Redundancy Concept
Redundancy is one of the authorized causes for termination of employment under Article 283 of the Labor Code of the Philippines.
Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. A position is redundant where it superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as over hiring of workers, decreased of volume business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.
In Wiltshire, the Court held that an employer has no legal obligation to keep on the payroll employees more than the number needed for the operation of the business. (See Wiltshire File Co., v. NLRC, 1991; Coats Manila Bay vs. Ortega, 2009)
Adequate Proof of Redundancy
It is the employer’s burden to show that redundancy exists. It is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees (Asufrin vs. San Miguel Corporation, 2004).
Evidence must be presented to substantiate 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 (Panlilio vs. NLRC, 1997).
Requirements of a Valid Redundancy Program
The employer must comply with the following requisites to ensure the validity of the implementation of a redundancy program:
- A written notice served on both the employees and the Department of Labor and Employment (DOLE) at least one month prior to the intended date of retrenchment as required by the Labor Code;
- Payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher;
- Good faith in abolishing the redundant positions; and
- Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished. (See Caltex vs. NLRC, 2007, )
Separation Pay
In case of termination due to redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.
Proof of Losses Not Required
Redundancy does not require the exhibition of proof of losses or imminent losses. In fact, of all the statutory grounds provided in Article 283 of the Labor Code, it is only retrenchment which requires proof of losses or possible losses as justification for termination of employment. (See Coats Manila Bay case.)
Duplication of Work Not Necessary.
Redundancy does not necessarily refer to duplication of work. That no other person was holding the same position prior to the termination of the employee’s services does not mean that his position had not become redundant. Indeed, in any well-organized business enterprise, it would be surprising to find duplication of work and two or more people doing the work of one person. (See Wiltshire case.)
In redundancy, what is looked into is the position itself, the nature of the services performed by the employee and the necessity of such position. (Tierra International Construction Corp. vs. NLRC, 1992)
Redundancy Arising from Contracting Out of Labor
In several cases, the court upheld the dismissal on ground of redundancy even when the employer contracts out the services of another company to perform the same task as the redundant positions. Contracting out of labor has been held as a valid management prerogative. (See De Ocampo vs. NLRC, 1992; Serrano vs. NLRC, 2000.)
Cases
- The employer was engaged in the production of wooden doors and furniture. The complainants who were hired as mechanics were terminated by the employer when their positions were abolished, and contracted out to Gemac Machineries. The dismissal is proper. In contracting the services of Gemac, which the company has the right to do, the services rendered by the mechanics became redundant and superfluous, and therefore properly terminable. (De Ocampo vs. NLRC, G.R. No. 101539 September 4, 1992.)
- As a result of the phasing-out of the company’s security section, and contracting out the same with an independent contractor, the services of the complainant as head of the security checker’s section, was terminated. The termination was for an authorized cause, i.e., redundancy. (Serrano vs. NLRC, G.R. No. 117040. January 27, 2000.)
Last Edited: Friday, August 19, 2011
August 19th, 2010 at 04:12 pm
Pls furnish me a copy or sample of redundancy program
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August 19th, 2010 at 04:13 pm
please furnish me a copy or sample of redundancy program
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September 26th, 2010 at 11:46 pm
Please reply to my question whether allowances should be included in the computation of the separation pay.
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Ted Ferrolino Reply:
February 8th, 2011 at 6:39 pm
Normally, only the basic salary of the employee is taken into account in the computation of separation pay. However it has been held in a number of cases that regular allowances and allowances that are deemed included in basic salary should also be included in the computation.
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November 28th, 2010 at 09:10 am
with all due respect please consider reviewing the ARTICLE 287 – Retirement (linked from Article 283 of the Labor Code of the Philippines). For the second paragraph, the word \employer\ seemed to be unfit to relay the bona fide thought of that particular law. If I may suggest changing the word \employer\ to \employee\. The word \employee\ seemed to be more accurate to reflect the true intention of the said article
Thank you very much. Have a nice day.
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Ted Ferrolino Reply:
February 8th, 2011 at 6:41 pm
Noted. Thanks for the input.
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May 14th, 2011 at 03:19 pm
Sir Ted,
Am currently working in call center. Currently employed and unfortunately, the current client did not renew the contract. In this industry, agents either CSR, TSP or TSR are distributed among various accounts. However, when at times an account reach \EOL\, end of life, HR takes several actions. One of which is a waiver for Temporary Reserve Status.
