What is the difference between Art. 298 and Art. 299 separation pay?

Art. 298 (formerly Art. 283) covers authorized causes initiated by the employer such as redundancy, retrenchment, installation of labor-saving devices, and closure. Art. 299 (formerly Art. 284) covers termination due to disease. The multiplier differs: redundancy and labor-saving devices get 1 month per year, while retrenchment and closure get 1/2 month per year. Disease cases get 1 month per year with a minimum of 1/2 month salary.

When is an employer required to pay separation pay?

Separation pay is required when the employer terminates employment for authorized causes under the Labor Code: redundancy, retrenchment to prevent losses, installation of labor-saving devices, closure or cessation of business, and disease not curable within 6 months. It is NOT required for just causes (e.g., serious misconduct, willful disobedience, fraud) or voluntary resignation.

Is separation pay subject to income tax under the TRAIN Law?

No. Under Revenue Regulations No. 2-98 as amended, separation pay received due to authorized causes (redundancy, retrenchment, closure, disease) or involuntary separation beyond the employee's control is exempt from income tax and withholding tax. Only separation pay from voluntary resignation or for just causes may be taxable.

Is a 30-day notice required before separation?

Yes. Under Art. 298 of the Labor Code, the employer must serve a written notice to both the employee and the Department of Labor and Employment (DOLE) at least 30 days before the effective date of termination for authorized causes. Failure to provide proper notice may result in additional liability.

How are partial years of service counted for separation pay?

A fraction of at least 6 months of service is considered as 1 whole year for separation pay computation purposes. For example, 3 years and 7 months of service is counted as 4 years. This calculator prorates partial years for precise estimation.

Separation Pay Calculator

Compute separation pay under the Philippine Labor Code based on the cause of separation and your length of service. Covers redundancy, retrenchment, closure, labor-saving devices, and disease.

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Automate Separation Pay with TalinoHR

TalinoHR computes final pay including separation pay, pro-rated 13th month, leave monetization, and loan deductions. Fully compliant with the Labor Code.

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Separation Pay Rates Summary

Quick reference for separation pay multipliers under the Philippine Labor Code.

Cause of Separation	Legal Basis	Separation Pay Rate
Redundancy	Art. 298(b)	1 month per year of service
Installation of labor-saving device	Art. 298(a)	1 month per year of service
Retrenchment to prevent losses	Art. 298(c)	1/2 month per year of service
Closure or cessation of business	Art. 298(d)	1/2 month per year of service
Disease (not curable within 6 months)	Art. 299	1 month per year of service, min. 1/2 month salary

Frequently Asked Questions

What is the difference between Art. 298 and Art. 299 separation pay?: Art. 298 (formerly Art. 283) covers authorized causes initiated by the employer such as redundancy, retrenchment, installation of labor-saving devices, and closure. Art. 299 (formerly Art. 284) covers termination due to disease. The multiplier differs: redundancy and labor-saving devices get 1 month per year, while retrenchment and closure get 1/2 month per year. Disease cases get 1 month per year with a minimum of 1/2 month salary.
When is an employer required to pay separation pay?: Separation pay is required when the employer terminates employment for authorized causes under the Labor Code: redundancy, retrenchment to prevent losses, installation of labor-saving devices, closure or cessation of business, and disease not curable within 6 months. It is NOT required for just causes (e.g., serious misconduct, willful disobedience, fraud) or voluntary resignation.
Is separation pay subject to income tax under the TRAIN Law?: No. Under Revenue Regulations No. 2-98 as amended, separation pay received due to authorized causes (redundancy, retrenchment, closure, disease) or involuntary separation beyond the employee's control is exempt from income tax and withholding tax. Only separation pay from voluntary resignation or for just causes may be taxable.
Is a 30-day notice required before separation?: Yes. Under Art. 298 of the Labor Code, the employer must serve a written notice to both the employee and the Department of Labor and Employment (DOLE) at least 30 days before the effective date of termination for authorized causes. Failure to provide proper notice may result in additional liability.
How are partial years of service counted for separation pay?: A fraction of at least 6 months of service is considered as 1 whole year for separation pay computation purposes. For example, 3 years and 7 months of service is counted as 4 years. This calculator prorates partial years for precise estimation.

Read our full guide: Separation Pay Computation Guide →