Labor law trumps company policies

Dear Atty. Angela,

I am about to turn 60 years old this coming

March having worked in our company for over 15 years. When

I consulted with our HR manager to have my retirement pay computed, I was informed that according to our company policy, I could only get the full retirement pay when I finish the 2023 calendar year — or until December 2023. That, if I only stayed until my 60th birthday in March, I will be getting a 50 percent reduction in my retirement pay. I am not sure if this is legal and I want to confirm if the company can enforce its regulation?

Gigi

Dear Gigi,

This is not legal and the company policy cannot override the Labor Code policy as amended by Republic Act 7641 on retirement pay benefits.

Under the law, an employee upon reaching the age of 60 years or more, but not beyond 65 years which is the compulsory retirement age, who has served at least five years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half month salary for every year of service, a fraction of at least six months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean 15 days plus one-twelfth of the 13th-month pay and the cash equivalent of not more than five days of service incentive leaves.

The labor law is clear that when an employee reaches 60 years old and has served at least five years in the company, he or she shall be entitled to retirement pay which should not be lower than what the law prescribes. It did not provide any condition that an employee must end the calendar year before being entitled to retirement pay. Thus, the labor law will prevail over the company policy.

You are entitled to the retirement pay of at least 22.5 days computation for every year of service. If the company’s retirement policy will cover the 22.5 days computation under the law, then this will be the applicable and prevailing rate of your retirement pay.