The employee may be retired upon reaching the retirement age established in the employment contract, CBA, or company policy.[1] If there is no retirement plan or agreement, an employee may be retired upon reaching the age of 60 years (optional) or more but not beyond 65 years old (mandatory) provided he/she has served at least five years in the establishment.[2]

The employee is entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements.[3] The retirement benefits cannot be lesser than that provided for in the Labor Code.[4]

If there is no existing retirement plan or agreement in the establishment, the employee is entitled to retirement pay equivalent to at least ½ month salary for every year of service, a fraction of at least six months being considered as one year.[5] Unless otherwise agreed upon by the parties, the said “½ month” salary includes: (a) 15 days salary based on latest salary rate; (b) cash equivalent of the 5 days service incentive leave; and (c) 1/12 of 13th month pay.[6] As a result, the “½ month salary” is equivalent to 22.5 days.[7] COLA is not included in the computation. [8]

Table 1
Retirement Pay Computation

Minimum Retirement Pay = Daily Rate x 22.5 days x Number of Years in Service

In addition to the retirement pay, the employee is entitled to the proportionate 13th month pay for the calendar year and to the cash equivalent of accrued leave benefits.[9]

An underground mining employee may be retired upon reaching the age of 50 years or more, but not beyond 60 years so long as he has served at least five years as an underground mine worker with the establishment.[10]

For covered workers paid by results with no fixed monthly salary rate, the basis for the salary of 15 days will be based on their average daily salary.[11]

Part-time workers are entitled to retirement pay if these additional conditions are met: (a) there is no retirement plan between the employer and the employee, and (b) the employee should have reached the age of 60 years, and should have rendered at least five years of service with the employer.[12]


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[1] Ibid. Paragraph 1, Article 301.

[2] Ibid. Paragraph 3, Article 301. 65 years old is the mandatory retirement age.

[3] LABOR CODE. Paragraph 2, Article 301.

[4] Ibid.

[5] LABOR CODE. Paragraph 3, Article 301.

[6] Ibid. Paragraph 4, Article 301.

[7] Ibid., citing Capitol Wireless, Inc. v. Honorable Secretary Ma. Nieves R. Confessor, G.R. No. 117174, 13 November 1996.

[8] Id. at 49.

[9] Ibid.

[10] LABOR CODE. Paragraph 5, Article 301. For underground mining employees, the mandatory retirement age is 50.

[11] Id at 121. “The ADS is derived computed by dividing the total salary or earnings for the last twelve months reckoned from the date of retirement by the number of actual working days in that particular period, provided that the determination of rates of payments by results is in accordance with the established regulations” (Ibid.).

[12] Ibid.