Let me give you some background, before I detailed my questions. We were notified Wed, May 11, 2011 that the account will be on EOL effective June 30. They are aware that their responsibility is to place us on new existing account and will enjoy the same benefits for lateral movement, (same job grade) or promotion (higher job grade). They clarified in the waiver that after June 30, 2011 the company will not pay us, in effect of \no work, no pay policy\. Thus, the duration for reserve status will start from July 1 until December 2011, to complete the 6 month period prescribed by law.
Note that company has listed openings in other account and can accomodate the number of individuals in the Temporary Reserve Status’ list. Though, placement will pass through hiring that includes evaluation of existing benefits, skills and annual performance evaluation. To add, HR allows to find a job outside the company but notice did not stipulate if its limited to non-competitor of same industry or not.
Questions:
1. What is the legal term for Temporary Reserve Status and its closeness to Lay off, Redundancy, Retrenchment (temporary or permanent)? Which specific portion of Labor Code , it is closely tied?
2. Does signing the waiver that stipulates that we will not receive pay afer June 30 2011, make it legally binding or is this action legal in any labor code or related provisions?
3. In case it is not legally binding, can one demand a retroactive pay until a placement has been made? The employee is fit to work yet the placement process is taking too long.
4. If permanent retrenchment will apply, should I get 1/2 month or 1 month pay times the years of service (redundancy pay)? Who determines this? NLRB or Labor Code itself?
5. Is there a way to retract the waiver if already signed? Until when and on what grounds?
Any of these questions answered will be highly appreciated. My subsequent questions will depend on your response. Maraming Salamat. Ang inyong maagang pagtugon ay napakalking tulong.
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June 15th, 2011 at 10:50 am
how can i get in touched with you? i have several questions to make regarding this redundancy Thanks
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Ted Ferrolino Reply:
August 20th, 2011 at 12:23 pm
Hi Myra! You may use the Contact page to reach me. Thank you.
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August 20th, 2011 at 09:09 am
Hi,
I was given notice that my position is redundant. I signed the document August 3rd and was given ’til September 3 to complete/transition pending projects. September 3rd is supposed to be my last at work. On August 19th though, I was given another notice that they have decided to keep me in the same role, apparently I was still needed on the job. Am I supposed to accept it just like that and continue on with the job after getting really demoralised and tormented mentally and emotionally? Do I have the liberty to refuse to take my job back? What happens to the redundancy document that I signed? What happens to the severance package that they initially offered, A) If I refuse to continue on with my job, and B) If I agreed to keep my employment? Am I entitled to at least any amount for the moral damages that they caused me?
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Ted Ferrolino Reply:
August 20th, 2011 at 11:17 am
(1) I suggest that you consult a lawyer first if you intend not to continue with your employment. I can’t comment on this matter because I have not seen what documents you actually signed.
(2) If you decide to keep your employment, you are no longer entitled to severance benefit because there will be no more severance of employment to speak of.
(3) As to moral damages, normally, you will need to prove bad faith to claim it. That is, you need to have clear proof to show that your employer acted with malice or bad faith in giving you the notice of termination.
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October 4th, 2011 at 08:50 pm
Hi sir Ted,
I was terminated due to redundancy effective June 30, 2011 with a letter saying the position is redundant. they did not give me copies of those why redundancy came upon.
Questions :
1. Until now I did not receive my last pay and it was more than three months had passed from the date I received the letter and I did not received even a single cents. Can I demand my salary of the three months from July to Sept? Is it the redundancy last pay should be real time or should be given no later than one month?
2. I just received the letter and signed as Received Only and said to me that I will just receive the letter but not to conform. Is it valid to demand that until now I am still employed?
3. Can I sign on the Quit Claim and put notation that I have still balance to claim since there are still pending balances? If ever they dont want to pay me more on the balance can I demand for it?
Regards,
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October 27th, 2011 at 01:36 pm
hi! atty.
i receive a termination letter from my company, on oct.25,2011 start up to nov.25,2011 the termination letter herewith the following.
“in excess of the requirements of the service the company provides.your position are declared REDUNDANT as they are:
1. in excess of what is reasonable demanded by the actual requirements of the company.
2. superfluous
3. is an outcome of the dropping of a service activity previously undertaken by the company.
ang tanong ko po atty. ay ibigay ba sa akin yung separation pay sa araw ng itinakda nilang petsa ng termination ended date nov.25,2011 o kailangan pa ako mag file ng complain sa dole,para makuha itong separation pay.
