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Employee termination
in the Philippines.

SALARY PAYMENT IN Philippine Peso (₱)

CONTRACT LANGUAGES Tagalog / English

PAYROLL TAX 11.75% + Provident Fund

PAYROLL CYCLE Monthly

TIME TO HIRE  12 hours

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Valid reasons to terminate employment in the Philippines

In the Philippines, termination of employment must be based on valid and just causes as defined by the Labor Code of the Philippines. There are two main categories of termination:

1. Termination for Just Causes

  • Inefficiency or Poor Performance: Termination may be justified if an employee consistently fails to meet the required performance standards despite sufficient training.
  • Gross Negligence: If an employee shows a wilful disregard for their duties, they may be terminated. 
  • Fraud or Willful Breach of Trust: If an employee engages in dishonesty, fraud, or embezzlement that causes financial harm to the employer, it may be considered a just cause for termination.
  • Commission of a Crime: Conviction of a crime that significantly impairs the employee’s ability to perform their job duties.
  • Willful Disobedience: Refusal to follow lawful and reasonable instructions from superiors can be grounds for termination.

2. Termination for Authorized Causes

  • Business Closure: If the employer needs to close down the business or retrench employees due to financial losses or restructuring, termination for authorized causes may apply.
  • Redundancy: If the employee’s position becomes redundant due to technological advancements, operational streamlining, or other valid reasons, termination for authorized causes may be justified.
  • Disease or Illness: If an employee suffers from a disease or illness that cannot be cured or would impair their ability to perform their job duties, termination for authorized causes may apply.
  • Retirement: When an employee reaches the mandatory retirement age as specified in the employment contract or company policy, termination may be considered as authorized cause.

Unfair reasons to terminate employment in the Philippines

Unfair reasons to terminate employment in the Philippines are listed below:

  • Discrimination: Termination based on an employee’s race, ethnicity, gender, religion, age, disability, pregnancy, or any other protected characteristic is unfair and constitutes discrimination.
  • Exercising Labor Rights: Firing an employee for exercising their labor rights, such as joining a labor union, participating in collective bargaining, or filing a complaint with the labor authorities, is considered unfair labor practice.
  • Political Affiliation: Termination based on an employee’s political beliefs or affiliations is unfair and violates their right to political expression.
  • Exercising Maternity or Paternity Leave: Dismissing an employee because they took maternity or paternity leave is unfair.
  • Personal Appearance: Dismissing an employee based solely on their physical appearance is considered unfair.

Dismissal procedure in the Philippines

The best practice to dismiss an employee in the Philippines is to give the employee a notice letter a minimum of 30 days before effective termination.

If the dismissal is due to authorized causes such as redundancy, retrenchment, or closure of the business, the employee is entitled to receive separation pay.

Resignation procedure in the Philippines

The best practice to resign in the Philippines is to give a written notice to the employer 30 days before effective resignation. After this, there is an exit interview and an exchange of company property given back to the employer.

Hiring in the Philippines, Made Easy

Your business can easily hire employees in the Philippines without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 180+ countries worldwide. All you need to do is focus on your business.

FAQs

As long as the employer has just cause or an authorized business reason it is not hard to terminate employment in the Philippines when 30 days’ notice is given. Employers can get into litigation issues if they do not provide a 30 days’ notice or 30 days’ worth of pay in lieu of the 30 days’ notice. 

Terminating employment in the Philippines carries certain risks like legal liabilities, reputational damage, and poor employee morale in reaction to terminations. The best way to mitigate these issues in the Philippines when terminating employment is to give 30 days’ notice and only terminate employment if there is a justified cause or economic business reason. 

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