I. Introduction

Redundancy is a recognized authorized cause for termination of employment under Philippine labor law. When a position is declared redundant, the affected employee is generally entitled to separation pay.

A recurring question is:

“Are probationary or non-regular employees also entitled to separation pay if their position becomes redundant?”

Short answer: Yes, they can be, as long as they are validly terminated due to authorized cause (redundancy) and not merely because their probationary or fixed term ended.

This article explains the full legal landscape for probationary and other non-regular employees affected by redundancy in the Philippines.

II. Legal Framework

Key legal sources:

Labor Code (as amended)
- Article on authorized causes (redundancy, retrenchment, closure, etc.).
- Provisions on regular, casual, project, seasonal, and probationary employment.
DOLE rules and department orders
- Implement the statutory rules on termination due to authorized causes.
- Provide documentary requirements and procedural guidelines.
Jurisprudence (Supreme Court decisions)
- Clarify that separation pay in redundancy applies to all employees, not only regulars, provided there is a valid employer-employee relationship and a lawful redundancy.

The law on redundancy does not limit separation pay only to regular employees. The standard is: employee + valid authorized cause = separation pay, unless an exemption legally applies.

III. What Is Redundancy?

Redundancy exists when:

The service or position is in excess of what is reasonably required by the business; or
There is a reorganization, streamlining, or automation that makes certain jobs unnecessary; or
The employer’s decline in business or change in operations means fewer employees are needed for a function.

Legally, redundancy as an authorized cause requires:

Good faith in abolishing positions;
A legitimate business reason (not a pretext to dismiss a particular person);
Use of fair and reasonable criteria in selecting which positions to abolish (e.g., efficiency, seniority, status, etc.);
Proper notice and payment of separation pay.

Redundancy is different from:

Just cause dismissal (serious misconduct, fraud, etc.)
End of probation due to failure to qualify
Natural expiration of a project or fixed-term contract

Each has different rules on separation pay.

IV. Who Are “Probationary” and “Non-Regular” Employees?

1. Probationary employees

A probationary employee is hired on trial, usually for up to six (6) months (unless a longer period is allowed by law for specific positions). During probation:

Employer evaluates if the employee meets reasonable standards made known at the time of engagement.
At the end (or earlier), the employer may:
- Regularize the employee; or
- Terminate for just cause or failure to qualify, with procedural requirements.

Probationary employees are still employees and are protected by the Labor Code; they simply have a different tenure status.

2. Other non-regular employees

“Non-regular” often refers to employees who are not yet regular under the Code, such as:

Project employees – engaged for a specific project or phase.
Seasonal employees – engaged for recurring seasons (e.g., harvest, peak months).
Casual employees – perform work that is not usually necessary or desirable to the business (but may become regular if they render at least one year of service).
Fixed-term employees – hired for a specified period (through valid fixed-term contracts).

They are all employees, and the employer-employee relationship exists during their engagement.

V. Are Probationary and Non-Regular Employees Entitled to Separation Pay in Redundancy?

1. General principle

The Labor Code rule on separation pay for redundancy is phrased broadly: employees whose services are terminated due to redundancy are entitled to separation pay of at least:

One (1) month pay or one (1) month pay for every year of service, whichever is higher, (with a fraction of at least six months considered one whole year).

The law does not say “only regular employees.” Once redundancy is the cause of termination, the employee’s classification (regular, probationary, project, etc.) does not, by itself, bar separation pay.

So, in principle:

Probationary employees made redundant → entitled to separation pay.
Project, seasonal, casual, fixed-term employees made redundant before their natural end of engagement → may also be entitled to separation pay.

2. Crucial distinction: cause of termination

What matters is why the employment ended, not just the status.

If a probationary employee is terminated because they failed to meet standards (properly communicated, with due process, in good faith): → This is not redundancy. → No statutory separation pay, unless company policy or CBA says otherwise.
If a probationary employee is terminated because the position is abolished or declared redundant (the company no longer needs that job): → This is redundancy. → The employee is entitled to separation pay for redundancy, despite being probationary.

