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D. Retirement

1. Coverage

The benefit applies to all employees except:

1) Government employees; and

2) Employees of retail, service and agricultural establishments/operations regularly employing not more than ten (10) employees. (Handbook on Workers’ Statutory Monetary Benefits, DOLE-BWC, 2020 edition; Paragraph 6, Article 302, Labor Code)

2. Basis for retirement

a. Employment contract or CBA, if any

Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. (Article 302, Labor Code)

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, retirement benefits under any collective bargaining and other agreements shall not be less than those provided therein. (Paragraph 2, Article 302, Ibid.)

Where both the employer and the employee contribute to a retirement fund pursuant to the applicable agreement, the employer’s total contributions and the accrued interest thereof should not be less than the total retirement benefits to which the employee would have been entitled had there been no such retirement benefits’ fund.  If such total portion from the employer is less, the employer shall pay the deficiency. (Handbook on Workers’ Statutory Monetary Benefits, DOLE-BWC, 2020 edition)

1) “Any employee” – includes part-time employees

Republic Act No. 7641 is a curative social legislation. It precisely intends to give the minimum retirement benefits to employees not entitled to the same under collective bargaining and other agreements. It also applies to establishments with existing collective bargaining or other agreements or voluntary retirement plans whose benefits are Jess than those prescribed in said law. (De La Salle Araneta University v. Bernardo, G.R. No. 190809, 13 February 2017)

Republic Act No. 7641 states that “any employee may be retired upon reaching the retirement age” and “[i]n case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements.” The Implementing Rules provide that Republic Act No. 7641 applies to “all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those specifically exempted.” And [DOLE] Secretary Quisumbing’ s Labor Advisory further clarifies that the employees covered by Republic Act No. 7641 shall “include part-time employees, employees of service and other job contractors and domestic helpers or persons in the personal service of another.” (Ibid.)

The only exemptions specifically identified by Republic Act No. 7641 and its Implementing Rules are: (1) employees of the National Government and its political subdivisions, including government-owned and/or controlled corporations, if they are covered by the Civil Service Law and its regulations; and (2) employees of retail, service and agricultural establishments or operations regularly employing not more than 10 employees. (Ibid.)

Based on Republic Act No. 7641, its Implementing Rules, and Secretary Quisumbing’s Labor Advisory, Bernardo, as a part-time employee of DLS-AU, is entitled to retirement benefits. The general coverage of Republic Act No. 7641 is broad enough to encompass all private sector employees, and part-time employees are not among those specifically exempted from the law. The provisions of Republic Act No. 7641 and its Implementing Rules are plain, direct, unambiguous, and need no further elucidation. Any doubt is dispelled by the unequivocal statement in Secretary Quisumbing’s Labor Advisory that Republic Act No. 7641 applies to even part-time employees. (Ibid.)

Under the rule of statutory construction of expressio unius est exclusio alterius, Bernardo’s claim for retirement benefits cannot be denied on the ground that he was a part-time employee as part-time employees are not among those specifically exempted under Republic Act No. 7641 or its Implementing Rules. (Ibid.)

b. Retirement law

1) Requirements

a) Retirement age

(1) Voluntary/Optional retirement

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years [Voluntary/Optional], who has served at least five (5) years in the said establishment, may retire. (Paragraph 3, Article 302,Labor Code)

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age, agrees to sever his or her employment with the former. (Cercado v. Uniprom, Inc., G.R. No. 188154, 13 October 2010)

Article 287 of the Labor Code, as amended by R.A. No. 7641, pegs the age for compulsory retirement at 65 years, while the minimum age for optional retirement is set at 60 years. An employer is, however, free to impose a retirement age earlier than the foregoing mandates. This has been upheld in numerous cases as a valid exercise of management prerogative. (Ibid.)

(2) Compulsory retirement

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire. (Paragraph 3, Article 302,Labor Code)

b) At least 5 years of service

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. (Paragraph 3, Article 302,Labor Code)

An underground mining employee upon reaching the age of fifty (50) years or more, but not beyond sixty (60) years which is hereby declared the compulsory retirement age for underground mine workers, who has served at least five (5) years as underground mine worker, may retire and shall be entitled to all the retirement benefits provided for in this Article. (Paragraph 5, Article 302, Ibid.)

c. Computation

1) Formula

The retirement pay shall be computed as follows:

Minimum Retirement Pay = Daily Rate x 22.5 days x number of years in service

2) Components of 22.5 days

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves. (Paragraph 4, Article 302, Ibid.)

The term “one-half month salary” is equivalent to 22.5 days, as it consists of the following:

1) Fifteen (15) days salary based on the latest salary rate;

2) Cash equivalent of five (5) days of service incentive leave; and

3) One-twelfth (1/12) of the thirteenth-month pay (1/12 x 365/12 = .083 x 30.41 = 2.5). (Handbook on Workers’ Statutory Monetary Benefits, DOLE-BWC, 2020 edition)

A fraction of at least six (6) months being considered as one (1) whole year. (Ibid.)

3) COLA, excluded

Cost of Living Allowance (COLA) is not included in the computation. (Ibid.)

3. Retirement for certain employees

a. Workers who are paid by results

Workers paid by results are entitled to retirement pay, which shall be based on their average daily salary (ADS) that is, in turn, derived 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 payment by results are in accordance with the established regulations. (Ibid.)

b. Part-time workers

Part-time workers are entitled to retirement pay provided they comply with the following conditions precedent for optional retirement: (a) there is no retirement plan between the employer and the employee and (b) the employee should have reached the age of sixty (60) years, and should have rendered at least five (5) years of service with the employer.

c. Underground or surface mine employees under R.A. 8558, as amended

In the absence of a retirement plan or other applicable agreement providing for retirement benefits of underground mine employees in the establishment, an employee may retire upon reaching the compulsory retirement age of sixty (60) years or upon optional retirement at the age of fifty (50) years, provided he/she has served for at least five (5) years as an underground mine employee or in underground mine of the establishment. (Ibid.)

Underground or surface mine employee refers to any person employed to extract mineral deposits underground or in the surface, or to work in excavations or workings such as shafts, winzes, tunnels, drifts, crosscuts, raises, working places whether abandoned or in use beneath or in the earth’s surface for the purpose of searching for and extracting mineral deposits. Moreover, surface mine workers shall only include mill-plant workers, electrical, mechanical and tailings pond personnel. (Ibid.)

d. Racehorse jockeys

The compulsory retirement age of professional racehorse jockeys who are duly licensed by the Philippine Racing Commission (PHILRACOM) is fifty-five (55) years old provided that he/she has served for at least five (5) years as racehorse jockey and has paid additional premium to the SSS. (Ibid.)

e. Kasambahay and persons in the personal service of another

Kasambahay and persons in the personal service of another are entitled to retirement benefits pursuant to DOLE Department Order No. 20, series of 1994. (Ibid.)

4. SSS retirement benefits are separate and different

SSS retirement benefits are separate and different from the retirement pay required to be given by the employer. (Ibid.)

5. 13th month pay and unused service incentive leave credits are separate and added

The proportionate 13th month pay and cash equivalent of unused service incentive leave credits are separate and added to the retirement pay. (Ibid.)

6. Exempted from income tax, exceptions

Retirement benefits under R.A. 7614 and those received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer, are exempt from income tax: Provided, That the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of his retirement: Provided, further, That the benefits granted under this subparagraph shall be availed of by an official or employee only once. (Ibid.)

The term “reasonable private benefit plan” means a pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for the benefit of some or all of his officials or employees, wherein contributions are made by such employer for the officials or employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said officials and employees. (Ibid.)

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