Question & AnswerQ&A (DOLE LABOR ADVISORY)
Republic Act No. 7641 is known as the Retirement Pay Law.
R.A. 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. This includes part-time employees, employees of service and other job contractors, and domestic helpers or persons in the personal service of another.
Yes. Employees of retail, service, and agricultural establishments or operations employing not more than ten (10) employees or workers are excluded. Also excluded are 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.
Retirement pay shall be at least one-half (1/2) month salary for every year of service, with a fraction of at least six (6) months considered as one whole year.
One-half month salary means 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, unless the parties agree to broader inclusions.
Yes. The period of employment with the same employer before the effectivity date of January 7, 1993, is included in reckoning the length of service.
If such agreement, policy, or practice provides retirement benefits equal or superior to those provided by R.A. 7641, it will prevail over the law.
Yes. As per R.A. 7742, a private employer can treat the coverage of the PAG-IBIG Fund as a substitute retirement benefit, provided it offers benefits equal or superior to those under R.A. 7641 and does not violate existing agreements.
The employer is liable to pay the difference in benefits to the employee.
If both the employee and employer contribute, only the employer's contribution and its increments count towards compliance. If the employee alone contributes and the employer is exempt, the employer still must provide retirement benefits under the law.