Who must receive retirement pay under this law?

Any private‑sector employee who works for a company without a retirement plan, is at least 60 years old but not older than 65, and has at least five years of service.

At what age can an employee retire if there is no retirement plan?

The compulsory retirement age is between 60 and 65 years.

How is the retirement pay amount calculated?

It is at least half a month’s salary for each year of service; a fraction of six months or more counts as a whole year.

What does ‘half‑month salary’ include?

It includes fifteen days of regular pay, one‑twelfth of the 13th‑month pay, and the cash equivalent of up to five days of service incentive leaves, unless a better benefit is provided.

Are small businesses exempt from this requirement?

Yes. Retail, service, and agricultural establishments with ten or fewer employees are exempt.

Does the law affect benefits already given by the company?

No. It does not take away any retirement benefits that employees already receive under existing laws or company policies.

What happens if an employer violates the retirement‑pay rule?

The violation is unlawful and the employer may be penalized under the provisions of Article 288 of the Labor Code.

When did RA 7641 become effective?

It took effect fifteen days after its publication in the Official Gazette or in at least two national newspapers.

RA 7641 - Retirement Pay Law (1992)

Philippine lawLegal status not independently verified

In brief

AI summary. Verify against the source below.

RA 7641 adds a rule to the Labor Code that private companies without a retirement plan must give eligible workers a retirement pay. The pay is at least half a month’s salary for each year of service, with specific calculations and exemptions.

Who it affects: It applies to private‑sector employees who work for companies that have no retirement plan or agreement.

Key provisions

Coverage. The rule covers private‑sector workers in establishments that do not have a retirement plan or agreement providing retirement benefits. [Art. 287, Sec. 1]
Compulsory retirement age and service requirement. An employee may retire between age 60 and 65 if he or she has worked at least five years for the same establishment. [Art. 287, Sec. 1]
Retirement pay amount. The employee is entitled to at least one‑half month salary for every year of service; any fraction of at least six months counts as a full year. [Art. 287, Sec. 1]
Definition of half‑month salary. One‑half month salary means fifteen days of pay plus one‑twelfth of the 13th‑month pay and the cash value of up to five days of service incentive leaves, unless a broader benefit is agreed upon. [Art. 287, Sec. 1]
Exemption for small establishments. Retail, service, and agricultural businesses that employ ten or fewer workers are not covered by this provision. [Art. 287, Sec. 1]
Penalty for violation. Violating the retirement‑pay rule is unlawful and subject to the penalties listed in Article 288 of the Labor Code. [Art. 287, Sec. 1]
Preservation of existing benefits. The act does not take away any retirement benefits an employee already receives under other laws or company policies. [Sec. 2]
Effective date. The law became effective fifteen days after it was published in the Official Gazette or in at least two national newspapers. [Sec. 3]

Common questions

Who must receive retirement pay under this law?: Any private‑sector employee who works for a company without a retirement plan, is at least 60 years old but not older than 65, and has at least five years of service. [Art. 287, Sec. 1]
At what age can an employee retire if there is no retirement plan?: The compulsory retirement age is between 60 and 65 years. [Art. 287, Sec. 1]
How is the retirement pay amount calculated?: It is at least half a month’s salary for each year of service; a fraction of six months or more counts as a whole year. [Art. 287, Sec. 1]
What does ‘half‑month salary’ include?: It includes fifteen days of regular pay, one‑twelfth of the 13th‑month pay, and the cash equivalent of up to five days of service incentive leaves, unless a better benefit is provided. [Art. 287, Sec. 1]
Are small businesses exempt from this requirement?: Yes. Retail, service, and agricultural establishments with ten or fewer employees are exempt. [Art. 287, Sec. 1]
Does the law affect benefits already given by the company?: No. It does not take away any retirement benefits that employees already receive under existing laws or company policies. [Sec. 2]
What happens if an employer violates the retirement‑pay rule?: The violation is unlawful and the employer may be penalized under the provisions of Article 288 of the Labor Code. [Art. 287, Sec. 1]
When did RA 7641 become effective?: It took effect fifteen days after its publication in the Official Gazette or in at least two national newspapers. [Sec. 3]

Republic Act No. 7641 December 9, 1992

AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, BY PROVIDING FOR RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIREMENT PLAN IN THE ESTABLISHMENT

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Article 287 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is hereby amended to read as follows:

"Art. 287. Retirement. – Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract.

"In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employee's retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein.

"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.

"Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

"Retail, service and agricultural establishments or operations employing not more than (10) employees or workers are exempted from the coverage of this provision.

"Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under Article 288 of this Code."

Section 2. Nothing in this Act shall deprive any employee of benefits to which he may be entitled under existing laws or company policies or practices.

Section 3. This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation, whichever comes earlier.

Approved: December 9, 1992.lawphi1Ÿ