Generally

speaking,

an

employee

who

voluntarily resigns their position is not entitled to

the payment of unemployment benefits.

The exception to this could be if the employee

can prove they resigned due to "good cause."
While there is no comprehensive list of what
qualifies as good cause the employees' reason for
leaving is scrutinized using a combination of
common

sense

dissatisfaction

and

with

prudence.

working

conditions

mere
is

not

normally sufficient to qualify. Some examples of

what

may

be

considered

good

cause

are

harassment, illegal, immoral or unsafe working

conditions

or

similar

circumstances

which

reasonable person might consider to be good

cause for quitting a job.

An employee who voluntarily resigns from his

work is not entitled to separation pay. There is no
provision

in

the

Labor

Code

which

grants

separation pay to voluntarily resigning employees.

Separation pay as a rule is paid only in those

instances where the severance of employment is
due to factors beyond the control of the employee.
Thus,

in

case

of retrenchment

to

prevent

losses where the employee is forced to depart from

the company due to no fault on his part, separation
pay is required by law to be paid to the dismissed
employee.
The case is totally different in case of voluntary
resignation where severance of employment is due
to employees own initiative. The law does not
oblige the employer to give separation pay if the
initiative to terminate employment comes from
employee himself.
However, by way of exceptions, there are at least
two instances where an employee who voluntarily
resign is entitled to receive separation pay, as
follows:
1.

When payment of separation pay is stipulated in

the employment contract or Collective Bargaining
Agreement (CBA, for companies with existing
bargaining agent or union);

2.When it is sanctioned by established employer

practice or policy.
In Hinatuan Mining Corporation, et al. vs. NLRC, et
al., G.R. No. 117394, February 21, 1997, the court
ruled viz.:
It is well to note that there is no provision in the
Labor

Code

which

grants

separation

pay

to

voluntarily resigning employees. Separation pay

may

be

awarded

termination
installation

of

only

in

cases

employment

of

labor

is

when

due

saving

the

to:

(a)

devices,

(b) redundancy, (c) retrenchment, (d) closing or

cessation of business operations, (e) disease of an
employee

and

his

continued

employment

is

prejudicial to himself or his co-employees, or (f)

when an employee is illegally dismissed but
reinstatement is no longer feasible. In fact, the rule
is that an employee who voluntarily resigns from
employment is not entitled to separation pay,
except when it is stipulated in the employment
contract or CBA, or it is sanctioned by established
employer practice or policy. [Citations omitted.]

In Lilia Pascua, et al. vs. NLRC, et al., G.R. No.

123518, March 13, 1998, the Supreme Court,
reiterated that:
The

grant

of

separation

pay,

however,

is

inconsistent with existing employment or voluntary

resignation, for it presupposes illegal dismissal.

Special cases
In addition to the exceptions cited above, there
are other cases where the court may award
separation pay to voluntarily resigning employee.
For example, in Alfaro vs. CA, G.R. No. 140812,
August 28, 2001, the Court ordered the payment of
separation pay despite holding that the employee
voluntarily resign from service, and although such
payment was not mandated under the CBA or
employment

contract.

Same

conclusion

was

arrived at in J Marketing.
In both of the above cases, the employer
agreed to give separation pay to the employee as
an incident of the latters resignation, but later on
renege in the performance of such commitment.

The Court held that such practice should not be

countenanced.
In Alfaro, the Court ruled as follows:
Generally, separation pay need not be paid to an
employee who voluntarily resigns. However, an
employer who agrees to expend such benefit as an
incident of the resignation should not be allowed to
renege in the performance of such commitment.
References
Article 285, Labor Code of the Philippines
ART.

285. Termination

by

employee.

(a)

An

employee may terminate without just cause the

employee-employer

relationship

by

serving

written notice on the employer at least one (1)

month in advance. The employer upon whom no
such notice was served may hold the employee
liable for damages.
(b)

An

employee

may

put

an

end

to

the

relationship without serving any notice on the

employer for any of the following just causes:

1.

