Can an employee be forced to retire before he should?

Published by rudy Date posted on March 30, 2009

Dear PAO,

Please help me with my concerns:

a. Our school has amended our Employees’ Manual under its Revised Retirement Plan. Retirement age is set at 60. However, the company may extend the services of an employee beyond retirement age in meritorious cases. 

Is this rule legal? Can an employee be forced to retire at 60 years old, before reaching the compulsory retirement age of 65? 

b. I want to retire at 60 years old (optional retirement), but I still have pending requests for the computation of my salary increase in connection with tuition fee increase in SY 2005-2006 (P200.00) and SY 2006-2007 (P100.00). My request remains pending because the school has declared that this is subject to their discretion. The problem is we were given salary adjustments without knowing the basis of computation. How are incremental proceeds computed and distributed? Can I retire and still pursue my claim for salary increase after my retirement? 

c. Also, our school grants a gift of Asian Tour to its regular employees. In cases where regular employees do not avail themselves of the grant, is the gift considered as a benefit that may be converted to its cash or monetary equivalent? 

Minerva Almalvez

Dear Minerva, 

I assume that you are employed in a private educational institution. Thus, the applicable law is R.A. 7641 or the New Retirement Law, which is the law amending Article 287 of the Labor Code. It provides: 

“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. “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.” 

Applying the foregoing provision to your first concern, the Retirement Plan on your Employees’ Manual is the controlling agreement for your retirement. Under your Employees Manual, the option to extend the services of an employee beyond the retirement age of 60 years old depends on meritorious cases. This is a legal provision since the Labor Code as amended by R.A. 7641 has granted private companies to establish their own retirement plans for its employees. 

Regarding your second concern, if you retire at age 60, you can still pursue your claims for incremental proceeds that are due you during your employment. Retirement will not bar your claim for the incremental increase, if there be any, since retirement is only a means of separation or withdrawal of services of an employee from the company/ establishment he is employed from. You can demand this increase as a matter of right even if you already retired.

Please note that you must present your claim within three years from the time you have ascertained your right to the incremental proceeds. Article 290 of the Labor Code provides that all money claims arising from employee-employer relationship prescribe in three years from the time the cause of action accrued. The three-year period within which to file actions involving money claims arising from an employer-employee relationship equally applies to claims for incremental proceeds arising from tuition fee. After three years you cannot anymore collect your claim to said incremental proceeds.

The computation and distribution of the incremental proceeds arising from the increase in tuition fee would depend primarily on the agreement between the school and its employees. 

As to your third concern, the free trip given by the school to its regular employees is considered as a gratuity pay, which is paid to the beneficiary for past services or favor rendered purely out of the generosity of the giver or grantor. Its purpose is to reward employees who have rendered satisfactory service to the company.

Gratuity pay, therefore, is a money benefit or bounty; it is not intended to pay a worker for actual services rendered or for actual performance. The grant of such benefit is not mandatory so as to be considered a part of labor standard law unlike the salary, cost of living allowances, holiday pay and leave benefits, which are covered by the Labor Code.

The employer has the right to prescribe the terms and conditions for the grant of the trip to its regular employees. Hence, you can only demand its cash or monetary equivalent if the school expressly grants that it may be converted to its cash or monetary equivalent.

We hope that we have answered your queries. 

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to or via text message (key in: Times dearpao <YOUR QUESTION> and send to 2299).

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