Same logic for non-regular employees:

Project employee whose employment ends because the project is completed as planned: → Natural expiration of project employment. → Generally no separation pay (unless provided by CBA/company policy or special law).
Project employee whose contract is cut short because the employer no longer needs that position due to redundancy or business reorganization: → Redundancy is the real cause. → Separation pay for redundancy applies.

VI. Computation of Separation Pay in Redundancy

For redundancy (and installation of labor-saving devices), the minimum statutory formula is:

Separation Pay = higher of (1) 1 month pay, or (2) 1 month pay for every year of service Fractions of at least 6 months count as one whole year.

Key points:

Short service employees still get at least 1 month.
- Even if the employee has worked for less than one year, redundancy law says “one month pay or one month pay per year, whichever is higher.”
- For short service, the “one month fixed amount” is higher, so that is the minimum.
Pro-rating for more than 6 months.
- If service is, say, 1 year and 8 months, this is treated as 2 years for redundancy separation pay.
- Thus: 2 months separation pay (unless 1 month is higher, which it is not in this case).
“One month pay” usually means basic pay plus regularly integrated allowances
- Use the employee’s latest salary rate (basic pay) and add any legally or contractually integrated allowances or differentials, following DOLE rules and jurisprudence.
CBA or company policy may provide more.
- If the CBA or policy says “1.5 month per year” or “2 months per year,” that higher benefit prevails because the Labor Code sets only the minimum.

Example computations

Probationary employee working 4 months, declared redundant:
- Length of service: < 1 year → 1 month pay per year ≈ less than 1 month
- Compare:
  - One month per year of service (pro-rated) = < 1 month
  - OR flat one month
- Result: one (1) month separation pay.
Casual employee with 1 year and 3 months service, declared redundant:
- Service considered = 1 year (since < 1 year + 6 months)
- One month per year = 1 month
- Compare with flat 1 month: same.
- Result: one (1) month separation pay.
Project employee with 2 years and 7 months service, cut short by redundancy:
- Fraction of at least 6 months = count as whole year → 3 years
- Separation pay = 3 months (1 month × 3 years)
- Compare with flat 1 month → 3 months is higher.
- Result: three (3) months separation pay.

VII. Procedural Requirements in Redundancy

For all employees affected by redundancy (including probationary and non-regular), the employer must observe:

1. Written notice to the employee and DOLE

At least 30 days before the effective date of termination:
- Written notice to the employee; and
- Written notice to the Department of Labor and Employment (DOLE).

The notice should:

Clearly state redundancy as the ground;
Indicate effectivity date;
Ideally, specify the position declared redundant and the business reason.

2. Good faith and fair criteria

The employer must show:

Good faith: redundancy is genuine, not a disguise to remove specific people (e.g., union officers, pregnant employees, or those asserting rights);
Fair and reasonable criteria in selecting who to terminate, if multiple employees hold similar roles. Common criteria include:
- Efficiency / performance
- Seniority
- Status (regular vs probationary)
- Attendance, disciplinary record, skills

In practice:

Employers often terminate probationary or newer employees first (“last in, first out”) in redundancy situations.
This is acceptable if the criteria are consistent and not discriminatory, and redundancy is real.

3. Payment of separation pay and other monetary benefits

On or before the last day, the employer should pay:

Separation pay for redundancy (as computed above);
Pro-rated 13th month pay;
Unused but convertible leave credits (if company policy or CBA says these are convertible);
Any other contractual benefits.

Failure to pay separation pay, despite valid redundancy, can lead to a finding of illegal or defective termination, with liability for backwages and other damages.

VIII. Redundancy vs. End of Probation / Contract

This is where many disputes arise: employers sometimes label the termination as “end of probation” or “end of project,” but the facts show actual redundancy.

1. End of probation (failure to qualify)

For a lawful termination due to failure to qualify:

Standards must have been made known at hiring;
The employee must have been evaluated fairly;
There is no genuine redundancy of the position; the job still exists but the employee is not fit for it.

In such a case:

Termination is not due to redundancy.
Statutory separation pay is not required (unless company policy provides).

2. Disguised redundancy

If in reality:

The job is abolished or reabsorbed;
The employer admits the position is no longer needed;
The employee’s performance was acceptable and the only reason is that “the company is cutting headcount,”

then the true ground is redundancy. The employer should:

Comply with notice requirements, and
Pay separation pay even if the employee is probationary or non-regular.