Serious

insult

by

the

employer

or

his

representative on the honor and person of the

employee;
2. Inhuman and unbearable treatment accorded
the

employee

by

the

employer

or

his

representative;
3. Commission of a crime or offense by the
employer or his representative against the person
of the employee or any of the immediate members
of his family; and
4. Other causes analogous to any of the foregoing.
ART.

286. When

terminated.

employment

not

The bona-fide suspension

deemed
of

the

operation of a business or undertaking for a period

not exceeding six (6) months, or the fulfillment by
the employee of a military or civic duty shall not
terminate employment. In all such cases, the
employer shall reinstate the employee to his
former position without loss of seniority rights if he
indicates his desire to resume his work not later
than one (1) month from the resumption of
operations of his employer or from his relief from
the military or civic duty.

An employee who has voluntarily separated

from work is entitled to be paid his benefits due to
him under the law. One of the benefits which you
are entitled as a resigned employee is the payment
of your 13th month pay. Under the Revised
Guideline on the Implementation of the 13th Month
Pay Law, an employee who has resigned or whose

service was terminated at any time before the time

for payment of the 13th month pay is entitled to
this monetary benefit in proportion to the length of
time he has worked during the calendar year up to
the time of his resignation or termination from the
service.
As to service incentive leave, according to
Article 95 of the Labor Code, every employee who
has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five
(5) days with pay. On the other hand, performance
bonus is an employment incentive which is not
mandated under the Labor Code. This is one of the
benefits which may be voluntarily given by the
employer in the exercise of its management
prerogative. In connection therewith, the employer
may

set

out

reasonable

guidelines

on

how

employees could avail the same. But once granted,

the said benefit cannot be unilaterally withdrawn or
reduced by the employer as this could be a
violation of Article 100 of the Labor Code regarding
prohibition against elimination or diminution of
benefits.
Reference

Article 100 of the Labor Code

Art.

100.

Prohibition

against

elimination

or

diminution of benefits. Nothing in this Book shall be

construed to eliminate or in any way diminish
supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code

Concept
The principle of non-diminution of benefits states
that: any benefit and supplement being enjoyed
by employees cannot be reduced, diminished,
discontinued or eliminated by the employer.[1]
This principle is founded on the Constitutional
mandate to protect the rights of workers and
promote their welfare, and to afford labor full
protection. Said mandate in turn is the basis of
Article 4 of the Labor Code which states that all
doubts in the implementation and interpretation of
this Code, including its implementing rules and
regulations shall be rendered in favor of labor.[2]
Benefit and supplement definition

Employee benefits are compensations given to

employees in addition to regular salaries or wages.
[3]

Some benefits are legally required, e.g., social

security benefits, medicare, retirement benefits,

maternity benefits,service incentive leave, etc.
Other benefits are offered by the employer as an
incentive to attract and retain employees as well
as increase employee morale and improve job
performance.[4]
Supplements include those benefits or privileges
granted to an employee for the convenience of the
employer, e.g., board and lodging within the
company premises.
Common application
In employment setting, the principle of nondiminution of benefits finds application when a
change initiated by the employer to existing
company policies, specially matters concerning
employee benefits, results in reduction, diminution
or withdrawal of some or all of the the benefits
already enjoyed by the employees. For example, if
the employees of a certain company is traditionally
granted

14th

month

pay,

and

the

employer

subsequently withdrew such benefit, or reduced its

amount,

the

reduction

or

withdrawal

is

objectionable on the ground that it would result to

diminution of benefits.
Requirements
The application of the principle presupposes that a
company practice, policy and tradition favorable to
the employees has been clearly established; and
that the payments made by the company pursuant
to it have ripened into benefits enjoyed by them.[5]
To ripen into benefits, the following requisites must
concur:
1.

It should have been practiced over a long

period of time; and

2.

It must be shown to have been consistent and

deliberate.[6]
With regard to the length of time the company
practice should have been exercised to constitute
voluntary employer practice which cannot be
unilaterally withdrawn by the employer, the Court
has not laid down any rule requiring a specific
minimum number of years.[7]

1.

