Must an employee render 5 consecutive years of service prior to retirement age to be entitled to retirement benefits?

The total of all of the years of actual service for the company will be considered in determining whether an employee has rendered five (5) years’ worth of service for purposes of availing him/herself of retirement benefits. Thus, the five (5) year period need not be an unbroken, consecutive period. It can be the accumulated duration of the employee’s employment with the company.

The Labor Code says:

“In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.”

RA 7641, otherwise known as the Retirement Law of the Philippines, which amended the Labor Code provision on retirement pay, merely states that the employees who retire at age 60 with at least five (5) years of service with the company will be entitled to the minimum regulatory benefit. So under the Retirement Law, a retiring employee must satisfy the dual condition of minimum age (age 60) and minimum service years (5 years) to be eligible for retirement pay.

As the law did not specify “continuous” five (5) years of service prior to retirement, the Supreme Court has held in several cases, that all employment period that the employee worked for the establishment, even with broken service or gaps of years, the computation of the length of service for the company should include all the actual years of work that the employee rendered for the establishment meaning they must have worked for the company for an aggregate period of five (5) years.

Click here for the full copy of the Philippine Retirement Law.