Separation Pay as Financial Assistance


If there is no dismissal to speak of, no financial assistance may be granted.

Amount of financial assistance is not fixed in law or jurisprudence. The amount thereof varies. It may be equivalent to the separation pay under the law, or under the CBA or company policy or practice, whichever is higher, or even lower than any of the separation pay provided therein, depending upon the sound discretion of the court.The financial assistance may be equivalent to one-half (1/2) month’s pay for every year of service, plus regular allowances, or it may be fixed at a certain amount.

When long years of service, equity or compassionate justice merit the award of financial assistance. In quite a number of cases, the Supreme Court considered long years of service, equity or social or compassionate justice as basis for the award of financial assistance.

In the 2014 case of International School Manila v. International School Alliance of Educators (ISAE), the teacher’s dismissal on the ground of gross inefficiency was held valid. The ground being an analogous cause and thus falling under the exception in Toyota, separation pay was awarded to her. In so awarding, her long 17 years of service was likewise cited as basis.

In the 2011 case of Villaruel v. Yeo Han Guan, petitioner’s act of terminating his employment relationship with respondent on the ground of disease under Article 284 of the Labor Code was held as being tantamount to resignation. This is so because only the employer is allowed to invoke said article to terminate employment based on disease. He is therefore not entitled to the separation pay provided therein. This notwithstanding, he was awarded the amount of P50,000.00 as financial assistance as a measure of social and compassionate justice and as an equitable concession taking into consideration, inter alia, his service for more than 35 years.

In the 2013 case of Padillo v. Rural Bank of Nabunturan, Inc., which, like Villaruel, involves the termination by petitioner employee of his employment due to disease under Article 284 of the Labor Code, no separation pay by virtue of this article of the Labor Code was awarded to him. Neither was he given any retirement benefit since he terminated his employment when he was 55 years of age – 5 years short of the 60-year old optional retirement age provided in Article 287 of the Labor Code. Nevertheless, the Court concurred with the CA that financial assistance should be awarded to him but at an increased amount. With a veritable understanding that the award of financial assistance is usually the final refuge of the laborer, considering as well the supervening length of time which had sadly overtaken the point of Padillo’s death – an employee who had devoted twenty-nine (29) years of dedicated service to the respondent bank – the Supreme Court, in light of the dictates of social justice, held that the CA’s financial assistance award should be increased from P50,000.00 to P75,000.00, in addition to and exclusive of the P100,000.00 benefit receivable by the petitioner under the Philam Life retirement/insurance plan coverage of petitioner which remained undisputed by the parties.

When long years of service was considered against the grant of financial assistance. - There are a number of cases where the long years of service were taken against the grant of financial assistance to the validly dismissed employee. Indeed, length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee.

The 2010 case of Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) – Katipunan, instructs that “xxx Length of service is not a bargaining chip that can simply be stacked against the employer. After all, an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service. If an employer had treated his employee well, has accorded him fairness and adequate compensation as determined by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty. Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair employer. ”

In accordance with Reno, petitioner’s length of service of more than 10 years, in the 2013 case of Moya v. First Solid Rubber Industries, Inc., was taken against him. In affirming the CA’s deletion of the separation pay awarded to him as financial assistance, it was declared that he is outside the protective mantle of the principle of social justice as his act of concealing the truth41 from the company is clear disloyalty to the company which has long employed him.