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ILS Discussion Paper Series 2011

Retirement Under R.A. 7641:


Issues and Prospects for
Social Dialogue


Celia V. Cabadonga



























3

TABLE OF CONTENTS

*Abstract of the Study

1

Chapter 1

INTRODUCTION

2-7

A.

Background of the Problem

2-4

B

Statement of the Problem

5

C.

Significance of the Problem

6

D.

Objectives of the Study


6

E.

Scope and Limitations

7

Chapter II

THE RETIREMENT LAWS IN THE PHILIPPINES

8-15



Evolution of Retirement laws

8

The Legal Basis

9 - 13

Proposed Legislation on Retirement Benefits

14 - 15

Chapter III

ANALYTICAL FRAMEWORK

16

Definition of Variables

17 -18

Globalization and Its Effects

18 - 19

Labor Flexibility

19

Management Prerogatives

20

Chapter IV

METHODOLOGY


Research Design

21

Samples and Instrumentation

22

Data and Collection Procedures

22
4


Chapter V

RESULTS AND DISCUSSIONS

23 - 51

I

POLICY CONTENT:


23 - 34

R.A. 7641 Legal Framework

24 - 26

Observations and Findings

27 - 34

II

POLICY IMPACT:

35-51

A.

Impact of RA 7641 at the Company


Case Study of a Medium Size Company Operating at
the Countryside

35 -42

a. Background

35

b. Company Profile

36

c. Employment Profile

36 - 37

d. The Retirement Problem

38

e. Company As Cases on Retirement

40

f. Policy Impact HR Responses

43 - 44

g. Management Prerogatives and Options

44

h. Other Possible HRM Responses and Options

45

B.

Impact of Globalization to R.A. 7641

46

Labor and Employment Situation

47 - 48

Workers Displacement

49 - 51

Chapter VI

THE ROLE OF SOCIAL DIALOGUE IN RETIREMENT
POLICY ISSUE

52 - 54

Chapter VII

CONCLUSION AND RECOMMENDATION

55 - 59

Policy Recommendations/Options

56 - 59
5







































ANNEXES LIST OF ANNEXES

Annex A

List of Retirement Bills Filed in 15
th
Congress

Annex B

Case Review Matrix : The Role of Social Dialogue in
Retirement Policy Issue

Annex C

Questionnaire for a Case Study
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ABSTRACT

Republic Act 7641 or The New Retirement Law in the Philippines, is originally
conceived by the Department of Labor and Employment to give ample protection to workers,
particularly, those that are not covered by retirement contract. This Act provides that, all private
sector employees, regardless of their position designation or status and irrespective of the
method by which their wages are paid are entitled to retirement benefit upon compulsory
retirement of sixty five (65) years or upon optional retirement at sixty (60) years or more. The
minimum retirement pay due to covered employees shall be equivalent to one-half month
salary for every year of service. The Act mandated that retirement pay should be shouldered by
the last employer.

The study attempts to assess and analyze the impact of R.A. 7641 to both labor and
capital in a globalized business setting. The study examined both the policy content and the
policy impact by looking at the relationship of age group to the incidence of workers
termination, the bulk of retrenchment cases decided by NLRC and Supreme Court, and a
workplace scenario in analyzing a specific case of one company who had volumes of retirement
cases in court. The paper posit a hypothesis that the continued mandate of the law will only
cause trigger to capital, to terminate employees approaching retirement age, just to avoid the
giving of benefits. This can be manifested through legal and illegal options. The legal option is
through the use of labor flexibility, which they termed as companys best practices while; the
illegal options results to illegal dismissals.

The study concluded that the implementation of the Act has the logical implications on
the increasing trend of termination/retrenchment of workers, especially when workers are
approaching the age of retirement. The companies response to the mandate of law can be
shielded by management prerogatives and globalization pressures to the detriment of old age
loyal employees. The paper suggested some amendments to the Act to make it effective and
implementable. This is in order to carry out the Constitutional wisdom of law for the workers to
have a just share to the companys fruit of production, which is their investment during the best
years of their lives.


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Chapter I

INTRODUCTION


A. Background of the Problem

Republic Act 7641 or The New Retirement Law in the Philippines, is an
amendment of Article 287 of the Labor Code. The Act is originally conceived by the
Department of Labor and Employment to give ample protection to old age workers,
particularly, those that are not covered by Collective Bargaining Agreement or
retirement contract. It gives a retirement pay to all workers reaching its twilight years of
60-65 years of age. The law is conceptualized as a protective measure to give workers
their rightful share to the companys fruit of production, after investing the best years of
their lives to the company.

RA 7641, was passed in Congress on December 9, 1992, and took effect on
January 7, 1993. This Act provides that, all private sector employees, regardless of their
position designation or status and irrespective of the method by which their wages are
paid are entitled to retirement benefit upon compulsory retirement of sixty five (65)
years or upon optional retirement at sixty (60) years or more. The minimum retirement
pay due to covered employees shall be equivalent to one-half month salary for every
year of service, a fraction of at least six (6) months being considered as one whole year.

Under the New Retirement Law, it is a financial obligation of an employer to
give retirement pay to its employees reaching 60 to 65 years of age, who has served the
company for at least five (5) years. The amount of retirement pay is based on expanded
one half month salary equivalent of 22.5 days, based from their latest salary at the
time of retirement. One half month salary shall mean: a) Fifteen (15) days salary based
on the latest salary rate; b) Cash equivalent of five (5) days of service incentive leave;
c)One-twelfth (1/12) of the thirteenth- month pay, (1/12 x 365/12=.083x30.41=2.52).

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Thus, for example, an employee, 30 years of age and receiving P5,000 basic pay
in 1993, with an increment of 10% per year will have a salary of P87,000 after 30 years
in the company. By the time, that an employee has already reached 60 years old and
qualified for optional retirement, the company has the total financial liability of Two
Hundred Fourty-Four Thousand, Six Hundred Eighty Seven Pesos (P244,687.50) to
him. If the company is maintaining 100 workers at the time of the inception of the law,
by the year 2023, the company has the financial liability of, 244,687.50 to each
employee or a total of Two Hundred Fourty-Four Million, Six Hundred Eighty Seven
Thousand, Five Hundred Pesos (P244,687,500.00). This is the actual picture of
employees benefit and the financial burden to be shouldered by the employer,
employing 100 regular workers at the time of inception of this Act.

There is a presumption that, many employers speculate that its impact would
cause tremendous financial liability that will cripple their business operations if not cured
outright. Queries received by the Department of Labor and Employment (DOLE)
revealed that many of the employers, are not prepared for the mandatory
implementation of the law. Hence, many capitalists tried to think of some management
schemes to avoid the giving of benefits under R.A. 7641.

By looking at the labor side, at present, there are numerous cases of money
claims on unpaid retirement benefits filed with the National Labor Relations
Commissions(NLRC) and National Conciliation Mediation Board (NCMB), allegedly due to
lack of companys fund or the companies have gone bankrupt and/or become insolvent.
Likewise, illegal termination and constructive dismissal cases were observed when
workers are nearing the age of retirement, as one of the companys prerogatives in
avoiding the heavy financial burden of retirement benefits which is entrusted to the last
employer of the retiring workers.

On the employers side, the Act created confusion on part of the management of
keeping their loyal employees until retirement age, because of the tremendous financial
obligations to be incurred by the company. Added to this, R.A. 7641 has a retroactive
effect, as ruled by the Supreme Court in Oro Enterprises Inc. vs. NLRC. The retroactive
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application of the Act will mean that the employer will pay all its retiring employees from
1993 onwards, the retirement pay to be computed from the date of their employment to
the date of retirement to the company. For example, in the recently SC decided case in
27 April 2011, in Masing and Sons Devt. Corp. vs. Gregorio P. Rogelio, (GR 161787),
the court ruled that employer has to pay Rogelio his retirement benefit under RA7641
from the date of his employment in 1949 up to the time of his termination in 1997. The
impact of this ruling might even spell a financial collapse of small and medium size
enterprises.

In todays realities, businesses are operating in a competitive global environment.
The advent of globalization, change many companies on the way they are doing
business. Today, many companies are undergoing reorganization, thus, doing numerical
and functional flexibility to cope with the competitiveness in the global arena.
Globalization has enabled firms to maximize their technological and organizational
advantage like merger and consolidation and minimize business cost by employing labor
flexibility.

Hypothetically, it is perceived that the present development in doing business
and many forms of labor flexibility would logically render the Act ineffective. Logic
dictates that, the way how business is organized and managed today would in effect
cripple if not totally delete the mandates of R.A. 7641. The implementation of the Act
therefore, has the logical implications of the increasing trend of
termination/retrenchment of workers, especially when workers are approaching the age
of retirement.








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B. Statement of the Problem

After nineteen years of RA 7641 implementation, a researcher may ask: Is the
Act really effective? Does it achieve its purpose of protecting workers reaching the
twilight years of their lives? What will be the Acts impact to both labor and capital in
todays globalized business setting?

The retirement pay under this Act is basically the financial obligation of the
employers. Many employers are not yet ready, unaware, or trying to avoid the financial
liability brought about by the implementation of this Act. Thereby, before the situation
comes, they are making of any legal means to terminate/retrench workers approaching
the retirement age. Numerous cases on retirement and termination were filed at NLRC,
allegedly due to lack of companys fund or that the companies gone bankrupt or
insolvent. Many cases of workers above middle age are either; retrenched, terminated
or separated by the company.

Further more, globalization has already changed the way the companies are
doing business. The companies may either; merged, consolidate, restructured or stream
lined to cope with competition. They maximize production while at the same time
minimize labor cost by employing flexibility. Labor or numerical flexibility is now creating
a big impact to the mandates of R.A. 7641.

Therefore, the change of events in business community provokes the following
questions:

Can the globalize environment in business cripple the mandates of R.A. 7641,
thereby rendering it moot and academic? How can the workers be protected by this tide
of event, specially, when they are separated from service at the age where they cannot
find employment anymore or rather the companys will not accept them because of their
age? Will it be right to think that this Act will just trigger the employers to terminate the
service of workers nearing retirement age? What will be the HRM response of company
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when facing financial problem due to retirement pay for workers, especially now that
labor flexibility is the rule of the game?

This situation is quite alarming that needs immediate policy assessment.