In the case of Davao Fruits Corporation vs

Associated Labor Unions (G.R. No. 85073, August

24, 1993), the company practice lasted for six

years.
2.

In Davao Integrated Port Stevedoring Services

vs. Abarquez (G.R. No. 102132, March 19, 1993),
the employer, for three years and nine months,
approved

the

commutation

to

cash

of

the

unenjoyed portion of the sick leave with pay

benefits of its Intermittent workers.
3.

In Tiangco vs Leogardo, Jr. (G.R. No. L-57636,

May 16, 1983), the employer carried on the
practice of giving a fixed monthly emergency
allowance from November 1976 to February 1980,
or three years and four months.

4.

In the case of Sevilla Trading Company vs

Semana, ibid., the employer kept the practice of
including non-basic benefits such as paid leaves for
unused sick leave and vacation in the computation
of their 13th-month pay for at least two (2) years.
In all these cases, the grant of benefits has been
held to have ripened into company practice or
policy which cannot be peremptorily withdrawn.

REVISED GUIDELINES
ON THE IMPLEMENTATION OF THE 13TH MONTH
PAY LAW.
1. Removal of Salary Ceiling.
On August 13, 1986, President Corazon C. Aquino
issued Memorandum Order No. 28 which provides
as follows:
"Section 1 of Presidential Decree No. 851 is hereby
modified to the extent that all employers are
hereby required to pay all their rank-and-file
employees a 13th month pay not later than
December 24 of every year." chan robles virtual
law library
Before its modification by the aforecited
Memorandum Order, P.D. No. 851 excludes from
entitlement to the 13th month pay those
employees who were receiving a basic salary of
more than P1,000.00 a month. With the removal of
the salary ceiling of P1,000.00, all rank and file
employees are now entitled to a 13th month pay
regardless of the amount of basic salary that they
receive in a month if their employers are not
otherwise exempted from the application of P.D.

No. 851. Such employees are entitled to the benefit

regardless of their designation or employment
status, and irrespective of the method by which
their wages are paid, provided that they have
worked for at least one (1) month during a
calendar year.
2. Exempted Employers.
The following employers are still not covered by
P.D. No. 851:chanroblesvirtuallawlibrary
a. The Government and any of its political
subdivisions, including government-owned and
controlled corporations, excepts those corporations
operating essentially as private subsidiaries of the
Government;
b. Employers already paying their employees a
13th month pay or more in a calendar year or its
equivalent at the time of this issuance;
c. Employers of household helpers and persons in
the personal service of another in relation to such
workers; and
d. Employers of those who are paid on purely
commission, boundary, or task basis, and those
who are paid a fixed amount for performing specific
work, irrespective of the time consumed in the

performance thereof, except where the workers are

paid on piece-rate basis in which case the
employer shall grant the required 13th month pay
to such workers.
As used herein, workers paid on piece-rate basis
shall refer to those who are paid a standard
amount for every piece or unit of work produced
that is more or less regularly replicated, without
regard to the time spent in producing the same.
The term "its equivalent" as used on paragraph (b)
hereof shall include Christmas bonus, mid-year
bonus, cash bonuses and other payments
amounting to not less than 1/12 of the basic salary
but shall not include cash and stock dividends, cost
of living allowances and all other allowances
regularly enjoyed by the employee, as well as nonmonetary benefits. Where an employer pays less
than required 1/12th of the employees basic salary,
the employer shall pay the difference. chan robles
virtual law library
3. Who are Rank-and File Employees.
The Labor Code distinguishes a rank-and-file
employee from a managerial employee. It provides
that a managerial employee is one who is vested

with powers of prerogatives to lay down and

execute management policies and/or to hire,
transfer, suspend, lay-off, recall discharge, assign
or discipline employees, or to effectively
recommend such managerial actions. All
employees not falling within this definition are
considered rank-and-file employees.
The above distinction shall be used as guide for the
purpose of determining who are rank-and-file
employees entitled to the mandated 13th month
pay.
4. Amount and payment of 13th Month Pay
(a) Minimum of the Amount. The minimum 13th
month pay required by law shall not be less than
one-twelfth of the total basic salary earned by an
employee within a calendar year. For the year
1987, the computation of the 13th month pay shall
include the cost of living allowances (COLA)
integrated into the basic salary of a covered
employee pursuant to Executive Order 178.
E.O. No. 178 provides, among other things, that the
P9.00 of the daily COLA of P17.00 for nonagricultural workers shall be integrated into the
basic pay of covered employees effective 1 May

