Separation and Retirement Pay for Security Guards at Age 60 in the Philippines
A doctrinal and practical guide for employers, principals, agencies, and security guards
1. Governing Legal Sources
| Topic | Principal Authority | Key Provisions |
|---|---|---|
| Retirement benefits | • Article 302 of the Labor Code (as renumbered) • Republic Act (RA) 7641 – The Retirement Pay Law • Implementing Rules of Book VI, Rule II, DOLE |
• Optional retirement at 60 but not beyond 65 • At least five (5) years of service for entitlement (unless a superior CBA/plan applies) |
| Security-service contracting | • RA 5487 (Private Security Agency Law) • DOLE Department Order (D.O.) 150-16 (Revised Rules on Contracting/Security Services) |
• Security guards are regular employees of the security agency • All wage-related benefits—including retirement—are primarily borne by the agency; the principal is solidarily liable if the agency fails to pay |
| Separation pay | • Articles 298-299 [283-284] Labor Code | • Payable only when employment ends for authorized causes (closure, redundancy, disease, etc.) • Not payable when termination is by retirement, unless the retirement plan or CBA allows both and the worker chooses the more favorable |
| Age-Discrimination | RA 10911 (Anti-Age Discrimination in Employment Act) | • Prohibits compulsory retirement below 60 and other age-based employment barriers |
| State pensions | • RA 11199 (Social Security Act of 2018) | • Guards who are separated and at least 60 with 120 SSS contributions may start their SSS pension even while continuing elsewhere |
2. Retirement Pay: Amount and Computation
Statutory floor (RA 7641) At least ½-month salary per year of service, where “½-month” = • 15 days base salary • + 1/12 of the 13th-month pay (≈2.5 days) • + 5 days service-incentive leave ► Total: 22.5 days wage per year. Fraction of ≥ 6 months counts as one full year.
Daily-paid guards – Convert to a 30-day-month basis (statutory rule) before multiplying by 22.5/30.
Better retirement plans or CBAs prevail (non-diminution principle).
Tax treatment – Retirement pay exempt from income tax when paid under RA 7641 (NIRC § 32-B-6-b) or under a reasonable employer plan for employees ≥ 50 & ≥ 10 years in service (NIRC § 32-B-6-a).
3. “Sixty, Still Fit to Serve?” — Optional vs. Compulsory Retirement
| Age | Character | Who decides | Notes for security guards |
|---|---|---|---|
| 60 to < 65 | Optional | Guard may elect to retire and the agency may accept. An employer cannot compel retirement during this window unless a valid plan fixes a lower optional age that the employee agreed to. | |
| 65 | Compulsory | Employer must retire the employee. Continuing beyond 65 is only by mutual agreement, with no new statutory retirement accrual. |
Practical point: Agencies sometimes retire guards at exactly 60 citing “client preference.” That is lawful only if: (a) the guard consents under a retirement plan/CBA or a voluntary request; or (b) the agency terminates on an authorized cause (e.g., redundancy) and pays the correct separation pay—but then retirement pay is still due if the guard meets the 5-year service rule. Forcing retirement at 60 with no plan and no consent is illegal dismissal.
4. Separation Pay Scenarios at/after Age 60
| Cause of Termination | Statutory Separation Pay | Can it be added to Retirement Pay? |
|---|---|---|
| Closure/cessation not due to serious losses | 1-month pay or ½-month per year (whichever greater) | No stacking, unless the retirement plan/CBA provides otherwise and employee chooses both (rare). |
| Redundancy / installation of labor-saving devices | 1-month pay per year | Same rule on non-duplication. |
| Disease (art. 299) | ½-month pay per year | Retirement usually more beneficial; employee chooses the higher. |
| Retirement under RA 7641 | None (retirement pay applies instead) | N/A |
Jurisprudence consistently holds that an employee cannot collect both separation and retirement pay for the same termination event in the absence of an express agreement (e.g., Batangas-Laguna-Tayabas Bus Co. v. CA and progeny).
5. Who Pays, and When?
- Primary obligor – the security agency (employer of record).
- Solidary liability – the principal/client is liable in the same manner if the agency fails, pursuant to Article 109 Labor Code and D.O. 150-16.
- Timing – Payment is due within 30 days from effectivity of retirement/termination; delay entitles the guard to legal interest (6% p.a.) until full satisfaction (Article 306, Civil Code; BSP-MC 799-2023).
- Funding – Many agencies now build up retirement reserve funds under DOLE and SEC/BSP guidelines; however, setting up a fund does not suspend liability to pay on due date.