C. Significance of the Problem

The problem will generally affect the total work force registered at 35,061,000
1
.
Specifically, it directly affects those at the age group of 45-64 years registered at
9,495,000.00
2
. The New Retirement Law logically creates an increase in the
termination/retrenchment of the workers nearing retirement age. This implication will
likewise create a domino effect to the whole employment structure. The company,
instead of hiring permanent employees, will tend to hire part-time, contractual and
temporary employees in the process. The act would create an effect on the companies
manner of hiring as well as firing employees. Likewise, other types of non-regular
workers like the five-months contractual arrangements, which are not covered by
retirement law, will also benefit from the study.

The business community will also benefit from this study. The confusion of
keeping or not their trained and employees till retirement will hopefully be clarified by
the paper. Hopefully the Act if amended will find the balance between business viability
and workers protectionism to make it attune with the change of times.

D. Objectives of the Study

In general, this policy paper will attempt to analyze the impact of the
implementation of R.A. 7641 to both labor and capital, given a globalize setting.
Likewise, this study attempts to recommend possible amendments to law and its
implementing guidelines in order to really protect the workers just share to the
companys fruit of production, during the productive years of their lives.


1
2010 Yearbook of Labor and Statistics, ISSNO115-1851
2
Ibid, pp. 29-31
12

Specifically, this research will attempt to:

1. Analyze the effectiveness of the implementation of the Act to both labor
and capital given a global business setting;
2. Describe the employers responses to retirement benefits law, while
coping up with globalization and the predicament suffered by the
workers;
3. Suggest some recommendations on how the workers approaching
retirement age will get the retirement benefits due them.

E. Scope and Limitations

The researcher finds it really hard to gather primary data from the employers
perspective or through their human resource personnel (HRD). A focus group discussion
with the management is also hard to explore, because most management
representatives have the tendency to avoid honest answers to the issues involved.

Gathering of secondary data through cases is the most logical options that a
researcher would do to prove the hypothesis. However, money claims specifically
dealing on retirement are difficult to gather since cases are interlinked with illegal
dismissals, retrenchment, unfair labor practice, etc. The researcher just limits the
analysis to the retirement/termination cases already decided by the Supreme Court.

On examining the impact, the study limits itself to one specific company who is
encountering problems on retirement cases in Courts. An attempt to present one case
analysis from the viewpoint of the employer is pursued, to describe at the plant level
how the company deals with their financial problem brought by the mandatory
imposition of retirement benefits to the employer.





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CHAPTER II

THE RETIREMENT LAWS IN THE PHILIPPINES



A. Evolution of Retirement laws

The Philippines has an evolving four system of old-age protection scheme for its
people.
First, is the social assistance programs given for the benefit of the very poor in
the society, these programs are particularly handled by the Department of Social
Welfare and Development (DSWD), the Department of Health (DOH) and the
Department of Labor and Employment (DOLE).

Second, is the mandatory defined benefit scheme which is provided by the Social
Security System (SSS) for private sector workers and the Government Service Insurance
System (GSIS) for public sector employees.

Third, includes the mandatory requirement of retirement pay through Republic
Acts. Like, deposits maintained at the PAG_IBIG Fund, which become available upon
retirement and the mandatory retirement pay provided for under Republic Act 7641 for
the workers in private sector. The public sector workers receive a combination of first
and second layer benefit.

Fourth, is voluntary in nature, where companies devise their own retirement plan
or individuals on their own, buy pension plans and other pre-need products to provide
the many contingencies in life.





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The Legal Basis
At present there are four legal mode of giving retirement benefits in our country.
First, are those covered by Republic Act No. 4917 for private employees covered by
contract, through Retirement Plan initiated by the company, or negotiated through
Collective Bargaining Agreement (CBA). Second, are those acquired voluntarily through
a pre-need pension or retirement plans offered by pre-need companies, Third, are the
retirement schemes governing all public servants. And lastly, under Republic Act 7641
which mandates the retirement benefit for those private workers who retire without a
retirement contract.

1. The Retirement Benefits of Private Employees under RA 4917

It was on June 17, 1967, that the first Republic Act (RA 4917) on retirement
benefits of employees in private firms was enacted. Basically, it provides tax exemption
for the retirement pay received by officials and employees covered by a Reasonable
Private Benefit Plan maintained by the employer. Provided, that: a) a retiring official or
employee has been in the service of the same employer for at least ten (10) years and
is not less than fifty years of age at the time of his retirement; b) the benefits granted
under this Act shall be availed of by an official or employee only once; c) that in case of
separation of an official or an employee from the service of the employer due to death,
sickness, or other physical disability or for any cause beyond the control of the said
official or employee, any amount received by him or by his heirs from the employer as a
consequence of such separation shall likewise be exempted.

The term reasonable private benefit plan means a pension, gratuity, stock
bonus or profit sharing plan maintained by an employer or officials and employees,
wherein contributions are made by such employer or officials and employees, or both,
for the purpose of distributing to such officials and employees the earnings and principal
of the fund thus accumulated, and wherein it is provided in said plan that at no time
shall any part of the corpus or income of the fund be used for, or be diverted to, any
purpose other than for the exclusive benefit of the said officials and employees.

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2. Retirement under Contract offered by Pre-Need Insurance Company

Pre- Need Insurance Companies offered different retirement schemes to the
company as a group or to individual workers. This mode of retirement applies to all
workers who applied voluntarily through personal pension fund by the pre-need and life
insurance companies. The funds can be thru companys gratuity, cost sharing scheme,
productivity or profit sharing scheme.

An employee may retire or be retired by his employer upon reaching the
retirement age established in the CBA or other tax-applicable agreement contract and
shall receive the retirement benefits granted therein: provided, however, that such
benefits shall not be less than the retirement pay required by RA 7641 and provided
further that if such retirement benefits under the agreement are less, the employer shall
pay the difference.

The pre-need and life insurance companies offer voluntarily personal pension
funds. Pre-need companies are plan issuers authorized under Republic Act No. 8799 to
sell or offer for sale to the public any pre-need plan in accordance with rules and
regulations, which the Securities and Exchange Commission has prescribed. Pre-need
plans pertain to contract which provide for the performance of future services or the
payment of future monetary considerations at the time of actual need, for which plan
holders pay in cash or installment at stated prices, with or without interest or insurance
coverage and includes pension plans. Other dominant plan types are life, education and
interment plans.
3


On the other hand, the Philippine Insurance Code allows Assurance Company to
offer endowment and annuity contracts, which are classified as life insurance contracts
for purposes of said law. Old age and regular endowments are availed by those who
want guaranteed retirement income without however, entirely loosing the protection
element of the plans.


3
Private Pension Scheme in the Philippines, A Country Paper, Emilio B. Aquino, 2002.
16

This kind of retirement plan has existed since 1967. The problem that crop- up
on this kind of retirement is the availability of retirement fund at the date of retirement
of an individual. However, this is now well guarded by the Securities and Exchange
Commission (SEC).

3. Retirement Schemes of Public Servants or Government Workers

The Government Service Insurance System (GSIS) offers four retirement benefit
packages under the following laws:
1. R.A. 8291 If you are at least 60 years old, have rendered a minimum of 15
years in government service and not a permanent total disability pensioner.
2. P.D. 1146 - if public employees have been in service after May 31, 1977 but
before June 24, 1997
3. R.A 660 - if public employee were in service on or before May 31, 1977)
4. R.A. 1616 - if public employee were in the service on or before May 31, 1977
and;

R.A. 8291 provides two options for the qualified employee for availing
retirement benefits:

Option 1 Lump-sum equivalent to the sum of the basic monthly pension for
sixty months payable upon retirement and a monthly pension for life after the first five
years.
Option 2 Cash payment equivalent to 18 times the basic monthly pension
payable upon retirement and monthly pension for life payable from date of retirement.

P.D. 1146 - if an employee entered government service after May 31, 1977 but
before June 24, 1977, would be entitled to receive either of the sets of benefits below
depending on years of service:

Option 1 Basic monthly pension, if an employees are at least 60 years old and
had rendered 15 years of service. The basic monthly pension is guaranteed for five
17

years. After the five-year guarantee period, you would receive a basic monthly pension
for life. You may request for the payment in lump-sum of the basic monthly pension for
the guaranteed period of five years at a discounted rate of not less than 6%.

Option 2 if an employee are at least 60 years old and have rendered at least 3
years but less than 15 years of service, would be entitled to a cash payment equivalent
to 100% of the average monthly compensation for every year of service.

RA 660 this kind of retirement scheme is given to an employee whose sum of
age and years of service is 87 and at least 52 years old, have been in service on or
before May 31, 1977 with the last three years of continuous service. An employee is
entitled to receive the following benefits:

Monthly Annuity Guaranteed for Five Years and Lifetime Pension. If an employee
would retire at the age of 52 to 59, he/she would receive automatic pension from the
date of retirement with the option to request for a one-year lump sum at a discounted
rate and every six months thereafter. If an employee would retire at the age of 60 to
62, he/she is automatically entitled to receive a three-year lump-sum with the remaining
two-year balance payable at 63. If an employee would retire at the age of 63 and over
he/she have two options: a) Lump-sum guaranteed for five years and pension will
resume at the end of guaranteed period; or b) Automatic pension to start from date of
retirement. This option would entitle the employee to a mandatory annual increase in
pension and Christmas bonus.

R.A. 1616 if an employees have been in government service on or before May
31, 1977 with at least 20 years of service, the last three years of which had been
continuous except in case of death, disability, abolition of position, reorganization or
phase-out position. Under this act an employee would receive the following benefits:

Gratuity - an employees last employer would pay for the gratuity benefit, the
computation of which would be based on total creditable service converted into gratuity
months multiplied by the highest salary that you have received.
18


Refund of retirement premiums an employee is entitled to receive a refund
from the Government Service Insurance System (GSIS) consisting of an employees
personal contributions throughout the years of government service plus interest and
government share without interest.
4


4. The birth of New Retirement Laws as Retirement Benefits of all Private
workers not covered by Contract or CBA as mandated by RA 7641.

Republic Act 7641 is a new mode of retirement benefit under Article 287 of the
Labor Code that covers all workers in private sector who reached the age of 60-65 years
in a certain company with at least five years of service. At present, majority of Philippine
workers, especially those employed in small and medium establishment have no
retirement contracts. Hence, the Labor Code covers protection on retirement. R.A. 7641
provides the following:

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 employees 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

4
GSIS benefits, Leaflets Form, 2000
19

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 exclusions, the term one half (1/2)
month salary shall mean fifteen (15) days plus one twelfth (1/12) of the 13
th
month
pay and a cash equivalent of not more than five (5) days of service incentive leave.
5


Retail, service and agricultural establishments or operations employing not
more than ten (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

Republic Act 7641 came into force on January 7, 1993. Thereafter, the
implementing rule was subsequently issued and published by the Department of Labor
and Employment to implement the law and was made operative on the same date when
the Act took effect.

