RETIREMENT PAY

Pursuant to Article 302

(formerly Article 287 as renumbered)
as Amended by Republic Act 7641
COVERAGE
Employees shall be retired upon This benefit applies to all employees
reaching the age of sixty (60) years or except:
more but not beyond sixty-five (65) 1.Government employees;
years old [and have served the 2.Employees of retail, service and
establishment for atleast five (5) agricultural establishments/ operations
years.] regularly employing not more than ten
(10) employees.

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AMOUNT OF
RETIREMENT PAY
The minimum retirement pay shall be 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.

For the purpose of computing retirement pay, “one-half month salary” shall include the
following: The COLA shall not be
1.Fifteen (15) days salary based on the latest salary rate; included in the
2.Cash equivalent of five (5) days of service incentive leave; computation of
3.One-twelfth (1/12) of the 13th month pay. retirement pay.
(1/12 x 365 / 12 = .083 x 30.41 = 2.5)

Thus, “one-half month salary” is equivalent to 22.5 days.1

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1
Capitol Wireless, Inc. v. Honorable Secretary Ma. Nieves R. Confesor, G.R. No. 117174, November 13, 1996
AMOUNT OF
RETIREMENT
Illustration:
PAY
Minimum Retirement Pay = Daily RateII x 22.5 days x number of years in service

Other benefits may be included in the computation of the retirement pay upon
agreement of the employer and the employee or if provided in the Collective Bargaining
Agreement.

Cebu Institute of Technology vs. Ogle, GR No. 58870, Dec. 18, 1987 – Existing laws exclude allowances from the basic salary or wage in the computation of the amount of retirement and other
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benefits payable to an employee.
RETIREMENT
BENEFITS
UNDER A COLLECTIVE BARGAINING AGREEMENT OR APPLICABLE CONTRACT
Any employee may retire or be retired by his or her employer upon reaching the
retirement age established in the collective bargaining agreement (CBA)
or other applicable agreement/ contract and shall receive the retirement benefits
granted therein; provided, however, that such retirement benefits
shall not be less than the retirement pay under RA 7641, and provided further
that if such retirement benefits under the agreement are less, the employer
shall pay the difference.

Where both the employer and the employee contribute to a retirement fund
pursuant to the applicable agreement, the employer’s total contributions
and the accrued interest thereof should not be less than the total retirement
benefits to which the employee would have been entitled had there been
no such retirement benefits’ fund. If such total portion from the employer is less,
the employer shall pay the deficiency. 5
RETIREMENT
BENEFITS
PART-TIME WORKERS
Part-time workers are also entitled to retirement pay of “one-half month
salary” for every year of service under RA 7641 after satisfying the
following conditions precedent for optional retirement:
a) There is no retirement plan between the employer and the
employee and
b) The employee should have reached the age of sixty (60) years,
and should have rendered at least five (5) years of service with
the employer.

Applying the foregoing principle, the components of

retirement benefit of part-time worker may likewise be
computed at least in proportion to the salary and
related benefits due them.
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RETIREMENT
BENEFITS
UNDERGROUND OR SURFACE MINE EMPLOYEES (RA 8558 as amended by RA
10757*)

Underground or Surface Mine Employee - any person

employed to extract mineral deposits underground or in the
surface, or to work in excavations or workings such as shafts,
winzes, tunnels, drifts, crosscuts, raises, working places
whether abandons or in use beneath or in the earth’s surface
for the purpose of searching for and extracting mineral
deposits.
- Shall include mill-plant workers, electrical, mechanical and
tailings pond personnel.

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An Act Reducing the Retirement Age of Surface Mine Worker from Sixty to Fifty (50) years, amending for the purpose of Article 302 of PD 442, otherwise known as the “labor Code of the Philippines” which was signed into law
*

on 08 April 2016.
RETIREMENT
BENEFITS
UNDERGROUND OR SURFACE MINE EMPLOYEES (RA 8558 as amended by RA
10757*)

Retirement Age was reduced from 60 to 50 years.

In the absence of a retirement plan or other applicable
agreement providing for retirement benefits of underground
mine employees in the establishment, an employee may retire
upon reaching the compulsory retirement age of sixty (60)
years or upon optional retirement at the age of fifty (5)
years, provided he/she has served for at least five(5) years as
an underground mine employee or in underground mine of
the establishment.

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An Act Reducing the Retirement Age of Surface Mine Worker from Sixty to Fifty (50) years, amending for the purpose of Article 302 of PD 442, otherwise known as the “labor Code of the Philippines” which was signed into law
*

on 08 April 2016.
RETIREMENT
BENEFITS
RACEHORSE JOCKEYS KASAMBAHAY AND PERSONS IN
THE PERSONAL SERVICE
The compulsory retirement age of
professional racehorse jockeys Are entitled to retirement benefits
who are duly licenses by the pursuant to Department Order No.
Philippine Racing Commission 20, series of 1994.
(PHILRACOM) is fifty-five years old
provided that he/she has served for
at least five (5) years as racehorse
jockey and has paid additional
premium to the SSS.

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OTHER BENEFITS UPON
RETIREMENT
The retirement benefits under RA 7641 and RA 8558 are separate and
distinct from those granted by the Social Security System.
Under the law, upon optional or compulsory retirement, the employee is
also entitled to the proportionate thirteenth-month pay for the calendar
year and to the cash equivalent of accrued leave benefits.

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COVERAGE FROM
INCOME TAX
Exempted from taxation are the retirement benefits received under RA
7641 (now Article 302) and those received by official and employees of
private firms, whether individual or corporate, in accordance with a
reasonable private benefit plan maintained by the employer:
Provided, That the retiring official or employee has been in the service of
same employer for at least ten 10 years and is not less than fifty (50) years
of age at the time of his retirement.
Provided, further, That the benefits granted under this subparagraph shall
be availed of by an official or employee only once.

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COVERAGE FROM
INCOME TAX
REASONABLE PRIVATE BENEFIT PLAN
- A pension, gratuity, stock bonus or profit-sharing plan maintained by an
employer for the benefit of some or all of his officials or employees, wherein
contributions are made by such employer for the officials or employees, or
both, for the purpose of distributing to such officials and employees the
earnings and principal of the fund thus accumulated, and wherein it is
provided in said plan that at no time shall any part of the corpus or income
of the fund be used for, or be diverted to, any purpose other than for the
exclusive benefit of the said officials and employees.

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