The Department of Labor and Employment (DOLE), under its Department Order No. 147-15, defines “retrenchment” as the dismissal of employees to avoid or minimize business losses. It differs from the termination of employees for just causes or due to the employee’s misconduct and other similar grounds. But for those terminated without fault, retrenchment still means an abrupt loss of income and job uncertainty.
ABS-CBN Corp. recently shared its decision to retrench over 200 workers, comprising seven percent of its workforce, due to weaker advertising and consumer spending. In a statement, the company said the industry remains challenged amid the Middle East conflict, high inflation, and low economic growth, and that it needs to keep itself on “strong financial footing.”
Frankly, this may not be the last layoff we see in the media, and there may be more that we don’t know of. And while companies may resort to retrenchment due to business needs, Philippine labor laws and DOLE have limits on why and how employees can be let go.
As industries continue to shift, it’s important for all workers and employees to prepare for what may await them. If that day does come, the DOLE requires due process and proper rights accorded to the people laid off. Here’s what they can get.
VALID GROUNDS OF RETRENCHMENT
Under DOLE’s guidelines, a company’s retrenchment requires a written notice and must be:
- “Reasonably necessary” and for the prevention of business losses
- Experiencing “substantial, serious, actual and real, and reasonably imminent” losses and not merely “de minimis,” or minimal
- Backed up by sufficient and convincing evidence
- In “good faith” and not to defeat or circumvent the employees’ right to security of tenure
- Properly and objectively evaluate the employees it will lay off, ensuring fair retention considerations based on their seniority, physical fitness, age, and financial hardship
RIGHTS OF THOSE RETRENCHED
The country’s labor laws state that:
- An employee terminated due to authorized business causes is entitled to separation pay, regardless of the type of employment (regular, probationary, casual, project, seasonal, or fixed-term).
- The separation pay must be equivalent to one month’s pay, or at least one and a half months’ pay for every year of their service, whichever is higher. Meanwhile, any fraction of at least six months counts as a whole year.
- The pay must be given within 30 days of the separation date.
- The pay must also be exempt from income tax.
This separation pay provides financial relief amid the job loss, and if an employer fails to follow these rules or violates any of the grounds, the employee may file a formal complaint with DOLE.
Aside from this pay, the government also offers the SSS unemployment benefit to covered members, a two-month cash assistance for those who involuntarily lost their jobs due to retrenchment, redundancy, or company closure. The assistance equals 50% of the employee’s average monthly salary credit, and the employee must have made at least thirty-six monthly contributions to qualify.
FREQUENTLY ASKED QUESTIONS
The Department of Labor and Employment (DOLE) defines retrenchment as the dismissal or downsizing of employees to prevent further business losses.
ABS-CBN Corp. said it downsized to keep itself on strong financial footing after the Middle East conflict, high inflation, and low economic growth resulted in weaker advertising and consumer spending.
Separation pay is a form of financial support given to employees who were laid off due to specific authorized business reasons.
According to DOLE, retrenchment must be reasonably necessary, occur from substantial and real loss, and be backed up by sufficient financial evidence.
No, the pay is exempt from income tax.
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