In 1998, R.A. 8558 was signed to amend Article 287 as amended, by reducing
the retirement age of underground mine workers from sixty (60) to fifty (50) years.

Proposed Legislation on Retirement Benefits

As early as March of 1997, the Committee already passed a Resolution on
Revision of Laws in Congress to amend RA 7641 and its implementing rules. However,
until the present time the Act is not yet amended. Foremost of which, the committee
wish to determine the sufficiency of form and substance of the implementing rules and
regulation of the Act and the setting up of a trust fund to insure the availability of funds

5
Integrated Labor and Labor Related Laws, Institute for Labor Studies, 2000.
20

to pay the retirement benefits. House Resolution 1030, entitled Resolution Directing the
Committee on Revision of Laws and/or Oversight Committee to Conduct a Study and an
Inquiry and to Evaluate, Review, and/or amend RA 7641 and Its Implementing Rules
and Regulations Issued by the Department of Labor and Employment, Otherwise Known
As the Retirement Law For the Private Sector For the Purpose Of, and with the End in
View of Determining Whether the Implementing Rules and Regulations are Sufficient in
Form and Substance to Properly Pursue and Implement the Law to its Fullest Extent by
Making Mandatory the Setting Up of a Trust Fund or Retirement Fund to Insure and
Assure Availability of Funds to Pay Retirement Benefits as the Need Arises.

Thirteen years have passed but until now, the problem brought about by the
amendment of Article 287 of the Labor Code as amended by R.A. 7641 or the New
Retirement Act is not yet been acted upon. During the 15
th
Congress, there are more
than 30 Bills were filed on retirement but it was observed that no single Bill seeking
amendments of RA 7641 to remove confusions on its implementation was not passed in
Congress . The Bills on retirement during the 15
th
Congress is attached, as Annex A.

It is imperative therefore, to conduct a policy analysis to assess the effectiveness
of the law and its impact, as a support in lobbying for the amendments of the Act.
21


CHAPTER III

ANALYTICAL FRAMEWORK


Figure 1
Impact of Retirement Act to both labor and Capital
And its relationship to Globalization




There is no previous study yet on the impact of the R.A. 7641 to both labor and
capital. This study shall, therefore adopt a micro framework by using cases filed in Court
to analyze the implications or possible effects of the Act in a specific company. Factors
like the pegging of retirement age to 60-65 years and imposing the burden of giving
retirement benefits to last employer would cause the capital to shape up and modify
some employment structures inside the company. Any action introduced by the capital
would therefore create an implication to labor. Many workers with age ranges of 45-55
will likewise be eliminated through termination or retrenchment. This situation would
R.A. 7641
- mandate the employer to pay
- retirement age 60-65
- benefit of 22.5 days/years of
service
-
Capital
- avoid payment of benefits
- terminate workers before
retirement
- changed in employment
structure

Labor
- unemployment, termination;
- retrenchment at the age 45
55;
- increase of cases filed
Globalization
- change of business
organization
- labor flexibility
22

imply bulk of cases filed at the Department of Labor and Employment (DOLE) as quasi-
judicial body more specifically at the National Labor Relation Commission (NLRC).

As shown in Figure 1, the impact of retirement Act to capital or private
companies would cause them to adopt, modify their employment structure for them to
cushion the financial effect of retirement pay benefits. Some modifications that the
mangement tends to adopt are early retirement, termination, retrenchment, job-
contracting, hiring part-time employees, etc. It can be done by adopting labor flexibility,
which is now acceptable by the government, as a process of adjusting to globalization.
The companies are streamlining, merging or consolidating in competing with the
globalize business environment. Many establishments just maintain core employees and
do away with the production line workers to survive in the competition. Hence, it creates
big impact to labor.

This is to test the hypothesis that, change of event would cause the
implementation of the Act ineffective. If not timely cured and amended would create a
big implication in negating the workers retirement benefit. The workers just share to
the companys fruit of production, by rendering long years of service to the company
during the best years of their lives would be gone into waste. The intention of the law of
giving protection to workers in their twilight years will be defeated.

a. Definition of Variables

Republic Act 7641 or the New Retirement Law is the Act that has provided
for the mandated payment of retirement benefits to all private sector employees
regardless of their position, designation or status and irrespective of the method by
which their wages are paid upon reaching the compulsory retirement age of sixty-
five (65) or an optional retirement of sixty (60). The minimum retirement pay due to
covered employees shall be equivalent to one-half month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.

23

Globalization is a condition, it simply means the state wherein any entity can
obtain goods or services from anywhere, or have facility to access any place in the
world. It is a phenomenon. It can be observed. It can be experienced.

Capital /Employer includes any person acting in the interest of an employer,
directly or indirectly. The term shall not include any labor organization or any of its
officers or agents except when acting as an employer.

Labor/ Employees - the total workforce. It includes any person in the employ of
an employer. The term shall not be limited to the employees of a particular
employer, unless the Labor Code so explicitly states. It shall include any individual
whose work has ceased as a result of or in connection with any current labor dispute
or because of any unfair labor practice if he has not obtained any other substantially
equivalent and regular employment.

b. Globalization and its Effects

Globalization, in simple terms, means the state wherein any entity can obtain
goods or services from anywhere, or have the facility to access any place in the world.
As such, globalization may be seen to envision three things. First, the world is one huge
market of traded goods and services, and the demand for such goods and services is
both specialization-driven and technology-driven. Second, investments can locate- and
in fact should be encouraged to locate- in areas which offer the most attractive
comparative advantages, and bring back the most profits for the investor and the host
country. And third, labor markets have become so integrated that the worlds human
resources have now become an internationally-shared resource. (Aquino and San Gil,
1977).

Director General of ILO, in his report, at the Session of the International
Conference, noted that while there had been an unprecedented increase in global
output, there had been no corresponding growth in employment opportunities. In
relation to the ILO- identified potential dangers, Bitonio, in his paper titled Some
24

Thoughts on Globalization, enumerates the four main macroeconomic issues
endangered by globalization as far as employment is concerned:

1. The Factor-Price Equalization Theorem. The fear in the industrialized
countries that globalization is unleashing new international competition from newly-
industrialized countries that they cannot withstand and which is causing rising
unemployment and falling relative wages among unskilled workers.

2. High Transitional Costs. For a developing country, trade and investment
liberalization means greater internal and external competition. Necessary structural
adjustment could lead to loss of jobs and widening wage inequality.

3. Integration of Labor Markets. A fear that globalization of the labor market is
leading to a race to the bottom with respect to wages and labor standards. Thus, it may
face difficulties in securing job tenure and in applying traditional systems of collective
bargaining and industrial relations.

4. Loss of National Policy Autonomy. The increasing mobility of capital in the
global setting poses a distinctive to governments to tax and regulate investments,
thereby undermining its revenue resources. Global financial markets also limit
governments discretion over interest rates, exchange rates portfolio investments. This
implies loss of national policy autonomy and that governments are becoming impotent.

Labor Flexibility

At the plant-level, the companies respond to globalization pressures with
different sorts of innovations. These innovations oftentimes referred as Best Practices
or labor flexibility, which aimed at simultaneously reaching the highest level of quality,
productivity and flexibility at competitive costs. From the employers point of view, labor
flexibility measures-such as labor-only contracting, total quality management, flexible
working hours, outsourcing, contractualization, and agency-hiring, among others are
25

necessity for the survival of the enterprises. However, the uncertainty is transferred to
the workers, either in the form of less employment security, less income or both.

The companies, in surviving the cutthroat of competition sometimes lead to
streamlining or re-engineering of the whole corporate structure and process and other
forms such as downsizing, smart-sizing, right-sizing mean displacement of workers.

The rapid pace by which trade and investment policies have developed within the
control of globalization has not been matched by the development of corresponding
labor and employment policies.

Management Prerogatives

Management prerogatives refers to the rights of an employer to regulate all
aspects of employment, such as the freedom to prescribe work assignments,
working methods, processes to be followed, regulation regarding transfer of
employees, supervision of their work, lay-off and discipline, and dismissal and recall
of workers (Baybay Water District vs. COA).

Similarly, the Court has defined a valid exercise of management prerogative as
one which covers hiring, work assignment, working methods, time, place and
manner of work, tools to be used, process to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay-off of workers and
the discipline, dismissal and recall of workers. Except as provided for or limited by
special laws, employers are free to regulate, according to their own discretion and
judgement, all aspects of employment (Consolidated Food Corp. vs. NLRC 1999).
6






6
Juris Bernadette M. Tomboc, CPA, JD, MSIRM, Management Prerogatives and Employees Participation,
De La Salle University, Manila Philippines
26

CHAPTER IV

METHODOLOGY




A. Research Design

This study proceeds by presenting first the Legal Policy Framework of RA 7641,
and analyzing its policy content. Some issues and cases emanated from both labor and
capital are presented to understand deeper the flaws on the wordings of the provisions
and its impact.

To address this concern, a cursory look on retirement cases filed in Supreme
Court was reviewed. This was taken as a springboard in choosing a company for a case
study. Primarily, the study intends to describe the undergoing internal labor flexibility by
the company in resolving their financial problem/obligation under new retirement law by
using questionnaire interview method.

Recent Supreme Court decisions on retirements in 2011 were also reviewed to
find out if social dialogue within the workplace existed. Although statistics can provide a
good idea of what is happening to the industrys labor market as a result of the
mandatory implementation of New Retirement law nothing or little is known about the
internal changes happening inside the company specially after the effect of global
financial crisis in 2008. The facts of the case brought in Court will hopefully help the
researcher understands the process of reduction of workers (organizational rightsizing)
inside the workplace.

Then it proceeded in understanding its general impact by looking at the labor
statistics in the industrys employment structure and termination structure. A cursory
view of trends in age group employment and termination structure will give a hint on
possible relationship on how the establishments adjust themselves to resolve the effect
of New Retirement Law implementation.
27


B. Samples and Instrumentation

Case Study, both in actual cases filed in Courts and company practice were used
as a tool for analysis. The Study focused on one case study of one company only. The
company was selected based on the bulk of cases they are having in courts and their
openness to share information about their company and their availability for interview. A
combination of purposive and snowball technique is used in determining company
sample. Questionnaire-interview method is also used to analyze the internal flexibility
undergoing in specific companies. Labor Statistics data on employment by age group
and termination trend is also used to determine the general impact of New Retirement
Law.

