Guidelines for implementing RA 7641

Republic Act No. 7641 applies as the governing Retirement Pay Law implemented through the advisory’s guidelines.
The advisory sets out how RA 7641 retirement pay is computed and applied for covered private-sector employees.
The advisory also incorporates rules on substitute retirement benefits through references to Republic Act No. 7742.

RA 7641 applies to all employees in the private sector, regardless of position, designation, or status, and irrespective of the method by which wages are paid.
Covered employees include part-time employees, employees of service and other job contractors, and domestic helpers or persons in the personal service of another.
RA 7641 covers these private-sector employees under the Act’s entitlement to retirement pay upon retirement.
RA 7641 does not apply to employees of retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers.
RA 7641 does not apply to employees of the National Government and its political subdivisions, including Government-owned and/or controlled corporations, when they are covered by the Civil Service Law and its regulations.

A covered employee who retires under RA 7641 is entitled to retirement pay of at least one-half (1/2) month salary for every year of service.
A fraction of at least six (6) months of service is considered as one whole year.
“One-half month salary” means fifteen (15) days plus one-twelfth (1/12) of the 13th month pay.
“One-half month salary” also includes the cash equivalent of not more than five (5) days service incentive leaves.
The retirement pay computation recognizes broader inclusions only when the parties provide for them.

When determining the length of service, the period of employment with the same employer prior to the effectivity date of the law on January 7, 1993 must be included.
The advisory’s length-of-service rule requires counting service before January 7, 1993 for purposes of retirement pay entitlement.

Qualified workers are entitled to the retirement benefit under RA 7641 in the absence of any individual or collective agreement, company policy, or practice.
If an individual or collective agreement, company policy, or practice provides retirement benefits that are equal or superior to RA 7641, that agreement, policy, or practice prevails.
A private employer may opt to treat coverage of the PAG-IBIG Fund as a substitute retirement benefit under the conditions provided by RA 7742.
The option to treat PAG-IBIG Fund coverage as a substitute retirement benefit must not contravene any existing collective bargaining agreement or other employment agreement.
When the PAG-IBIG substitute scheme provides benefits less than what the employee is entitled to under RA 7641, the employer is liable to pay the difference.

When both the employee and the employer contribute to a retirement plan, only the employer’s contribution and its increments count toward full or partial compliance with RA 7641.
When the employee is the lone contributor to the PAG-IBIG Fund and the employer is exempted from its coverage, the employer must still provide the employee retirement benefits under RA 7641.