector): who is covered

A. Basic eligibility under the statutory minimum

The statutory minimum retirement pay generally applies when:

The employee is in the private sector, and
The employee meets the retirement age requirement (optional at 60, mandatory at 65, unless a plan says otherwise), and
The employee has rendered at least 5 years of service with the employer, and
The employer does not have a retirement plan/CBA providing at least the same or better benefits (if there is a plan, the plan usually governs)

B. Common exclusions under the statutory minimum

The statutory minimum retirement pay rule generally does not apply to:

Government employees (covered by GSIS and civil service rules)
Certain small retail/service/agricultural establishments with not more than 10 employees (a key statutory exclusion often overlooked)
Employees already covered by a qualifying retirement plan/CBA that is at least as favorable

(Separate laws may apply to special categories like household workers, uniformed personnel, and certain regulated professions.)

5) How statutory retirement pay is computed (Private sector)

A. Minimum formula

The minimum statutory retirement pay is:

At least one-half (1/2) month salary for every year of service (A fraction of at least six months is treated as one whole year.)

B. What “one-half month salary” means in this context

For the statutory minimum, “one-half month salary” is conventionally understood as:

15 days (half of a 30-day month), plus
1/12 of the 13th month pay, plus
Cash equivalent of up to 5 days of Service Incentive Leave (SIL)

This is why many computations use 22.5 days per year of service (15 + 2.5 + 5 = 22.5), multiplied by the employee’s daily rate—subject to nuances on whether SIL applies to the employee and how daily rate is derived under the pay scheme.

C. “Year of service” rule on fractions

If the final portion of service is 6 months or more, it counts as 1 year
If less than 6 months, it may be disregarded for the “fraction” rule under the statutory minimum

D. What salary base is used

The law refers to the employee’s latest salary rate, commonly understood as the basic salary and wage components treated as part of salary for retirement computation under the plan/law (details vary with pay structure, and disputes often arise here—see Section 12).

6) Retirement plan/CBA vs. statutory minimum: which one applies

If a company has a retirement plan or a CBA retirement provision, it usually governs so long as it provides benefits at least equal to the statutory minimum. If the plan is more generous, the employee is entitled to the plan benefit.

Key points:

Employers cannot use a plan to give less than the statutory minimum if the statutory minimum applies.
If the plan provides multiple benefit options (e.g., lump sum vs. pension), the plan terms and employee election rules apply.
Some plans condition benefits on vesting periods, but they cannot undercut the statutory floor where it applies.

7) SSS retirement benefits (Private sector): separate from employer retirement pay

For private-sector employees, SSS retirement is a separate system benefit. An employee may receive:

Employer retirement pay (statutory or plan-based), and
SSS retirement benefit (pension or lump sum), if eligible

Typical SSS retirement framework (high-level)

Retirement eligibility depends on age, separation/cessation of work, and minimum contribution requirements (commonly a threshold of monthly contributions for pension eligibility; otherwise lump sum).
Importantly, SSS retirement pension can be affected by re-employment. Under SSS rules, returning to covered employment may lead to suspension of the retirement pension while employed, with resumption under conditions after separation. (This matters a lot for retirees who plan to work again—see Section 9.)

SSS does not replace employer retirement pay; they operate independently unless a plan integrates benefits (integration must still respect minimum standards).

8) Government employees (GSIS): what typically happens after compulsory retirement

For government personnel covered by GSIS, compulsory retirement at 65 generally ends active service and triggers eligibility for GSIS benefits depending on service length and category.

Common post-retirement benefit streams include:

GSIS retirement pension or retirement benefit option (depending on applicable retirement mode and eligibility)
Terminal leave benefits (monetized unused leave credits, subject to civil service/audit rules)
Other benefits under special laws applicable to certain sectors (e.g., some uniformed services, judiciary, and other special groups have different retirement ages/benefits regimes)

As with SSS, returning to government service may affect the status of a GSIS pension (often involving suspension and reinstatement mechanics, depending on the nature of re-employment and governing rules).

9) Working after mandatory retirement: how salary and benefits can still exist (legally)

The most common question under this topic is:

“Can someone keep working and keep getting paid after mandatory retirement?”

Yes—but usually only through a new engagement

After mandatory retirement, continuing to receive “salary” generally requires one of these:

A. Re-employment as a regular employee (new employment relationship)

The parties may agree to hire the retiree again as an employee.
This can restore entitlement to employee benefits during the new employment, subject to the new terms and applicable law.
But it can also create disputes if the arrangement is unclear.

B. Fixed-term employment contract (project/term-based)

The retiree is hired for a definite period or project.
Terms should be documented clearly to avoid confusion about tenure and benefits.

C. Consultancy/independent contractor arrangement

Payment is usually professional fee, not “salary,” and statutory employee benefits do not automatically apply.
Misclassification risk: if the “consultant” is actually controlled like an employee (control test), the relationship can be treated as employment with corresponding benefit liabilities.

Practical legal warning: avoid “retire on paper, work as usual”

If the employee is “retired” but keeps working under essentially the same conditions without clear documentation, it can fuel claims that:

retirement was not genuine or was used to defeat security of tenure, or
the employment relationship continued, affecting benefit computations and liabilities

“Second retirement pay”: can a rehired retiree receive retirement pay again?