C. Data and Collection Procedure

This policy research used both primary and secondary data. Primary data was
taken at the (micro) plant level case analysis on companies responses to the problem
brought about by several cases filed against the establishment in Courts. The primary
data is gathered through a combination of personal interview and focus group discussion
(FGD) with the management and questionnaire method. Company files on retirement
are also gathered to support the FGD.

The secondary data is gathered through document review using internet and
copies of retirement cases filed in judicial and quasi-judicial body like the NLRC, books,
statistics, leaflets and other study related to the problem.







28

CHAPTER V

RESULTS AND DISCUSSIONS



I. POLICY CONTENT:

A. R.A 7641 Legal Framework

Basically, the intention of the Act is to provide additional old age protection to
private workers over and above the social protection scheme provided by SSS. It
evolves as a measure to fill the deficiencies of old-age protection provided by SSS and
Pag-Ibig.

R.A. 7641 provides and amendment of Article 287 of the Labor Code which reads
as follows:

Article 287 of the Labor Code as amended by RA 7641, provides:

Retirement. Any employee may be retired upon reaching the 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 employees retirement
benefits under any collective bargaining agreements 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
29

establishment, may retire and shall be entitled to retirement pay equivalent to at least
six (6) months being considered as one whole year.
7


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 13
th
month pay and
the cash equivalent of not more than five (5) days of service incentive leave.

The Bureau of Working Condition (BWC) of the DOLE released a simplified
interpretation of the Act in its handbook entitled Statutory Monetary Benefits as
follows:

Effectivity - Republic Act 7641 was passed on December 9, 1992, and took effect
on January 7, 1993. The Act serves as an amendment of Article 287 of the Labor
Code.

Coverage - This Act shall apply to all employees in the private sector, regardless of
their position, designation or status and irrespective of the method by which their
wages are paid. This benefit however, does not apply to government employees,
and employees of retail, service and agricultural establishments or operations
regularly employing not more than ten (10) employees.

Amount of Retirement Pay The minimum retirement pay shall be equivalent to
one-half month salary for every year of service, a fraction of at least six (6) months
being considered as one whole year.

For the purpose of computing retirement pay, one-half month salary shall
include all of the following:

a) 15 days salary based on the latest salary rate;
b) cash equivalent of 5 days of service incentive leave;
c) one-twelfth (1/12) of the 13
th
month pay.

7
Integrated Labor and Labor Related Laws, Institute for Labor Studies, 2000
30


Other benefits may be included in the computation of the retirement pay upon
agreement of the employer and the employee or if provided in the Collective Bargaining
Agreement (CBA).

For covered workers who are paid by results and do not have fixed monthly
salary rate, the basis for the determination of the salary for fifteen days shall be their
average daily salary (ADS). Dividing the total salary or earnings for the last twelve
months reckoned from the date of retirement by the number of actual working days in
that particular period derives the ADS.

Retirement under a Collective Bargaining Agreement or Applicable Contract

Any employee may retire or be retired by his employer upon reaching the
retirement age established in the CBA or other applicable agreement/contract and shall
receive the retirement benefits granted therein; provided, however, that such retirement
benefits shall not be less than the retirement pay required under RA 7641 and provided
further that if such retirement benefits under the agreement are less, the employer shall
pay the difference.

Where both the employer and the employee contribute to a retirement fund
pursuant to the applicable agreement, the employers total contribution and the accrued
interests thereof should not be less than the total retirement benefits to which the
employee would have been entitled had there been no such retirement fund. If such
total portion for the employer is less, the employer shall pay the deficiency.

Retirement Benefits of Workers who are Paid by Results

For covered workers who are paid by results and do not have a fixed monthly
salary rate, the basis for determination of the salary for fifteen (15) days shall be their
average daily salary (ADS). The ADS is derived by dividing the total salary or earnings
for the last twelve months reckoned from the date of retirement by the number of actual
31

working days in that particular period, provided that the determination of rates of
payment by results are in accordance with the established regulations.

Retirement Benefits of Part-time Workers

Part time workers are also entitled to retirement pay of one month salary for
every year of service under RA 7641 after satisfying the following conditions precedent
for optional retirement: (a) there is no retirement plan between the employer and the
employee and (b) the employee should have reached the age of sixty (60) years, and
should have rendered at least five (5) years of service with the employer.

Applying the foregoing principle, the components of retirement benefit of part
time workers may likewise be computed at least in proportion to the salary of related
benefits due them.

Retirement Benefit of Underground mine Employees under Republic Act
8558

The retirement of underground mine employees has been reduced to a much
lower age. For this purpose, an underground mine employee refers to any person
employed to extract mineral deposits underground or to work in excavations or workings
such as shafts, winzes, tunnels, drifts, crosscuts, raises, working places whether
abandoned or in use beneath the earths surface for the purpose of searching for and
extracting mineral deposits.

Other Benefits upon Retirement

The retirement benefits under RA 7641 and RA 8558 are separate and distinct
from those granted by the Social Security System.



32


B. Observations and Findings

The following are the observed identified issues on the wordings of the law,
which are deem considered as hindering factors for the effective implementation of the
Act:

1. The conflict brought about by the retroactive application of RA 7641s
(RA 7641 took effect on January 7, 1993).

Supreme Court in a number of its decisions ruled on the retroactive application of
the law, Oro Enterprises, Inc. vs. NLRC and L.L. Cecilio, GR 110861, 14 November 1994;
Philippine Scout Veterans Security & Investigation Agency vs. NLRC. G.R. No. 115019,
14 April 1997 and most recently Masing and Sons Development Corporation and Crispin
Chan vs. Gregorio P. Rogelio, GR 161787, 27 April 2011. The Court upholds in its recent
ruling that xxx the benefit under Republic Act 7641, which was enacted as a labor
protection measure and as curative statute to respond, in part at least, to the financial
well being of workers during their twilight years soon following their life of labor, can be
extended not only from the date of its enactment but retroactively to the time the
employment contracts started.
8


The DOLE, in the course of implementing the Act has received many queries
among employers, foremost of which is the reckoning point of the effectivity date of the
Act.

The retirees of 1993 onwards, claim that, their retirement pay should be
reckoned from the date of employment which is strongly opposed by employers. The
employers claim that, they will just start the giving of retirement pay benefits under
7641, on January 7, 1993 onwards and not backwards.



8
Masing and Sons Development Corporation and Crispin Chan vs. Gregorio P.Rogelio, GR 161787, 27
April 2011.
33

To illustrate the conflict:

The Supreme Court ruled on the retroactive application of the Act, it
states that, its retroactivity reckoned from the date of employment. Meaning a
company should give the retirement pay of 1993 retirees computed from the
start of his/her employment. Hence, many employers claim that this decision
seem to be inconsistent on the prospective application of the law, to wit: No
law shall have retroactive effect.

The cases below clearly figure out the problem on effectivity date:

The case of Sta Catalina College and SR Loreta Oranza vs. NLRC and
Hilaria G. Tarcero. GR No. 144483, November 19, 2003.

Hilaria, an employee is hired in 1955 as elementary school teacher by Sta.
Catalina College. On May 31, 1997, Hilaria already reached her compulsory
retirement age of 65. In 1998, the employee, Hilaria filed money claims on
retirement pay benefit to her employer, claiming her 42 years of service in Sta.
Catalina College under RA 7645. The employer, Sta Catalina College, contend
that they are only liable for her retirement pay for four years. That is, from 1993
97 because of the non-retroactivity of the law. On its decision, the SC ruled
that the employer have to shoulder the retirement pay of the employee
multiplied to her 42 years of service.

The SC decisions, trigger a negative signal to employers. Why? This decision has
caught many employers unaware of the bulk of financial responsibility that they have to
shoulder on their retiring employees, since 1993. Since, the last employer has to
shoulder the retirement pay of their retirees, many employers are not ready to assume
the financial burden imposed by the Act. Hence, they results to employees termination
before retirement. This situation is happening inside the company through legal
remedies of management prerogatives and business flexibilities and other illegal means.

34

This problem creates a domino effect of retirement cases filed in court. Cases
like individual money claims and illegal dismissals are filed by the terminated employees
afterwards. The employers contend that the financial effect of RA 7641 is tremendous
that will cause financial collapse of the company. The employees on the other hand are
contending on the language of RA 7641 as their esteemed right under the law.

The above conflict is continuously happening inside the company since 1993. It
was observed from the cases studied that the source of conflict is basically the
reckoning point of computing the retirement pay and the basis of computation of
retirement pay. Under its implementing rules, retirement pay should be based on the
latest salary of the retiring employees.

The heavy financial obligation of an employer which the Acts demanded to pay,
at the time of retirement is causing a serious problem to the company. The
management is curing this financial burden by terminating workers before they reached
the age of retirement to avoid a financial collapse of the establishment.

2. The confusion on the computation of retirement pay based on the
mathematical meaning of fifteen days as basis for the amount of
payment.

The computation on the actual retirement benefit under the Act creates lots of
confusion to employers, thus resulting increase of money claims cases being filed by
workers.
Under the Act the term one-half (1/2) month salary is not consistent with its
mathematical meaning of fifteen (15) days. The component of one-half month under the
Act is actually twenty two and half (22.5) days.

The Bureau of Working Condition explained that the application of the above
phrase creates disparity in the computation of wages such as when deriving the daily
salary rate of the employee. It must be noted that the employer practice of adopting or
35

using a factor/devisor to get the average daily rate (ADR) of an employee from his fixed
monthly rate.

To illustrate, factor 365 days (where the employer pays his workers for his rest
days/Sundays) may be compared with factor 314 days (where workers are not
paid of their rest days) using the monthly rate of P6,000.00.


Average Monthly Rate ( AMR) x 12
_____________________________ = Average Daily Rate (ADR)
Factor
Thus;

P6,000.00 x 12 vs. P6,000.00 x 12
-------- -------- = P197.26/day ------------------ = P229.29/day
365 314

An interview with regional directors confirmed that many complaints on money
claims in the region arise from the conflict of the interpretation of one-half
month or 15 days application of the Act.

3. The retirement age pegged at the age of sixty (60) to sixty five (65)
years.

The question of equity and justice are posed by both employers and workers as
well as several unions in the pegging of giving the retirement benefits to 60-65
years of age. This issue has been a source of debate in Congress since 1993.
Hence, there are lots of Bills filed in Congress reducing the retirement age to 55
to different types of workers.

36

Queries received by the DOLE include the contention of some employees on the
unfairness of this provision. The employees on one hand contend that, they need
to wait for long years until 60-65 yrs of age, in one company, before they can be
qualified for the retirement benefits. They are worried that before they will reach
that age, they will be retrenched/terminated.

