Termination of Employment due to Redundancy

PUBLISHED ON: October 29, 2020
LAST UPDATED ON: May 1, 2021

Termination of Employment due to Redundancy is an authorized cause of termination of employment wherein manpower is in excess of the actual reasonable demand of the company. The excess of manpower may the due to one or more of the following: 1. Overhiring of Workers; Decreased Volume of business, or 3. Dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.

Defining Termination of Employment due to Redundancy

The following provision contains the legal basis for the Termination of Employment due to Redundancy which is contained in Presidential Decree No. 442 also know as the Labor Code of the Philippines:

Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of laborsaving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

Art. 283 of the Labor Code of the Philippines

Article 283 of the Labor Code of the Philippines states that an employer terminate the employment an employee due to redundancy to prevent losses or the closing or cessation of operation of the establishment. The employer must serve a written notice to the employee and the Department of Labor and Employment (DOLE) at least one (1) month before the intended date of termination. The employee is be entitled to separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

The Implementing Rules and Regulation of the Labor Code of the Philippines defines the term "Redundancy" as the condition when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise or superfluous.

Elements of Redundancy

The Implementing Rules and Regulations of the Labor Code of the Philippines states that the following are the grounds for a valid termination of employment due to redundancy:

  1. There must be superfluous positions or services of employees;
  2. The positions or services are in excess of what is reasonably demanded by the actual requirements of the enterprise to operate in an economical and efficient manner;
  3. There must be good faith in abolishing redundant positions;
  4. There must be fair and reasonable criteria in selecting the employees to be terminated; and
  5. There must be an adequate proof of redundancy such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management of the restructuring.

Procedure in the Termination of Employment due to Redundancy

The following is the general procedure on the how terminate the employment of an employee due to Redundancy:

  1. Necessity of the termination of employment of an employee whose services are determined to be superfluous;
  2. A written notice to the employee concerned;
  3. Furnish a copy of the notice to DOLE at least one (1) month prior to the intended date of retrenchment; and
  4. Payment of Separation Pay.

What if an employee is the only one performing the type of work?

In CMB v Ortega, termination due to Redundancy does not necessitates that the work performed is duplicated by another worker. That is, the work performed is not exempted from being redundant even if the work performed is unique and only performed by that person whose employment is to be terminated. Redundancy does not refer to the duplication of work.

Does a company need to have proof of losses to Terminate the Employment of an employee due to Redundancy?

No, a company is not required to prove that the they are having financial losses to terminate an employee due to redundancy.

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