Failure to do so can make the dismissal illegal, exposing the employer to:

Reinstatement (if feasible) or separation pay in lieu of reinstatement;
Backwages from date of dismissal until finality of judgment;
Attorney’s fees and, in some cases, damages.

IX. Non-Regular Employees in Contracting / Subcontracting Arrangements

Some “non-regular” employees work under a contractor/subcontractor (agency) deployed to a principal.

In redundancy situations:

If the principal declares redundancy and ends the service agreement,
- The contractor may reassign the employees to other principals/projects if possible;
- If the contractor itself terminates employees due to redundancy or closure, it must pay separation pay as an employer under the authorized cause rules.

Key points:

The agency/contractor is generally considered the employer (if the arrangement is valid job contracting).
If the arrangement is ruled as labor-only contracting, the principal may be deemed the true employer and thus liable for separation pay.

X. Separation Pay vs. Other Monetary or Remedial Rights

It’s important to distinguish separation pay due to redundancy from other amounts and remedies:

Separation pay as a remedy for illegal dismissal
- Courts sometimes award separation pay in lieu of reinstatement (even in just cause cases), based on equity. This is different from statutory redundancy separation pay.
Retirement pay
- Retirement benefits arise under retirement plans, CBAs, or the Retirement Pay Law (if applicable). These are separate from redundancy separation pay, though they may overlap in some situations.
Backwages and damages
- If the redundancy is held invalid (for lack of notice, bad faith, or bogus redundancy), the termination may be declared illegal and the employee may get:
  - Backwages,
  - Reinstatement or separation pay in lieu of reinstatement,
  - Possibly moral/exemplary damages, attorney’s fees.
Tax treatment
- As a general rule, separation pay due to redundancy or other involuntary causes is subject to special treatment under tax law and may be tax-exempt up to certain conditions, but exact tax consequences depend on current tax regulations and should be checked with a tax professional or BIR.

XI. Practical Guidance

For employees (probationary / non-regular):

Clarify the ground.
- Ask for a written notice clearly stating redundancy as the reason for termination if that is the real ground.
- If the employer says “end of probation” but the position itself is abolished, that’s a red flag.
Ask for computation in writing.
- Request a detailed breakdown of separation pay and other benefits.
- Check if at least one month pay (or more, if longer service) is being given.
Keep documents.
- Employment contract, company policies, memos, notices, payslips, and separation computations are key evidence.
Seek advice if in doubt.
- For disputes (e.g., no separation pay given, or redundancy seems bogus), you may consult a lawyer or bring the matter to the DOLE for assistance, mediation, or complaint.

For employers:

Be clear and honest on the ground.
- Do not “disguise” redundancy as end of probation or end of contract if the real reason is headcount reduction.
Prepare documentation.
- Organizational charts, new staffing patterns, board resolutions, studies showing excess positions, etc., help prove good faith in redundancy.
Observe notice periods.
- Serve the 30-day written notice to affected employees and DOLE.
- Respect due process even for probationary and non-regular staff.
Compute correctly.
- Follow the one month or one month per year, whichever is higher rule.
- Remember even those with short service get at least one month.
Review CBAs and internal policies.
- Some companies or CBAs provide higher separation benefits; those are binding.

XII. Conclusion

In Philippine law, separation pay for redundancy is a protection that applies to employees generally, not only to those who are already regular. What determines entitlement is the real cause of termination, not simply the label of “probationary” or “project” or “casual.”

If a probationary or non-regular employee is terminated because their position is genuinely redundant—with proper notice, documents, and good faith—they are ordinarily entitled to statutory separation pay (at least one month pay, or one month per year of service, whichever is higher), plus other earned benefits.

Where the employer fails to provide separation pay, mislabels the termination, or fakes redundancy, the dismissal may be ruled illegal, with far more serious consequences than simply paying the correct separation pay from the start.

As always, because individual situations vary and jurisprudence continues to develop, it is prudent for both employees and employers to seek professional legal advice when dealing with actual redundancy and separation cases.