On the other hand, the employers are also complaining, because they find it hard
to use loyalty, as a factor for promotion. The act of pegging the heavy financial
burden to the employers has caused them to terminate employees before they
will reach retirement age; either by offering early retirement benefits or other
legal measures like retrenching the employees, just to avoid financial collapse
due to retirement. Hence, the management are sometimes resulting of hiring
temporary workers even for higher technical positions.

On the labor side, workers claimed that they were already, retrenched,
terminated or dead before they will be qualified for the benefit.

On the side of capital, the employer explained that way to evade the mandates
of the Act simply falls on what they called management prerogatives. Specially
now, that business is operating in a globalize environment.

On the government side, the DOLE also believes that the giving of retirement
benefits should be based on two options: 1) the years of service and 2) the age
of employees, to justifiably give to labor sector its due share to the fruit of
company production, which is the rationale behind RA7641. More importantly,
this will prevent the negative response of employer on limiting the number of
their employees to avoid benefits.

Likewise, the pegging of retirement age is detrimental to workers. Since,
employers will just resolve their manpower supply to five-months contractual
arrangement with lower age requirement, of 25 years and below. The older
workers, of more than 30 -40 age group for example, will find it hard to find
37

employment. Worst, highly trained workers of 40 -55 years old are prone to
termination. They find it hard to find employment because of age.

4. The silent provision on non- taxability of retirement benefits creates
lots of confusion to capital

The tax exemption on the retirement law is not explicitly provided in RA 7641,
neither in its implementing rules and regulation. Lots of cases had been filed on
this aspect. In NLRC Region V (Bicol Region) alone, there are 27 cases of
money claims filed against one company only. The claims are based on the
confusing non-taxability of retirement benefits.

This problem cause the employer to be placed under the most difficult situation
of whether or not to subject the retirement pay to tax. At present, the lies on the
provision of Section 28 (b) (7) of the National Internal Revenue Code on
Exclusions from Gross Income. The above Section states:

Sec. 28 (b) Exclusions from gross income the following items shall not be
included in gross income and shall be exempt from taxation under this title:
xxx
(7) Retirement benefits, pensions, gratuities, etc. (A) Retirement benefits
received by officials and employees of private firms, whether individuals or
corporate, in accordance with a reasonable private benefit plan maintained by
the employer: Provided, that the retiring official or employee has been in the
service of the same employer for at least 10 years and is not less than 50 years
of age at the time of his retirement. Provided, further, that the benefits granted
under this paragraph shall be availed by an official or employee only once. For
purpose of this subsection, the term reasonable retirement benefit plan means
a pension, gratuity, stock bonus or profit sharing plan maintained by an
employer for the benefit of some or all of his officials or employees, where
contributions are made by such employer for official or employees or both, for
the purpose of distributing to such officials or employees the earnings and
38

principal of the fund thus accumulated, and wherein it is provided in said plan
that at no time shall any part of the corpus or income of the fund be used for, or
diverted to, any purpose other than for the exclusive benefit of said officials or
employees.
9


What does the law implies? It would mean that if the company has no BIR
approved retirement benefit plan, the retirement benefit is taxable.

Articles from the Tax Watch Issue of SGV and Co. in 2005, confirmed the above
statement. It noted that planning for retirement could save retirees from having
to pay the top rate of 32% on their retirement pay. It explained in that article
that, Failure to think ahead can lead to unexpected and exorbitant costs .

Under the Tax Code, retirement benefits are exempt from income tax whether
these are received from private companies with private benefit plans under
Republic Act 4917 or without retirement plans under RA 7641 provided the
following proviso are complied with:
a) There is a BIR approved retirement plan
b) The employees is 50 years of age and stay in the company for 10
years;
c) Should be availed only once

RA 7641 legal provisions and its implementing rule is silent about this non tax-
requirements. It just plainly requires all private employers with at least 10
employees to pay retirement benefits to qualified employees in the absence of a
retirement plan. But the law is silent if it should be taxable or not.

RA 4917, mandated a definite written program setting forth all provisions
essential for qualification for retirement benefits but never mention about the
non- taxability of the benefit. However, the Tax Code requires that the

9
National Internal Revenue Code
39

retirement plan should be approved by the BIR before it will be tax-free. How
about if the plan is not yet approved? Should it be taxable? Under what law?

This inconsistency under the Act has created lot of problems that leads to so
many cases filed, resulting to the too tedious adversarial procedure.
40


II. POLICY IMPACT


A. Impact of RA 7641 at the Company: (A plant level assessment)

This part presents the result of the case study of one company. The purpose of
this exercise is to determine the impact of the passing of RA 7641 at the plant level.
Likewise, it describes how the retirement cases being encountered by the company
affect the management decisions and prerogatives.

The attempt is to describe the employer response to the restrictive
implementation of the law. The problems that the company is facing with the bulk of
cases on retirement filed against them; And, how the company is affected by the
problem, while at the same time, coping up with the competition brought about by
globalization. It is noteworthy to note a company samples to examine how the company
is coping.






A. Background

Company A is a domestic corporation, medium in size, engaged in the
manufacture of abaca pulp in since 1976. Company A is an industry leader and one of
the worlds manufacturers of abaca pulp sheets. It has been supplying quality abaca
pulp sheets to the international market for more than a decade now. Abaca fiber being
considered as an indigenous product, which can only be found in the Philippines and
Ecuador, is currently having a very large world demand.


Case Study: The Case of Medium Size Company operating
at the countryside

41

Company As current market is Japan, which is known for its very complex
distribution channel. The product (pulp sheets) is being resell to Japanese companies to
be used as their raw materials to manufacture specialty papers such as: currency or
bank notes, electrolytic condenser papers, filter papers, tea bags, meat casings,
disposables, non-woven and cigarette papers. To meet As increasing market demand
and its vision of becoming one of the worlds largest manufacturers of abaca pulp
sheets, the company need to strengthen both its external and internal environment.

B. Company Profile

Date Established: January 24, 1974
Principal Line of Business : Manufacturer/Exporter of abaca pulp
Authorized Capital Stock : P35,000,000.00
No. of years of existence : 31 years
Business Address : Dela Cost St. Salcedo Village Makati.
Plant site : Albay


C. Employment Profile

The company is relatively small with the total of 147 employees, 9 of its employees
are located in the head office in Makati while the other 138 workers are Bicolanos
working in Malinao Plant in Albay. As company culture is characterized by a family-
oriented environment, where everybody in the company knows everyone. At present
the distribution of workers as to age groups are as follows:

Age- Employment Profile of Company As Employees
Years in Service No. of Workers Percentage of Total
1-5 14 9%
6-10 41 27%
11-15 10 7%
16-20 33 23%
21-25 3 3%
26-30 46 31%
TOTAL 147 100%

42



The following graph indicates the number of years and the number of workers
the companys under current plantilla of the company:
Company A's Current Age-Plantilla
11 - 15
7%
6 - 10
28%
2 - 5
10%
26 - 29
32%
21 - 25
2%
16 - 20
21%
2 - 5 6 - 10 11 - 15 16 - 20 21 - 25 26 - 29

It was noted that 71% of its employees have been in the company for ten years
or more.

Thirty two percent (32%) or 46 of its workers are already at the prime age
approaching retirement with the total of 25-30 years in service.
Three percent (3%) or 3 of them have served the company for 21-25 years.
Twenty-one percent (21%) or 33 of them are already serving the company
for 16-20 years.
Seven percent (7%) or 10 of them had been in the company from 11- 15
years.
Eight percent (8%) or 12 of them had been in the company for exactly ten
years.

With the profile of employees, it is quite alarming to note that most of its
workers are nearing a retirement age. By understanding their age at present, 114 of
43

them are already qualified to receive benefits under RA 7641, if they reached 60-65
years of age.

This scenario presents a very clear alarming illustration of the burden that the
company has to face on the implementation of the RA 7641, since the start of January
7, 1993. Added to this injury, is the signing of their CBA in 2003, which specifically
provides their employee of a tax-free BIR approved retirement plan. The Executive Vice
President in Finance and Administration is alarmed with the problem and believed that if
not be properly address by the management, will create a big impact on their financial
status as well as employment structure.

D. The Retirement Problem

The number of cases filed against them in Court brings about Company As
problem. From 1994-2004, there are a total of 27 labor cases on retirement filed against
the company. The complaints are basically on money claims representing the amount of
tax withheld by the company on their retirement pay. The following illustrates the
problem at hand:

The CBA Agreement

In January of 2003, a new CBA was signed by labor and management. Art. X of
its provision states that, the company agrees to provide to all its regular employee a
BIR approved Retirement Plan out of pure gratuity. The retirement benefits provided
by the company doubled the mandatory requirements under RA 7641.To wit:

Article X Retirement Plan
The company agrees to provide a BIR approved
Retirement Plan covering all regular employees. The
amount of retirement fund shall commensurate to the
provisions on retirement benefits as stipulated on Art. XII.
44

This retirement plan shall entitle the employee of a tax-
free retirement benefits.

Under Article XII, the retirement benefits enjoyed by the
employees are as follows:

Compulsory Retirement the company shall pay a
retirement to forty five (45) days basic pay for every year
of service (no length of service required);

Optional Retirement the company shall pay equivalent to
thirty (30) days basic pay for every year of service;

Termination due to disease the company shall pay a
separation pay equivalent to forty five days (45) for every
year of service.

TheCompanys Dilemma

Since the effectivity of RA 7641 in 1993, many workers retired. In 2003, during
the effectivity of their new CBA, Compnay A was in a dilemma of giving the retirement
pay to workers as agreed in the CBA, since they are just in the process of applying for
BIR approval for its Retirement Plan. As per BIR Rule, in the meantime that the Plan is
not yet approved, Company A, being a withholding agent has a responsibility of
deducting taxes to the retired employees and faithfully remit the same to the BIR.

By looking at the provision of the RA 7641, there is no provision under the law
and its implementing rules that specifically provide for a tax-free retirement benefit.
However, since, Art. X of the CBA agreement provides a tax free BIR approved
Retirement Plan the retirees assumed that their retirement benefit is tax-free. The
problem is, while the Retirement Plan is not yet approved, the company, under the BIR
rule, has the obligation to withhold taxes to the retirement pay of the retirees.
45


The company is confused whether or not to subject the retirement pay to tax.
Further, the process of BIR approval for a tax-free retirement plan needs to satisfy a
rigorous requirement. Foremost of which, is the putting up of a retirement fund
amounting to Six Million Eight Hundred Fifty Three Pesos, Four Hundred Twenty Five
and Forty Four Centavos (P6, 853,425.44). The amount is so big that the company
finds it hard to provide the amount immediately.