A. ang separation computation at backwages magkaiba po ba? ang pag compute o separation pay lang at included na doon yung backwages.
at kasalukuyan ko po pinapasukan itong remaining days na natitira sa itinakdang petsa ng termination.
ibibigay po ba ng office yung sasahurin ko sa araw ng payday,o isama na nila sa separation pay kung mayroon man.
god bless
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November 2nd, 2011 at 04:33 pm
Hi. Once notice of redundancy is served, what is the standard procedure? Do we let them go back to their jobs until the effectivity date, and pay them both salary and separation pay on that date? What I am aware of is that usually, payment is given on the same day the notice is released and employee is asked to go out on the spot.Need your input please. Maraming salamat!
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November 2nd, 2011 at 04:36 pm
Hi Atty!
I am working in a QSR business, i was initially in the store operation then promoted in a position in the main office. Unfortunately last July, 2011 the company declared redundancy and my position was declared redundant. We were 4 handling the same position, 2 were retained, the other one was terminated and paid. I was the only one returned back to the operation. There was no explanation regarding the selection process and i have not received any document or notice of my status. When i asked the HR about it they can’t explain what was the criteria in the selection. Am i treated unfair?
Thanks
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December 16th, 2011 at 01:47 pm
Sir/Madam,
I am an Indian.
I really need help here. I have been with my company for over 5 years now. I started to work with the company on July 2006. April 2009, my company sent me to the Philippines to transition a project here. After six months of staying in the Philippines (still as an Indian employee), i was made an offer by the employer to become a Philippine employee but still with the same company (since it is an MNC). Now i am being informed that they are in excess of manpower and would want to terminate my contract on grounds of redundancy. Moreover i was informed that i will be provided the redundancy amount propotional to the number of years i have spent in Philippines as a Philippine Employee only and not for my entire tenure with the company.
Please help me…
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May 2nd, 2012 at 12:04 pm
hi Atty,
my case is I am due for separation of my company due to redundancy of our position. now they have given as an offer a separation package 15yrs bellow in-service 175% and 15 yrs above 200% your lent of service be multiplied by your basic salary. my question base on the art.#283 stated that a fraction of 6 month will be considered as 1 yr. my situation is that my lent of service that start from my probationary til present will be 14.9 years already. my question is am I entitled for the 200% package? since im only short of 3 months to be in 15 yrs in service. hoping for your idea regarding my case. ty
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July 5th, 2012 at 09:16 am
Hi sir,
Is it a requirement that the company will deduct our current loans to SSS and Pag-ibig from our last pay? Our concern is what if they won’t be able to remit said payments (just like what happened to some of our co-employees before…)? Do we have the right to personally pay our dues to SSS and PAG-IBIG after our redundancy? Ty.
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July 5th, 2012 at 09:22 am
Hi Sir!
Is it a requirement that our loans to SSS and Pag-ibig be deducted from our last pay? Our concern is what if they won’t be able to remit said payment (just like what happened to our co-employees before…)? Do we have the right that we personally pay our dues after our redundancy? Ty.
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September 24th, 2012 at 05:57 pm
Good Day! Legally how long should I wait before I can receive my Redundancy Pay? It has been more than 2 months already and as per the HR Personnel it is not signed yet because it is the prerogative of the Company’s COO. Please help.
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September 26th, 2012 at 10:42 pm
Hi,
Would like to know what is used to compute separation pay; basic salary or gross salary or net salary?
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October 17th, 2012 at 03:04 pm
konstrak intl terminated my services due to redundancy last sept 4 2012.my separation pay was supposedly release on oct.5 2012.but twice,the company asked for an extension due to lack of fund as they claimed.last oct 16.i was instructed to report at dole office at cainta by konstrak hr
to recieve my separation pay fpr 3 years of service.but hours passed and no konstrak representative shown up and instead i recieved a call from hr dept and informed mr that my claims is hold and will not be released by the management due to ongoing audit at the site and charges will be filed against me soon.
what shall i do.please help.
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October 19th, 2012 at 12:06 am
R E Hi atty.
I’m a regular employee po and now pregnant. Pede po ba nila ako tanggalin dahil redundant yung position ko? May 1 vacant position po for assistant pero hindi nila binigay saken dahil daw po akoy buntis… hope you can advise. I need my job now.
Thanks
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December 4th, 2012 at 01:17 pm
Hi,
My employer illegally dismissed me, but I preferred not to sue him since after several discussions, he said that he’s willing to give me my severance pay. But just today, I was told that he’s planning to revoke it. I don’t want to work with him anymore and in this company ’cause our relationship is already strained. Can I refuse if he does revoke it?
