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Business closure is one of the consequences of the COVID-19 pandemic. Despite the loss, we can part ways with employees in a dignified way.


Hi Sir. Sonnie,
Just want to ask questions po regarding our predicament.
At present we are working from home, but because of the recent lockdown, management has no other recourse but to close the business. We already announced the business closure last April 8, and we sent out memos to the employees. All employees returned the memo with their signature. Business closure will be on May 11, 2021. Since we have a problem with cash flow, I have the following questions:

  1. Can we delay the release of salary on April  25  and include it on the final and separation pay on which we plan to release on May 11?
  2. But management is still not sure if we’ll have the resources by May 11,  can we further delay the release to June?
  3. May I also know the due process for our situation?

–  Jonathan

creative expression of business closure
Hi Jonathan,
Let me answer item #3 because it will also address your concerns in items #1 and #2. Business closure per Art. 298 of the labor code applies in your situation. Below is the prescribed separation process for your reference:

  1. Documentary requirement: Notice of separation addressed to concerned employees and reported to DOLE
  2. Monetary obligation: A separation pay computed as follows
    • 1 month to 2 years tenure: equivalent to 1-month pay (because of the whichever is higher clause)
    • 3 years and more (fraction of 6 months is equivalent to 1 year): 1/2 month pay for every year of service
  3. Procedural:
    • At least 30 days in advance, DOLE and employees were advised of the end of employment
    • Release of separation and final pay not later than 30 days after the effectivity of end of employment, per LA  06-2020

In application to above, below are my suggested steps:

  1. Since you already complied with the 30 days notice, and employees are working from home during the rendering period, proceed with the timely release of employee salary for the April 25 pay-out. Delaying its release is a bad idea,
  2. In an ideal environment, the separation pay should be released on the last working day and the final pay, 30 days after business closure.
  3. However, since your dilemma involves cash flow, integrating the separation pay to the final pay is understandable. On top of the separation pay, the following should be included on the release of the final payment not later than June 10, 2021, per LA  06-2020
    • May 10 salary
    • Pro-rated 13th month if applicable
    • Unused and accrued SIL or SL/VL  whichever is applicable
    • Tax refund if applicable
    • Others like cash bond and CBA provisions if applicable
  4. If you cannot follow the suggested timeline, it is better to reach-out to DOLE to discuss your predicament and seek assistance in dealing with employees.

On top of these legal requirements, my suggestion is to also have an off-boarding engagement program for employees. This, to help them transition to the next phase of their life.
Please note that I can only give advice based on the information you provided, and if I misunderstood the context of your situation, my advice can be erroneous. Stay safe.

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