As per BIR Rule Sec. 2 (b), item 1 of Revenue Regulations No. 12-86, the
retirement and separation pay constitute compensation subject to withholding tax. To
wit:

BIR Rule 12-86 -Sec. 2 xxxxxx
Pension, retirement, and separation pay. Pensions,
retirement, and separation pay constitute compensation
subject to withholding tax, except the following:

1) The benefit plan must be approved by the Bureau
of Internal Revenue;
2) The retiring officials or employee must have been
in service of the same employer for at least ten
(10) years and is not less than fifty (50) years at
the time of retirement; and
3) The retiring officials and employee shall not have
previously availed of the privilege under retirement
benefit of the same employer.
E. Company As Cases on Retirement

In 2003, five of its employee retired. Alindeco, being a good father of the family,
faithfully complied with the CBA agreement to its workers. The company gave the
retirement benefit to the retirees, but was forced to withhold taxes as mandated by the
above BIR rules. This act had cause instigation to the retirees to file money claims in
46

NLRC against Alindeco, on the ground that, as per CBA agreement, Alindeco should
provide a tax- free retirement plan to its employees. By understanding the case
involved, following information was gathered:

The following are the run down of cases filed against Company A:

The Companys Labor Cases on Retirement

Complainants Years
Retired
Retirement
Pay
Received
Money
Claims due
to tax
Status of
Cases/decision
1. Employee A 2001 162,019.50 130,317.68 -underpayment of
65,049.25 as per CA
decision

2. Employee B
1998 131, 853.48 76,003.26 -dismissed at CA

3. Employee C
2000 53,271.99 162,501.10 - dismissed at CA

4. Employee D
1997 87,000.00 44,499.45 -dismissed at CA

5. Employee E
2000 156,466.15 73,599.35 - pending -

6. Employee F
1998 123,482.60 42,893.75 Dismissed at CA

7. Employee G
1997 146,060.57 50,464.86 -Filed at NLRC
Legazpi

8. Employee I
1998 112,417.45 13,860.00 - fled at NLRC
Legaspi

9. Employee J
1998 23,115.01 190,063.91 -filed at NLRC
Legazpi

10. Employee K
1998 142,964.65 117,789.16 Filed at NLRC
Legazpi

11. Employee L
1995 107,432.60 45,846.36 -filed at NLRC,
Legazpi

12. Employee M
1994 88,990.40 141,830.76 -filed at NLRC
legazpi

13. Employee N
2000 129,280.94 248,596.94 -filed at NLRC Naga

14. Employee O

-

-

-
Filed at NLRC
Legazpi

15. Employee P

2003

180,344.63

116,082.79
-57,911.21
underpayment per
CA decision

16. Employee Q

2003

293,776.00

210,901.76
-105,655.25
underpayment as
per CA

17. Employee R

2004

232,407.14

124,713.21
-70,780.14
underpayment as
per CA decision
- filed before NLRC
47

18. Employee S 2003 102,476.97 207,978.67 Legazpi

19. Employee T

2004

99,660.63

205,050.62
- filed before NLRC
Legazpi

20. Employee U

2002

212,950.30

190,063.91
- filed before NLRC
Legazpi

21. Employee V

2002

146,801.39

50,464.86
-filed before NLRC
Legazpi

22. Employee X

2004

218,472.71

132,995.74
-filed at NLRC
Legazpi

23. Employee Y

2004

195,313.07

199,139.29
- filed before NLRC
Legazpi

24. Employee Z

2004

204,446.19

204,466.19
- filed before NLRC
Legazpi

27. Employee AA

2003

218,704.30
- President of Union
the only retirees who
do not file a case
Sources: Case Background:

The complainants seek to claim for the balance of their retirement pay benefits
representing the tax withheld and remitted to the BIR. The arguments anchored on the
ground that the retirement pay should be exempt from taxes as mandated by RA 7641.
Further, they argue that under Article X of their CBA, which was signed on January 1,
2003, Company A has agreed to provide a BIR approved Retirement Plan to the
employees of the company.

On first batch of 10 cases, NLRC decided in favor of the claimants. NLRCs
decision charged Company A with exemplary and moral damages of One Hundred Fifty
Thousand Pesos to each and every complainant. The decision had bloated the award to
One Million Two Hundred Forty Seven Pesos and Ninety Four Centavos(P1,000, 247.94).

On Appeal, the decision of the Court of Appeals (CA) affirmed NLRCs decision to
five claimants, whose retirement falls from January 2003, which is the effectivity of their
CBA. Company is obliged to return the tax withheld from the five retirees claims as
indicated in the above Table. The other five cases were dismissed due to prescription,
since it happened long before the effectivity of the CBA.

Company A, file a Petition for Partial Review in the Supreme Court. The company
faithfully believes that the agreement under Art. X of CBA is prospective in nature. It
48

does not mean automatic as presumed by the Court. Their reason is grounded on the
fact that the process of having the retirement plan approved by the BIR does not
happen overnight. If the company did not deduct taxes from the retirement pay, as
claimed by claimants, then BIR would penalize them being a withholding agent.

Company A believed that the act of deducting taxes from the retirement pay of
the employees is within the bound of their CBA agreement. The management deem that
the company just only acted with prudence like any good corporation should do, to keep
its share of providing the lifeblood of the nation. They believe that their obligation under
the CBA is to come up with the BIR approved retirement plan within the duration of
CBA. That is from the period of January 2003 December 2004.

The decision of CA, had cause instigation to other retirees to file their own
similar cases at NLRC. Another batch of cases on retirement are filed in NLRC
afterwards.

On October 2004, the company is able to secure a tax-free, BIR Approved
Retirement Plan through the Insular Life Assurance Co. Ltd. From then on, they did not
deduct taxes to the retirement benefits of their employees. As of this writing there are
already six employees who enjoyed a tax-free retirement benefits.

On the management side, there is still a big question that left hanging in their
minds is Should the company be penalized while dutifully complying with the BIR
Rules, and at the same time adhering to their CBA agreement of providing retirement
benefits to its employees, which is over and above the mandates of RA7641? .

Policy Impact : an HR Response

Based from the in-depth discussion with the Vice President of Finance and
Administration of the company, the management is disappointed with what is happening
with their workers-retirees. They feel that the familial orientation of giving welfare to the
employees, which is in fact doubled the mandatory requirement of the law, should not
49

deserve this kind of reaction. The cases filed against the company deviates their time
and resources to handling cases in Courts, instead of focusing it to a much needed re-
engineering of the company, both internal and external, to meet global competition.

The management initial point of view in analyzing the impact brought about by
labor cases on retirement, while at the same time that the company is putting up a new
plant to respond to the competition in a global market, are as follows:

The intensified competition in the world market will force the company to
further cut cost and rationalize operations.
Employment in the company until retirement age would become less of a
norm, early retirement should become a permanent option for personnel
above middle age.
An attractive and comprehensive retirement package coupled with
training on entrepreneurship is a must, to develop possible business
partnership with our retired workers.

F. Management Prerogatives and Options

A companys option is to propose comprehensive early retirement scheme, to its
employees. It is believed that this option is a recognized management prerogatives.

Initially, the plan of the management is to offer a comprehensive package of
early retirement benefits to 71 of its employees. This retirement package will include an
entrepreneurship training aligned with the product they have (abaca). The intention is to
develop possible future business partnership with the workers-retirees.

As of this writing, the management has an initial plan of allotting at least Twenty
Four Million Pesos (P24, 000,000.00) for the early retirement package. While, at present,
Company A was able to put up another new manufacturing plant in Malinao Albay, to
meet its market demands. The new plant is equipped with semi-automated machines
that will increase its production, while at the same time reduce its workforce
50

requirements. Hence, offering early retirement to their employees could become a
permanent option of the management.

This kind of prerogative is backed-up by several decisions by Supreme Court. In
the case of Bulletin Publishing Corp. vs. Sanchez ( Philippine Airlines, Inc. vs. Airline
Pilots Association of the Philippine 2002), the Court held:

The aforestated section (in CBA) explicitly declares, in no uncertain
terms, that the retirement of an employee may be done upon initiative and option of the
management. And when there are cases of voluntary retirement, the same is effective
only upon the approval of the management. The fact that there are some supervisory
employees who have not retired after 25 years with the company or have reached the
age of sixty merely confirms that it is the singular prerogative of the management, at its
option, to retire supervisors or rank and file workers when it deems fit. There should be
no unfair labor practice committed by management if the retirement of private
respondents were made in accord with the agreed option. That there were numerous
instances wherein management exercised its option to retire employees pursuant to the
aforementioned provisions appears to be fact, which private respondents have not
converted.It seems only now when the question of legality of a supervisors union has
arisen that private respondents attempt to inject the dubious theory that the private
respondents are entitled to form a union or go on strike because there is allegedly no
retirement policy for their benefit.

Other possible HRM responses and options : internal and external
flexibility.

Internal flexibility refers to changes in work organization, wage system, work
performance, evaluation of job/tasks. These measures afford a more flexible deployment
of firms permanent staff to respond to work demands. It includes: job-rotation, multi-
skilling, part-time works, overtime works, and flexible shift work.

51

External flexibility refers to the controlling the size of the workforce. This
measures includes; job contracting, employment contracts of limited duration, agency
hiring, cross posting of workers and buying of modern equipments.


B. Impact of Globalization to RA 7641

The New Retirement Law was created during the time when the country has not
yet felt globalization. It was only in 1996, when the Philippines entered into GATT-WTO
that the impact of globalization to labor and capital has been much felt by the country.
The Act, being a social welfare policy is one of the legislations affected by this global
development.

The integration of the global economy is unleashing much fiercer international
competition, and the key to survive competition is competitiveness. Firms who want to
survive this competition do not only resort to the use of flexible work arrangements, but
also, streamlining or re-engineering of the whole corporate structure and process. Trade
union leaders to mean the same thing view this and other forms such as downsizing,
smart sizing: displacement of workers.

Labor sectors generally perceived globalization as a process of adjustments by
economy and society, which often results in the retrenchment of workers, as companies
consolidate their resources and gear them up for global competition. Under the regime
of liberalization and regulation some companies resulted to termination of workers
through retrenchment, closures, illegal termination and other means of avoiding workers
nearing retirement age. This practice crippled the mandate of R.A. 7641. As seen on on
the following Tables:





52


Labor and Employment Situation

Tables below, reflects a declining trend of employability as the workers increase
in age bracket or nearing the retirement age.

