Can a Company Retire Employees Below Legal Age Limit?

As a rule, the compulsory age of retirement is 65 while optional retirement starts at 60.  Employers, however, are allowed to enter into agreements for early retirement below these age limits but they must be able to show, if questioned later, that their retirement plans or agreements were voluntarily accepted by the employees.

Without proof of voluntary consent, a retirement made on the basis of this early retirement plan may be considered invalid as a “deprivation of property without due process of law.”

This was the Supreme Court’s decision in a case where a company retired its former clerk-typist at the age of 47 on the basis of a non-contributory retirement plan which gave the company the option to retire employees who have rendered at least 20 years of service.

After finding that the retirement plan was not embodied in a CBA or in any employment contract or agreement freely consented by the employee, the Supreme Court ruled that  the early retirement was invalid and constituted illegal dismissal.  (Cercado vs. UNIPROM, Inc. GR No. 188154, Oct. 13, 2010)


11 thoughts on “Can a Company Retire Employees Below Legal Age Limit?

  1. Chaye

    How about if the employee wants to have an early retirement due to Health Concerns, What are the benefits that he can avail? This is in the absence of an agreement or CBA in the company….

    1. Atty. Post author

      Without a CBA or existing company policy on retirement, the Labor Code providing for the minimum age of 65 for compulsory retirement or 60 for optional retirement will apply. Before these ages, when the employee voluntarily leaves the company due to health reasons, I believe that it is properly a resignation which is not legally entitled to any retirement benefits or separation pay. Of course, the employee can always appeal to the company for a retirement package even without any retirement plan or CBA. But this is purely discretionary for the company.

  2. Chaye

    Thanks a lot!
    This site a real BIG help for HR Practitioners like me.
    More Power and God Bless!

  3. sheila

    My Father has been working now or 37 yrs in the company. He wanted to avail an early retirement however, his boss told him that there we no separation pay that the company can give if ever he will be resigning. With the statement of my father’s boss, is this against to the labor code law? Can my father avail the retirement plan program and will receive the separation pay accordingly?

    1. Atty. Post author

      Sheila: Generally, an employee who resigns or retires is not entitled to separation pay, unless there is an existing company policy, employee agreement or collective bargaining agreement that provides for this. In the absence of a company retirement plan or CBA, and if your father is at least 60 years old, then he may retire and be entitled to retirement pay computed at 1/2 month pay for every year of service (a fraction of at least 6 months is consider one year of service). If there is a company retirement plan or CBA, then your father may be entitled to early retirement depending on its terms. He will have to let a labor lawyer examine the provisions of the existing retirement plan to determine what his rights are. I hope this helps.

  4. hazel

    How about if an employee starts to work in a company at the age of 55? Is she entitled for the retirment benefit if she retire at 60?

    1. Atty. Post author

      Hazel: In the absence of a retirement plan or agreement, yes, if she has served at least 5 years in the company. I hope this helps.

  5. First

    A friend who borrowed money from me has been working in PLDT for 12 years. He is planning to resign on his 15th year with the company (after 3 years from now). He’ll be 40 years old by then. Will he get any separation pay and how much is it normally (estimated)? He is saying that he can get not less than 1M. Is it true?

    1. Atty. Post author

      First: How much a retiring employee will get from his employer will depend on the company policy. Most employers (possibly PLDT) give at least a month’s pay for every year of service, or may have retirement funds where the employer pay double the employee’s contribution to the company retirement plan.

  6. Antonio

    Dear Atty,
    our company, accdg to our branch manager who is an expat, we have a retirement plan, but we have no idea of the extent of the benefits in the plan, as we have not seen it. just yesterday, he is asking me to write a request to the management that my service be extended as I will be 60 by june, and the said plan says retirement in the company is 60 and can be extended only by mutual agreement.
    Can he force me to write the request? thank you very much and God bless po!

    1. Webmaster Post author

      Replied through email.

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