Separation Pay and Retirement Pay Calculator (Philippines, 2026)
Philippine separation pay is one month's pay per year of service for redundancy or labor-saving devices, and half a month per year for retrenchment, closure not due to serious losses or disease, at least one month either way (Labor Code, Articles 298 and 299). Retirement pay at 60 or older with 5 years is 22.5 days' salary per year. Six months or more counts as a full year.
· Calculated with AiStaffo
The rules in Philippines
| Law | Labor Code of the Philippines, Articles 298 and 299 (separation pay) and Article 302 (retirement pay, as amended by Republic Act No. 7641) |
|---|---|
| Redundancy or labor-saving devices | One month's pay per year of service, at least one month's pay |
| Retrenchment, closure not due to serious losses, disease | Half a month's pay per year of service, at least one month's pay |
| No separation pay by law | Resignation, dismissal for a just cause, and closure due to serious business losses |
| Part years | A fraction of at least 6 months counts as one whole year |
| Pay used | Latest salary rate, including regular allowances integrated into the wage |
| Retirement pay | At least 22.5 days' salary per year of service: 15 days + 5 days of service incentive leave + 1/12 of the 13th-month pay (2.5 days) |
| Retirement eligibility | Age 60 to 65 with at least 5 years with the employer, when there is no better retirement plan. Retail, service and agricultural firms with 10 or fewer employees are exempt |
| Daily rate (monthly-paid) | Monthly salary × 12 ÷ 365 (the DOLE factor for monthly-paid employees) |
Worked examples
Monthly pay ₱30,000, 4 years and 7 months of service. The 7 months count as a full year, so 5 years are used.
Redundancy: 5 × ₱30,000 = ₱150,000. Retrenchment: 5 × ½ × ₱30,000 = ₱75,000.
Retirement at 60 after 20 years and 3 months (20 years counted): daily rate ₱30,000 × 12 ÷ 365 = ₱986.30; × 22.5 days × 20 years = ₱443,835.62.
The one-month minimum
For every authorised cause the law pays "one month pay or at least one month (or half a month) per year of service, whichever is higher". So a worker with only a few months of service still gets one month's pay, and on retrenchment the half-month rate only starts to give more than one month from 3 years of service. The calculator applies this minimum.
Retirement pay: why 22.5 days
Republic Act No. 7641 defines "one-half month salary" as 15 days' salary plus one-twelfth of the 13th-month pay plus up to 5 days of service incentive leave, which comes to 22.5 days. The calculator turns a monthly salary into a daily rate with the factor 365 that DOLE uses for monthly-paid employees. Daily-paid workers should use their own daily rate × 22.5 × years.
For employers: gratuity is one line of what a role costs
Gratuity, leave, statutory contributions and notice periods all sit on top of salary. Routine back-office roles such as data entry, follow-ups, reconciliations and reporting can be handed to AI workers that carry none of these costs. Book a free automation audit and we will put your own figures on it.
Please note: this calculator follows the published law and common practice as checked on 21 October 2026. It is a guide, not legal advice. Contracts can give more than the legal minimum, and special cases (part-time work, free zones, disputes) can change the figure, so confirm the final amount with your HR team or a lawyer before paying or accepting a settlement.
Sources
Questions people ask
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Do I get separation pay if I resign?
How is retirement pay computed?
Does six months count as one year?
Is there separation pay when a company closes?
Are allowances included in separation pay?
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