Table 1
Employed Person by Age Group in the Philippines
(2000 -2009)

Age
Group
2000 2001 2002 2003 2004 2005 2006

2007 2008 2009 Total
15-19 2,336 2,527 2,559 2,491 2,583 2,647 2,793 2,839 2,802 2,873 26,430
20-24 3,189 3,464 3,468 3,663 3,804 6,430 3,739 3,789 3,777 3,858 39,181
25-34 6,339 6,426 6,699 7,570 8,544 8,699 8,660 8,895 9,012 9,238 80,082
35-44 6,590 6,960 7,056 7,107 7,250 7,457 7,679 7,850 7,994 8,146 74,089
45-54 4,899 5,396 5,669 5,408 5,176 5,316 5,550 5,770 5,956 6,185 55,325
55-64 2,717 2,919 3,052 2,991 2,893 2,977 2,864 3,011 3,130 3,310 29,864
65 + 1,322 1,463 1,559 1,464 1,362 1,432 1350 1,407 1,416 1,452 14,227
Total

Ave.
27,454 29,156 30, 062 30,635 31,613 34,958 32,636 33,560 34,089 35,061 318,864

31,866

Source: BLES Labor Statistics Yearbook






Table 2
Percentage of Employed Person by Age Group
(2000 2009)

Age
Group
2000 2001 2002 2003 2004 2005 2006

2007 2008 2009 Total
Ave.
15-19 8.5 8.6 8.51 8.13 8.17 7.57 8.56 8.46 8.22 8.19 8.29
20-24 11.61 11.8 11.53 11.95 12.03 19.89 11.46 11.29 11.08 11.00 12.36
25-34 23.3 22.04 22.28 24.71 27.02 26.92 26.53 26.50 26.44 26.35 25.20
35-44 24.0 23.87 23.47 23.19 22.93 23.07 23.53 23.39 23.45 23.23 23.41
45-54 17.84 18.50 18.85 17.65 16.37 16.45 17.00 17.19 17.47 17.64 17.49
55-64 9.89 10.01 10.15 9.76 9.15 9.21 8.78 8.97 9.18 9.44 9.45
65 + 4.81 5.01 5.18 4.77 4.30 4.43 4.14 4.19 4.15 4.14 4.51
Source: BLES Labor Statistics Yearbook


53

8.29
12.36
25.20
23.41
17.49
9.45
4.51
15-
19
20-
24
25-
34
35-
44
45-
54
55-
64
65+

Source: Yearbook of Labor Statistics, 1998 - 2010



From 2000 2009, shows a declining trend of employment as the age bracket
increases. Employment rate reach its peak at the age bracket of 25-34 years of age
at 25.20%. As workers reached 45 to 54 age group it decline to 17.49%; then
sloped down to 9.45%for workers having 55-64 age group.

The graph reveals the following:
Only 4.5 % of workers reach the retirement age bracket of 65 years old;
The workers peak age of employability is from 25-34 years of age;
Employability decline started from age 45;
As workers nearing the retirement age of 45-54 employment drops by 7.71%;
A sudden drop of 15.75% is observed as workers nearing the retirement bracket
of 55-64 years of age.

This shows that age is related to employability because of the benefits attached
to age and length of service. In some consultation handled by DOLE, representatives
from the Visayas cited the case of Cebu Shipyard where there are now only about 400
54

workers, down from the original workforce of 600. Retiring or resigning workers are no
longer replaced as a way of saving on operational costs.
10


Workers Diplacement

On the question : Can the workers displacements as a result of globalization will in
effect, cripple if not totally delete the mandate of RA 7641?

In the study conducted by ILS in 1999, Understanding Globalization and Trade
Union Responses, labor groups identified labor flexibility as one of the immediate
effects of globalization. This measure is considered by labor groups as detrimental to
workers, leading them to job insecurity, sub-standard terms and condition of work and
worst is workers displacement. Among the issues raised by labor includes:
contractualization, agency hiring, increasing feminization of cheap labor, and utilization
of child labor are some forms of workers job displacement. Labor groups also claim that
capital resorts to sub-standard terms and conditions of work such as: diminution of
salaries, absence of social security like avoidance retirement benefits are considered as
HRM options to achieve competitive advantage of gaining more production volume while
at the same time reducing its labor force to attain more profits.

The capital side, on the other hand, argued that stiffer competition in a global
market has caused them for increased labor flexibility measures. They view the issue as
the management way of adopting to labor flexibility measures and as a means of
keeping business viable and competitive. Making the matters worst, it was pointed out,
that they lacked funds for old age assistance to their workers. They claim that
displacement is the matter of companys survival.
11









10
Proceedings, Understanding Globalization and Trade Union Responses, 1999.
11
ibid
55

The Table below shows the following:


Table 3
Establishments Resorting to Permanent Closure and Workforce Reduction,
due to Economic Reasons
2000 -2009

Year No. of Establishments
Reporting
No. of Workers
Displaced
2000 2,258 67,624
2001 2,859 71,864
2002 3,403 80,091
2003 3,262 67,977
2004 2,008 36,163
2005 2,943 57,594
2006 2,979 59,376
2007 2,468 51,125
2008 2,436 52,863
2009 2,522 61,360
Total 27,138 538,480
Average 2,713 53,848
Source: Bureau of Labor and Employment Statistics

In brief, the number of establishments resorting to permanent establishment
closure and workforce reduction in ten years (from 2000 2009) is ranging from 2,000 -
3,000 establishments. There is an average 2,713 establishments in the country who are
undergoing organizational flexibility/rightsizing yearly to cope with globalized business
competitiveness.
This organizational flexibility is affecting a total of 538,480 workers who were
displaced in ten years time or an average of 53,848 workers per year. The number of
workers displacement varied, it reached its peak in 2002 and its lowest in 2004. The
affected establishments were concentrated in the service sector, in urban centers (like
NCR), and among establishments with micro employment size.







56



Table 4
Workers Employment versus Workforce Reduction
due to Economic Reasons
1999 -2010

Year No. of Workers
Employed
No. of Workers
Displaced
2000 27,454 67,624
2001 29,156 71,864
2002 30,062 80,091
2003 30,635 67,977
2004 31,613 36,163
2005 34,958 57,594
2006 32,636 59,376
2007 33,560 51,125
2008 34,089 52,863
2009 35,061 61,360
Total 319,224 538,480
Average 31,922 53,848
Source: Bureau of Labor and Employment Statistics

By trying to compare the workers reduction viz number of employment per year,
data revealed that the number of workers displaced is greater than workers employed.
From 2000 2009, there were a total of 319,224 or an average of 31,922 persons
employed, while the total of workers displaced were 538,480 or an average of 53,848
per year.

In general, data confirmed that, establishments resort to the reduction of
workers to survive competition. In a globalized lingo, they called it as: downsizing or
smart sizing. This management prerogative can legally evade/cripple the mandate of
RA 7641.

It is quite alarming to note that, if the Act will not be amended, it will result to
the unjust deletion of the retirement benefits to private workers. Hence, the
constitutional right of workers share to the companys fruit of production, which is their
investment, during the best years of their lives will just gone into waste. Amendments
should consider business realities in global setting.
57

CHAPTER VI

The Role of Social Dialogue in Retirement Policy Issue


Social Dialogue simply means an exchange of ideas, a willingness to listen,
and to respect other opinions. The International Labor Organization (ILO) defines
broadly the concept of social dialogue, as: all types of negotiation, consultation or
exchange of information between representatives of government, employers and
workers, on issues of common interest relating to economic and social policy.
12


In a globalized economy, an alternative mechanism that works fast and
produces long term economic and social benefits is highly recommended, rather than
long and tedious adversarial legal procedures. ILO identified some of the possible
benefits of using social dialogue as an alternative way of resolving labor issues, as
follows:

Democratization of economic and social policy- making - More recently,
social dialogue has become part of the approach to deal with economic
growth and development. This has worked, not just in more
industrialized countries, but in countries with quite difficult situation like
Panama and Africa.

It adds legitimacy and ownership in a democratic society, any
unilateral action without the consent with stakeholders is often met with
resistance.

It reduces social conflicts by facilitating partnership and problem-solving
approach Dialogue can minimize adversarial relationships through
collaboration and partnership. It can develop a shared understanding of
problems can facilitate discussion of policy alternatives and their

12
Junko Ishihawa, ILO: Key Features of National Social Dialogue: A Social Dialogue Resource Book. ILO
Training Office Geneva, 2004
58

implications, and the finding of compromise to achieve common
responses.

It eases tensions during economic hardship and transition periods
social dialogue can be a very effective means to ease economic and
social tensions during economic crisis or transition.
13


The DOLE most recent policy direction in resolving any labor issues and
problems at the workplace is to engage both parties to social dialogue or
conciliation/mediation first, before any labor problem will ripen into a case,
Department Order No. 107-10, Series of 2010 (SeNA) . The directive is anchored with
the objective of facilitating the resolution of disputes through Alternative Dispute
Resolution(ADR) by mutual agreement of both parties. The intention is to attain
harmony at the workplace and not to further harm the productivity of the company.
This strategy is a balancing act of government, to cushion the impact of globalization
that is directly affecting both labor and capital.

The study tries to examine the most recent Supreme Court decisions in 2011
with retirement problems to understand if social dialogue existed inside the company
before the issue of retirement ripened into a case. Five cases were reviewed and
noted the following observations. See Matrix attached as Annex B:

1. On the existence of Social Dialogue - Out of five Supreme Court decided cases
in 2011 on retirement issue, there are two companies engaged in consultations.
One is through its employees union, before implementing the companys
Special Retirement Program. As a result, 102 employees agreed and benefitted
with the plan, only one employee dissent resulting to his termination and filing
of his case in court. The other case is through its grievance machinery
procedure, but the consultation failed.


13
ILO Resource Book on Social Dialogue
59

2. On representation two companies have employees union. In one case,
consultation and coming up with an agreement existed. The company had a
reorganization and special retirement plan discussed and agreed with the
employees union. However, consultation happened only during the planning
and implementing stage. Consultations did not conform with the required
phases of social dialogue in resolving problems. The other case is the non-
compliance with some CBA benefits, where consultation with union is being
processed by the grievance committee.

3. Sources of Problems resulting to filing of cases - two companies have
undergone reorganization/ numerical and functional business flexibilities. One
company had CBA renegotiation in economic benefits and two companies
experienced individual cases on money claims due to retirement.