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December 20th, 2012 at 01:32 pm
Good day sir
after being given notice -30 days and completion of clearance, how many days should it take the company to
release backpay ?
our 13th month wasnt also given yet HR said it will be
included with the payout …Oct 9 to Nov 10 2012 was the date …but till now Dec 20 2012 the payout wasnt yet released.
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March 31st, 2013 at 08:10 pm
I was terminated by my foreigner employer through text only., and his reason is he’s going to close his business.. at first he let me work from 5 days schedule to 2 days schedule. and a week ago he told me that i’m fired without any written notice, after he terminated me, he gave me my separation pay, after a week of terminating me, but he give me some papers to signed, It was QUIT CLAIMS / RELEASE CLAIM,is it right for them to let me signed with that document? after they terminated me.. he told me that his business will be close 20 days upon terminating me, a few days I’ve visited his business he hired 2 new employees and his business is still operating.. I’m 1 year and 3 months working as his crew..
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April 24th, 2013 at 03:08 pm
HI Good day,
ako po ay 22 yrs and 5months na sa isang logistics company. meron po kaming naririnig na lahat daw po ng tenure ay tatanggalin na po pagkatapos nilang mag release ng Bonus & Increase. april 15,2013 ay bigayan po ng Bonus and Increase namin. subalit ang akin lang pong pinirmahan ay sa Bonus. Meron po akong isang kasamahan na nagtanong kung bakit po kaming 5 tenure ay walang na received na increase. sa pagpapaliwanag po sa kanya ay sa kadahilanang malaki na daw po ang salary namin subalit kami po ay isang rank & file lang. wala pa pong formal na pakikipag usap sa amin kung kelan po ang final decision ng company. sa aking pong naririnig kaya po hindi pa kami kinakausap ay sa dahilang hindi pa po nila alam kung ano ang ibibigay na rason para sa plano nilang pagbabawas ng tenure.dahil po kung retrenchment ay hiring pa po kami, kung redundancy naman po ay bagong transfer lang po ako sa team ko. Ano po bang ibig sabihin ng “WHICH EVER IS HIGHER” pano po ang computation nun. ano po ba ang dapat naming gawin kapag kami ay kinausap na. Maraming salamat po.
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April 29th, 2013 at 11:23 am
Sir Ted,
I am currently working in call a center. Currently employed and unfortunately, the current client did not renew the contract. In this industry, agents either CSR, TSP or TSR are distributed among various accounts. However, when at times an account reach \EOL\, end of life, HR takes several actions. One of which is a waiver for Temporary Reserve Status.
Let me give you some background, before I detailed my questions. We were notified on April 15, 2013 that I will be on reserve effective May 15. They are aware that their responsibility is to place us on new existing account and will enjoy the same benefits for lateral movement, (French support) or promotion (higher job grade). They clarified in the waiver that after May 15, 2013 the company will not pay us, in effect of “no work, no pay policy”. Thus, the duration for reserve status will start from May 16 until November 15, to complete the 6 month period prescribed by law.
Note that company has listed openings in other account but they don’t have a French account that will accomodate my skills and salary (ie. Language premium allowance) Though, placement will pass through hiring that includes evaluation of existing benefits, skills and annual performance evaluation.
Questions:
1. What is the legal term for Temporary Reserve Status and its closeness to Lay off, Redundancy, Retrenchment (temporary or permanent)? Which specific portion of Labor Code , it is closely tied?
2. Does signing the waiver that stipulates that we will not receive pay afer May 15, 2013, make it legally binding or is this action legal in any labor code or related provisions?
3. In case it is not legally binding, can one demand a retroactive pay until a placement has been made? The employee is fit to work yet the placement process is taking too long.
4. If permanent retrenchment will apply, should I get 1/2 month or 1 month pay times the years of service (redundancy pay)? Who determines this? NLRB or Labor Code itself?
5. Is there a way to retract the waiver if already signed? Until when and on what grounds?
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May 17th, 2013 at 11:13 am
Good Day. I just want to know if filing notice of redundancy 3 yrs before the actual date of separation is valid ? The law states “at least 1 month” notice but in our case, we wish to inform the employees 3 yrs ahead of time and start paying already in installment their separation package computed up to the date of their future separation. Within the 3 yr period, they will still work normally as employees and receive salaries and at the same time, partially receive in installment their total separation package. Pleas advise if this is feasible and allowable by the law. Thank you.
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