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● Free HR tool · Labor Code and RA 7641
Separation and Retirement Pay Calculator Philippines 2026
Looking for a separation pay calculator Philippines employees and HR teams can trust? This one covers separation pay under Articles 298 and 299 of the Labor Code and retirement pay under Republic Act 7641.
- Redundancy, retrenchment and retirement
- 6 months or more counts as a year
- 22.5-day retirement formula
Calculate separation pay
Pick a country, enter your salary and dates of service.
PHP
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How separation pay is calculated in the Philippines: redundancy or installation of labor-saving devices earns 1 month of pay per year of service. Retrenchment, closure not due to serious losses, or disease earns half a month per year. Either way the minimum is 1 month, and a fraction of 6 months or more counts as a full year. Retirement pay under RA 7641 is 22.5 days of pay per year of service.
Separation pay formula
| Reason for separation | Separation pay |
|---|---|
| Redundancy or labor-saving devices | 1 month per year of service, minimum 1 month |
| Retrenchment or closure not due to serious losses | Half a month per year, minimum 1 month |
| Disease (Art. 299) | Half a month per year, minimum 1 month |
| Closure due to serious business losses | None |
Worked example
Monthly salary of ₱35,000, 6 years 7 months of service, separated due to redundancy. Service counts as 7 years: 35,000 × 7 = ₱245,000.
Retirement pay under RA 7641
Retirement pay = Daily rate × 22.5 days × Years of service
22.5 days is 15 days of pay, plus 5 days of service incentive leave, plus 2.5 days (one twelfth of the 13th-month pay). Employees qualify at age 60 to 65 with at least 5 years of service. The calculator uses monthly salary × 12 / 261 as the daily rate for a 5-day work week. Retail, service and agricultural businesses with 10 or fewer employees are exempt.
How to use the separation pay calculator
- Choose the reason for leaving. Redundancy, retrenchment or closure, or retirement.
- Enter your latest monthly salary. Include regular allowances.
- Enter your start date and last working day. The separation pay calculator Philippines tool counts 6 months or more as a full year.
- Click Calculate. You see the separation or retirement pay and the years counted.
Retrenchment example
Monthly salary of ₱25,000 and 3 years 2 months of service, separated due to retrenchment. The 2 months are less than six, so service counts as 3 years. Half a month per year gives ₱37,500, which is above the 1-month minimum, so the separation pay calculator shows ₱37,500.
Is separation pay taxed in the Philippines?
Separation pay received because of causes beyond the employee’s control, such as redundancy, retrenchment or closure, is exempt from income tax under the National Internal Revenue Code. Retirement pay under RA 7641 is generally exempt when the legal conditions are met. Check with the BIR or a tax adviser for your case.
Sources
This separation pay calculator Philippines page is based on the following sources, reviewed in October 2026:
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Frequently asked questions
Is this separation pay calculator Philippines tool free?
Yes. The calculator is free. You share your name, work email and phone number once and can then calculate as many times as you like.
How is separation pay computed in the Philippines?
1 month of pay per year of service for redundancy, or half a month per year for retrenchment, closure or disease, with a minimum of 1 month. A fraction of at least 6 months counts as a full year.
How is retirement pay computed under RA 7641?
22.5 days of pay for each year of service, for employees aged 60 to 65 with at least 5 years of service.
Is separation pay required if I resign?
No. Separation pay under the Labor Code applies to authorized causes such as redundancy and retrenchment, unless your contract or company policy gives it on resignation.
Is separation pay taxable in the Philippines?
Separation pay received because of causes beyond the employee’s control, such as redundancy, retrenchment, closure, death or sickness, is exempt from income tax under Section 32(B)(6)(b) of the National Internal Revenue Code. Separation pay from a voluntary resignation does not get this exemption.