Computation of Retirement Pay, Private Sector

If covered employees qualify for retirement, they are entitled to a retirement pay of at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole year.

1. Computation

1/2 month salary or 22.5 days

The minimum retirement pay is equivalent to one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole year. (P.D. 442, Labor Code, Article 287; 2023 DOLE-BWC Handbook on Workers’ Statutory Monetary Benefits or “DOLE-BWC Handbook”, pp. 48-49)

The term “one-half month salary” is equivalent to 22.5 days, as it consists of the following:

1) Fifteen (15) days salary based on the latest salary rate;

2) Cash equivalent of five (5) days of service incentive leave; and

3) One-twelfth (1/12) of the thirteenth-month pay. (1/12 x 365/12 = .083 x 30.41 = 2.5)

Thus, “one-half month salary” is equivalent to 22.5 days (Capitol Wireless, Inc. v. Honorable Secretary Ma. Nieves R. Confesor, G. R. No. 117174, November 13, 1996).

Sample computation

These are the steps on how to compute for retirement pay.

The following are the assumptions:

1) The covered employee’s daily rate is Php1,00.00.

2) The covered employee’s length of service is 10 years.

Formula:
Minimum Retirement Pay = Daily Rate x 22.5 days x number of years in service
Sample computation:
Php1,000.00 x Php22,500.00 x 10 = Php225,000.00

b. COLA, excluded

COLA is not included in the computation. (DOLE-BWC Handbook, p. 48)

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