1987, and the remaining P8.00 effective 1 October

1987. For establishments with less than 30
employees and paid-up capital of P500,000 or less,
the integration of COLAs shall be as follows: P4.50
effective on 1 May 1987; P4.50 on 1 October 1987;
and P8.00 effective 1 January 1988. Thus, in the
computation of the 13th month pay for 1987, the
COLAs integrated into the basic pay shall be
included as of the date of their integration.
Where the total P17.00 daily COLA was integrated
effective 1 May 1987 or earlier the inclusion of said
COLA as part of the of the basic pay for the
purpose of computing the 13th month pay shall be
reckoned from the date of actual integration.
The "basic salary" of an employee for the purpose
of computing the 13th month pay shall include all
remunerations or earning paid by this employer for
services rendered but does not include allowances
and monetary benefits which are not considered or
integrated as part of the regular or basic salary,
such as the cash equivalent of unused vacation
and sick leave credits, overtime, premium, night
differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits
should be included as part of the basic salary in the

computation of the 13th month pay if by individual

or collective agreement, company practice or
policy, the same are treated as part of the basic
salary of the employees.
(b) Time of Payment. The required 13th month
pay shall be paid not later than December 24 of
each year. An employer, however, may give to his
employees one half () of the required 13th month
pay before the opening of the regular school year
and the other half on before the 24th of December
of every year. The frequency of payment of this
monetary benefit may be the subject of agreement
between the employer and the
recognized/collective bargaining agent of the
employees.
5. 13th Month Pay for Certain Types of Employees.
(a) Employees Paid by Results. Employees who
are paid on piece work basis are by law entitled to
the 13th month pay.
Employees who are paid a fixed or guaranteed
wage plus commission are also entitled to the
mandated 13th month pay, based on their total
earnings during the calendar year, i.e., on both
their fixed or guaranteed wage and commission.

(b) Those with Multiple Employers. Government

employees working part time in a private
enterprise, including private educational
institutions, as well as employees working in two or
more private firms, whether on full or part time
basis, are entitled to the required 13th month pay
from all their private employers regardless of their
total earnings from each or all their
employers. chan robles virtual law library
(c) Private School Teachers. Private school
teachers, including faculty members of universities
and colleges, are entitled to the required 13th
month pay, regardless of the number of months
they teach or are paid within a year, if they have
rendered service for at least one (1) month within a
year.
6. 13th Month Pay of Resigned or Separated
Employee.
An employee who has resigned or whose services
were terminated at any time before the time for
payment of the 13th month pay is entitled to this
monetary benefit in proportion to the length of
time he worked during the year, reckoned from the
time he started working during the calendar year
up to the time of his resignation or termination

from the service. Thus, if he worked only from

January up to September his proportionate 13th
month pay should be equivalent of 1/12 his total
basic salary he earned during that period.
The payment of the 13th month pay may be
demanded by the employee upon the cessation of
employer-employee relationship. This is consistent
with the principle of equity that as the employer
can require the employee to clear himself of all
liabilities and property accountability, so can the
employee demand the payment of all benefits due
him upon the termination of the relationship.
7. Non-inclusion in Regular Wage.
The mandated 13th month pay need not be
credited as part of regular wage of employees for
purposes of determining overtime and premium
pays, fringe benefits insurance fund, Social
Security, Medicare and private retirement plans.
8. Prohibitions against reduction or elimination of
benefits. chan robles virtual law library
Nothing herein shall be construed to authorize any
employer to eliminate, or diminish in any way,
supplements, or other employee benefits or

favorable practice being enjoyed by the employee

at the time of promulgation of this issuance.
(Sgd.) FRANKLIN M. DRILON
Secretary