What is the difference between Retrenchment and Redundancy?

Termination due to Redundancy

You'll get a separation pay equal to your monthly basic pay or your monthly basic pay multiplied by the number of years you're served the company, whichever is higher.

Formula:

Separation pay = One month salary x Number of years served

If your monthly salary is PHP 20,000 and the years of service are 5, your separation pay will be PHP 100,000.

PHP 20,000 x 5 = PHP 100,000

Let’s say you’ve been with the company for four years and six months. This will be considered five years since a fraction of six months is one year. 

Termination due to Retrenchment

You can receive separation pay equivalent to your one-month basic pay or at least half of your basic compensation for every year you served the company, whichever is higher.

Formula:

Separation pay = (One month salary / 2) x Number of years served

With a monthly salary of PHP 20,000 and 5 years of tenure, the separation pay will be PHP 50,000.

(PHP 20,000 / 2) x 5 = PHP 10,000 x 5 = PHP 50,000