Digest of R.A. 7641, THE RETIREMENT PAY LAW
By Joel C. Romano, CPA
On December 9, 1992 President Fidel V. Ramos approved R.A. 7641: "AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, BY PROVIDING FOR RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIREMENT PLAN IN THE ESTABLISHMENT."
Digest of the Rules Implementing the new Retirement Law which took effect on January 7, 1993 are as follows;
1. The Act shall apply 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 under SEC. 2.
2. EXEMPTED (under Sec. 2)- The Act shall not apply to the following employees:
a. Employees of the National Government and its political subdivisions, including Government-Owned and/or Controlled Corporations (GOCCs), if they are covered by the Civil Service Law and its regulations
b. Domestic helpers and persons in the personal service of another.
c. Employees of retail, service and agriculture establishment or operations regularly employing not more than 10 employees.
3. Retirement under CBA/contract
Any employee may retire or be retired by his employer upon reaching the retirement age established in the collective bargaining agreement or any other applicable contracts; provided, however that an employee’s retirement benefits under any agreements shall not be less than those provided by the Act, and provided further that if such benefits under the agreements are less than the amount due to the employee as provided by the Act, the employer shall pay for the difference.
Where both the employer and the employee contribute to a retirement fund in accordance with CBA or any other applicable employment contract, the employer's total contribution shall not be less than the total retirement benefits to which the employee would have been entitled had there been no such retirement fund. In case the employer’s contribution is less than the retirement benefits as provided by the Act, the employer shall pay the deficiency.
4. Optional / Compulsory Retirement
OPTIONAL retirement may be availed of by an employee who has served for at least 5 years (the minimum length of service required for entitlement to retirement pay) in a subject establishment upon reaching the age of 60 years or more.
COMPULSORY: an employee must retire upon reaching the age of 65 years.