RETIREMENT

UNDER THE LABOR CODE

PD No. 442, as amended by RA 7641
 COVERAGE
Applies to ALL EMPLOYEES IN
THE PRIVATE SECTOR, regardless of:
their position,
designation;
status; or
the method that their wages are paid*.

*includes part-time workers and

workers who are paid by results
BENEFIT PROVIDED:
RETIREMENT PAY
minimum retirement pay equivalent to
one-half (1/2) month salary for every
year of service
a fraction of at least six months
being considered as one whole year

*separate and distinct from the

Retirement Benefits under the SSS
Exception from Income Tax
Retirement benefits received under RA
7641 and those from reasonable private
benefit plan* maintained by the employer
are exempt from income tax.
*a pension, gratuity, stock bonus or profit-
sharing plan maintained by an employer for
the benefit of employees, where
contributions are made by the employer,
employees, or both, for the purpose of
distributing the accumulated fund for the
exclusive benefit of the employees.
 MINIMUM RETIREMENT PAY
COMPUTATION:
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.
*COLA is not to be included
minimum RP is equivalent to 22.5
days' pay per year of service
For workers who are paid by results and
do not have a fixed monthly salary rate:

Basis for the determination of the salary for 15

days shall be their average daily salary (ADS)*.

*The ADS is equal to the total salary or

earnings for the last twelve months from
the date of retirement divided by the
number of actual working days in that
particular period.
In case of an Retirement Benefit provided
under a CBA or Applicable Contract,
The retirement benefit granted therein
will apply; provided that such benefit
shall not be less than the amount
required under RA 7641; otherwise,
the employer shall pay the difference.
In case 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 should not
be less than the total benefit
provided had there been no such
retirement benefits’ fund; otherwise,
the employer shall pay the deficiency.
CONDITIONS FOR ENTITLEMENT:
To be entitled to the benefit of
minimum retirement pay, the
employee must:
1. be in the retirement age of 60 to
65 years old.
2. have worked for the company for
at least 5 years.
When an employee is 60 to 64 years
old, retirement is optional but is
compulsory and obligatory at the age
of 65 years old.

In case of an existing retirement

provision under a CBA or Contract,
an employee may retire or be retired
upon reaching the age provided for
In case of Underground or Surface
Mine Employees
entitlement is allowed upon:
1. reaching the optional retirement
age of 50 years old, or the
compulsory retirement age of 60
years old; and
2. has served at least five (5) years
as mine worker
In case of licensed racehorse jockeys

entitlement is allowed upon:

1. reaching the compulsory
retirement age of 55 years old;
2. has served at least five (5) years
as a racehorse jockey
3. has paid additional premium to
the SSS
For the retirement pay to
be tax exempt:

1. The retiring official or employee

has been with the same employer
for at least 10 years and is not less
than 50 years old at his retirement;
2. The benefits granted shall be
availed of by an official or
employee only once.
EXCLUSIONS
The following are excluded from the
provisions for minimum retirement pay:
1. Government employees;
2. Employees of retail, service, and
agricultural establishments /
operations regularly employing
not more than ten (10) employees.