6. Continuous Service Issues Unique to the Security Industry
| Situation | Rule on Service Credit |
|---|---|
| Guard reassigned to several clients but keeps same agency | Service is continuous; no loss of seniority or retirement accrual. |
| Client changes agency and absorbs the guard as its own employee | Past service must be tacked if the absorption contract or CBA says so; otherwise, retirement liability stays with the former agency (but guard can still claim under Article 109 if joint liability applies). |
| Guard transfers to a different agency without gap and by agreement | Unless expressly provided, prior years do not carry over; but if transfer was due to merger/consolidation the successor may inherit the obligation. |
Tip: Guards should keep copies of deployment orders, payslips, and agency IDs to prove cumulative service in eventual claims.
7. SSS, PhilHealth, and Pag-IBIG Touchpoints
| Benefit | When Available at 60 | Interaction with Retirement Pay |
|---|---|---|
| SSS Retirement | If separated from employment and with ≥ 120 contributions (10 years). | Separate from employer-paid retirement; processed directly with SSS. |
| PhilHealth Lifetime Member | Starts at 60 if ≥ 120 monthly contributions. | No monetary payout; lifetime coverage. |
| Pag-IBIG Provident | Employee may withdraw all savings at 60 (optional) or 65 (mandatory). | Independent; agency cannot withhold. |
8. Tax and Reporting Compliance
- Withholding-tax exemption – Employer files BIR Form 2316 showing “Retirement Pay – Exempt.”
- Alphalist reporting – Retirement payouts still declared in the Annual Alphabetical List.
- SSS R-3 separation report – Must indicate “RETIRED – Optional” or “RETIRED – Compulsory” to align member status.
- DOLE RKS Form 5 – Report of establishment closure or termination if 5 or more guards are retired/separated simultaneously.
9. Illustrative Computation
Assumptions: • Daily Basic Wage (NCR, 2025): ₱610.00 • Guard rendered 23 years, retiring June 30 2025 at age 60
| Step | Formula | Amount |
|---|---|---|
| 1. Convert basic to monthly | ₱610 × 30 | ₱18,300 |
| 2. Daily equivalent | ₱18,300 ÷ 30 | ₱610 |
| 3. One-year retirement value | 22.5 days × ₱610 | ₱13,725 |
| 4. Multiply by years service | ₱13,725 × 23 | ₱315,675 |
| Retirement Pay Due | ₱315,675 |
If the agency instead closed its security business and paid separation pay for redundancy (1-month per year = ₱18,300 × 23 = ₱420,900), the guard may claim that separation pay in lieu of retirement pay, but not both—unless a superior plan permits.
10. Best-Practice Checklist for Agencies & Principals
- Prepare or review a written retirement plan (file with BIR for tax qualification).
- Sync optional retirement age with RA 7641 and RA 10911; avoid blanket “age 60 automatic retirement” clauses.
- Maintain a retirement reserve fund or insurance trust.
- Keep comprehensive 201 file showing uninterrupted service, deployments, and wage histories.
- Explain options to the guard at least 30 days before turning 60. Obtain a retirement application if voluntary.
- Settle all dues on last working day; issue Certificate of Employment, BIR 2316, and SSS clearance.
- Report promptly to DOLE and SSS to avoid fines.
11. Common Pitfalls and How to Avoid Them
| Pitfall | Consequence | Preventive Action |
|---|---|---|
| Forcing guards to retire at 60 with only separation pay | Money judgment for both retirement pay and full back wages for illegal dismissal | Align policies with optional retirement rules; pay statutory retirement. |
| Passing retirement cost to the principal via contract | Contractual clause is void; agency remains solidarily liable | Allocate adequate cost in bidding; build into billing rate. |
| Ignoring floating status > 6 months for guards aged 60+ | Constructive dismissal; still counts toward service years | Re-assign within 6 months or pay separation/retirement. |
12. Take-Away Rules of Thumb
- 60 – Guard’s choice to retire; employer can only offer.
- 65 – Employer’s duty to retire.
- ≥ 5 years’ service – Statutory retirement pay floor applies.
- 22.5 days wage × years = minimum benefit.
- No double recovery – guard chooses separation or retirement, unless a contract/CBA expressly allows both.
- Agency first, principal second – but the guard can sue both for full amount.
Disclaimer: This article synthesizes statutory text, implementing rules, and leading Supreme Court decisions up to 24 June 2025. It is not a legal opinion; specific cases may warrant tailored advice.