It depends on:

The express agreement upon re-employment, and/or
The retirement plan/CBA rules, if they cover re-employed retirees

A common approach is:

Pay retirement benefits upon first retirement,
Treat re-employment as a new engagement with separate terms, and
Clarify whether any additional retirement benefit will accrue for the subsequent service

Without clear terms, disputes can arise as to whether subsequent service creates a new retirement entitlement.

10) Common benefits people expect after retirement (and whether the law guarantees them)

A. 13th month pay after retirement

No employment = no accrual.
The retiree is generally entitled to pro-rated 13th month pay up to the retirement date (as part of final pay), but not beyond unless re-employed.

B. Leave credits after retirement

Accrual generally stops at retirement because employment ends.
Unused leave may be converted to cash only if:
- company policy/CBA allows it, or
- the employee is entitled to monetization under specific rules applicable to them

C. HMO/health coverage

Not automatically required to continue post-retirement in the private sector.
Continuation depends on company policy, plan design, CBA, or negotiated retiree benefits.

D. Allowances (transport, meal, etc.)

Usually stop after retirement unless:
- they are vested/earned prior to retirement (then included in final pay), or
- the retiree is re-engaged under terms that grant them

E. Bonuses/incentives

If already earned under a clear formula/target before retirement date, it may be claimable as part of final pay.
Discretionary bonuses are typically governed by company policy and established practice.

11) Tax treatment: retirement pay vs. other payments

Tax results can differ sharply depending on what payment is being made.

A. Retirement benefits (private sector) — commonly tax-exempt, but with conditions

Under the National Internal Revenue Code rules on tax-exempt retirement benefits, retirement pay may be excluded from gross income if conditions are met. Common statutory conditions include concepts such as:

minimum age requirement (commonly at least 50)
minimum service requirement with the employer (commonly at least 10 years)
the “availment only once” rule for certain retirement exemptions
and/or the requirement that benefits be paid under qualifying plan/statute

Because retirement pay under the labor law can be due even at 5 years’ service, tax exemption is not automatic in every scenario. The classification also matters: a statutory minimum retirement benefit, a company plan payout, or a separation benefit can be treated differently.

B. Final pay components

Unpaid salary/wages: generally taxable like regular compensation
Pro-rated 13th month pay and other benefits: subject to the statutory tax-exempt ceiling for 13th month/benefits (ceiling amounts can change by law)
Leave conversions: taxability depends on type of leave and applicable rules

C. SSS/GSIS and Pag-IBIG benefits

Benefits from government social insurance systems and Pag-IBIG maturity/retirement proceeds are generally treated under special tax rules and are commonly non-taxable in many standard cases, but precise treatment depends on the benefit type and applicable law/rules.

12) Disputes and tricky issues that commonly come up

Issue 1: “Company says I’m retired at 65 but won’t pay retirement pay”

In private employment, if the statutory minimum applies and eligibility requirements are met, failure to pay can lead to a money claim for retirement benefits and related amounts.

Issue 2: “Employer retired me earlier than 65”

Early/compulsory retirement before the statutory ages must generally be justified by:

a valid retirement plan/CBA/employment contract setting an earlier age, and
proof that the employee agreed to it or that it is otherwise enforceable and reasonable Otherwise, it can be attacked as an illegal dismissal disguised as retirement.

Issue 3: What counts as “salary” for retirement computation

Disputes often focus on whether to include:

regular allowances,
commissions,
COLA,
incentives treated as part of wage,
or only basic pay The answer depends on the pay’s legal characterization, regularity, and plan language.

Issue 4: “Can I get both separation pay and retirement pay?”

As a general principle, an employee should not automatically receive multiple benefits for the same separation unless:

the law specifically grants both for the situation, or
the plan/CBA expressly allows both, or
jurisprudence recognizes entitlement based on distinct grounds and clear benefit design In practice, many situations require careful classification of the cause of separation (retirement vs redundancy/closure, etc.) and the governing plan terms.

Issue 5: Prescription (deadlines to file claims)

Money claims under labor law are generally subject to prescriptive periods (commonly 3 years for many money claims under the Labor Code framework), running from accrual of the cause of action. Retirement benefit claims can be time-sensitive.

13) Practical checklist: what to document at mandatory retirement

For employees

Retirement effective date and last day worked
Final pay breakdown (wages, 13th month prorated, leave conversions, incentives due)
Retirement pay computation basis (years of service, salary base, inclusions)
SSS retirement filing plan and implications if planning to work again
Company plan/CBA provisions (if any)

For employers

Clear retirement notice and effective date
Accurate years-of-service computation (including fraction rule)
Transparent computation worksheet for retirement pay
Final pay schedule and clearance process
If rehiring: written post-retirement engagement contract clarifying status, pay, benefits, and whether any future retirement benefit will accrue

14) Bottom line

After mandatory retirement, the default legal effect is end of employment, so salary and active employment benefits stop, and the retiree shifts to receiving final pay, retirement pay, and potentially SSS/GSIS and other system benefits. Any continued “salary” or employment-style benefits after that point generally requires a new, properly documented engagement—and re-employment can affect eligibility or continuity of pension benefits under SSS/GSIS rules.