4. Facilitating Factors - the observed facilitating factors in cases studied include:
a) the presence of installed mechanism that initiate consultation, like the
presence of workers organization and grievance machinery inside the company;
b) the presence of retirement plan before consultation; c) plan had passed
consultation and agreement by the stakeholders before implementation.

5. Hindering Factors - the observed hindering factors that resulted to filing of
cases in Court, includes: a) companys implementation of termination without a
plan and consultations; b) non-involvement of workers in business
rightsizing/reorganization; c) separation/termination without prior consultation
to workers involved.
60

CHAPTER VII

CONCLUSION AND RECOMMENDATIONS



Concluding Remark

Globalization is a phenomenon that we cannot avoid. The increasing mobility of capital
in a global setting has cause the implementation of RA 7641 or the New Retirement
Law impotent. The companys respond to globalization pressures cut throats to the
mandate of the Act. The giving of retirement benefits will just remain within the scope
of management prerogatives. Hence, old age protection to all private workers not
covered by contract will logically be minimized if not vanished.

The influx of labor cases on retirement has caused some companies to shape up
through the use of its management prerogative right. The continued mandate of the law
will just only cause trigger to capital, to avoid the giving of benefits. This can be
manifested through legal and illegal options. The legal option is through the use of labor
flexibility, which they termed as companys best practices while; the illegal options
results to illegal dismissals. This kind of mandate just only results to the backlogging of
cases on money claims filed by the retirees and displaced workers in NLRC. The
displacement of workers as a result of globalization as well as the too rigorous
adversarial process in Courts hurts not only labor but capital as well.

It is now imperative for the government to innovate some options that will not hurt the
capital side and at the same time provide safety net to the labors rightful share to the
companys fruit of production. Labor and capital should be considered as partners in the
creation of wealth of a company and of a nation as well. Hence protection during the
twilight-years of their lives should be considered as shared responsibility of labor, capital
and government.


61

Policy Recommendations/ Options

1. Provident Fund Scheme or Productivity Based Retirement Benefits -
should be looked into as one scheme of the company, to provide old -age
welfare benefits to their workers, which they can be withdrawn at the time of
workers retirement to the company. This provident fund is a kind of scheme
wherein both labor and capital will contribute to the fund. The amount of
contribution of both labor and capital will depend on their respective agreement
or through productivity based sharing agreement. If the fund is intended for
retirement, then, it can only be withdrawn at the time of retirement. However, it
can be loaned to the members as form of accessory benefits. The government
contribution to the fund is its tax-free character. This can be modified through
the creativeness of every company or through CBA.

2. Integration of retirement benefits provided under RA 7641 to the
Social Security System (SSS) under Special Retirement Fund. This is to
ensure the retirement pay of every workers irrespective of their employment
status (including casuals, contractual and temporary workers). Like for instance,
the GSIS Retirement scheme for public workers, wherein the retirement pay of
every public worker is a shared contribution of the worker and the government.
The sharing of retirement pay contribution is 9% from the workers equated by
12% from the government computed from the public employees latest salary.
This kind of scheme can be used as pattern for private workers. Hence, every
worker who already rendered one year of service will be entitled to at least 22.5
days (pay equivalent) retirement benefits from their employers, computed with a
proportion of 2.5 days pay as workers share and 20 days as employers share.
This kind of schemes can be remitted to SSS as their retirement benefits which
can be done monthly or quarterly. In this way, the capital will not be financially
harmed during the actual date of workers retirement. In the same way that
workers nearing retirement age will not be prone to dismissal or retrenchment.
The fund should be put in trust and portable in character, so that, in case the
workers change employers or terminated from one job to another, the retirement
62

contribution remains intact with the care of SSS. The workers retirement fund
can only be given to the workers upon reaching 50 60 years of age. In the
same way that the fund cannot be withdrawn by the workers until they reached
their retirement, but can be loaned to workers, like the GSIS fund, as an
accessory benefit to the workers.

3. Integration of Retirement Benefit to Employment Contract for those
workers under contractual arrangement, specially the rampant
5months-5 months contractual arrangement. This is to give ample
protection to employees working under contract. In todays realities many
workers are forced to accept 5-5 employment contracts just to have work. This
management scheme is designed to avoid the giving of benefits to workers and
to evade legal responsibilities. The lack of employment opportunity in the
country, accepted 5-5 employment contract as a norm, especially in service
industry. It is proposed that a model employment contract should be designed by
DOLE to incorporate the giving of retirement benefits to workers who became
victims of 5-5 contractual arrangement. The management of the retirement fund
under this contract can be lodged at DOLE or SSS. This retirement fund is
portable in character, so that it can be transferred to any system when workers
find permanent employment.

4. Immediate amendment of RA 7641. The Proposed Provision for
Amendments on RA 7641 are as follows:

Prospective Application on the Effectivity Date to address
confusion on its implementation as well as to avoid termination of those
workers nearing retirement age, prospective application of the law is
recommended as an amendatory measure of the new retirement policy.
This is to protect workers who are approaching retirement age from the
fangs of legal and illegal termination. In the same light, this is to avoid
the hesitance on the part of the employers to comply with the mandate
of an Act. The employers notion of inequality under the law can be easily
63

cured-out by what they called as union reorganization or companys
smartsizing.

In the recent case of Masing and Sons Development Corporation vs.
Gregorio P. Rogelio (GR161787, 27 April 2011) the Court ruled that the
application of law shall start not only from the date of its enactment but
retroactively, from the time the employment contract started. The
dispositive portion to wit, xxx the benefits under RA 7641 which enacted
as a labor protection measure and as a curative respond, in part at least,
to the financial well being of workers during their twilight years soon
following their life to labor, can be extended not only from the date of its
enactment but retroactively to the time the employment contracts
started.

This decision created a big impact on the financial viability of the small
and medium company who are maintaining the loyalty of their old
workers.Further, this might trigger the HRD managers to retrench/dismiss
workers nearing retirement age just to do away with financial mess.

Explicitly provide in the law the expanded equivalent of
month pay which is equivalent to 22.5 days retirement benefit
per year of service

This is to avoid confusion on the computation regarding the exact
meaning of one-half month-salary under the Act.

Under the present law, one half months is equivalent to 22.5 days and
not 15 days, it should be clarified in the provision in order to avoid
confusion on the part of the employers. The component of one-half
month under the Act at present creates confusion because different
companies adopt different factor/devisor to get the average daily rate
(ADR). At present employers used two factors to get ADR, as follows: a)
64

365 days (where employer pays his workers for his rest days and
Sundays , b) 314 days (where workers are not paid of their rest days)

The Non-taxability of retirement pay should be clarified in the
provision of the law.

This is to avoid confusion on the part of the employer whether or not to
subject to tax the retirement pay of retirees. The silent provision on non-
taxability of the Act has been the source of conflict at the workplace and
legal battles in courts. The tedious legal battle resulted to the detriment
not only of the workers involved but also the employers.

Non- taxability of retirement without any condition should be clear not
only in the law itself, but in the IRR as well.



65

REFERENCES
I. Books
Institute for Labor Studies (2000). Integrated labor and Labor Related Laws.
Manila Philippines
Azucena, Cesario Jr. ( 2010). The Labor Code with Comments and Cases. Rex
Bookstore. Manila, Philippines.
Institute for Labor Studies (1999). Understanding Globalization and Trade Union
Responses. Intramuros Manila, Philippines.
The National Internal Revenue Code. Manila, Philippines.
Bureau of Labor and Employment Statistics (2010). Yearbook of Labor Statistics.
DOLE Bldg. Intramuros, Manila.
Aquino, Emilio B. (2002) Private Pension Scheme in the Philippines. Manila,
Philippines
Junko Ishihihawa (2004). ILO: Key Features of national Social Dialogue. A Social
Dialogue Resource Book. ILO Training Office, Geneva.
II. Pamphlets, Manuals
International Labor Organization (2004). Promoting National Social Dialogue, An
ILO Training Manual. In Focus Programme on Social Dialogue, Labor Law and
Labor Administartion. Geneva, Switzerland.
Department of Labor and Employment (2006). Handbook on Workers Statutory
Monetary Benefits. DOLE, Intramuros, Manila.
GSIS Leaflets on Retirement Benefits for Private Sector (2000). GSIS, Manila
III. Cases and Bills on Retirement
s.c.judiciary.gov.ph. Decisions on line
elibrary.judiciary.gov.ph
www.chanrobles.com/cralawsdecisions.htm
www.congress.gov.ph












66

Questionnaire for Case Study


Q1. Please provide vital information of your company:

A. Companys Profile:

1. Name of Company:
2. Date established:
3. Principal line of business:
4. Background:
Mission/Vision/Goals/Strategy






5. Capitalization
6. No. Of workers

Q2. How many persons are working in this company at present? Please
provide me the following information:

B. Employment Structure:


Occupation
al Category

Employment Status Category
Managerial/
Administrativ
e
Regular
/Permane
nt
Workers
Part-
Time
Temporary/
Seasonal
Dispatc
h
Contract Total
Engineers/ot
her
Professionals
M F M F M F M F M F M F
Clerical/Sales
Foremen/
Supervisors

Production
workers

Total

C. H R Responses in resolving problems on retirement:

Q3. Aside from salary what are other benefits you provide to the workers?

67

A3.
_____________________________________________________________
______
Q4. Approximately, at the average, how many persons are working in this
establishment in 1992?

A4. Total: Men _____ Women ______

Q5. Do you encounter problems on the implementation of retirement law?
Please describe the problem.
A5.
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
______________

Q6. How do you resolve this problem?

A6.
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
____


Q7. Please indicate how you fill vacant positions in this company now.
A7.
Occupational Category Fill the
vacant
regular
Get part
time
workers
Sourced
from
agency-
dispatch
Get
contract
workers
TOTAL
Managerial/Administrative
Engineers/Other
Professionals

Clerical and Sales Workers
Foremen/Supervisors
Production workers

68

Q8. Please indicate the number of workers in this company who resigned
voluntarily, were retrenched, or dismissed since 1992.

A8. TOTAL: Men _________ Women __________


Q9. Did the establishment hire replacements for the workers who resigned,
were retrenched or dismissed?

A9. Yes All ____ ; Yes Some ______ ; No ________


Q10. In general, is the mandatory obligation imposed to the company by
R.A. 7641 or retirement law discouraged the company to employ
regular workers?

A10. Yes ______; No ________; Other Remarks
__________


Q11. Does your company plan to increase _____ or decrease _______ the
number of workers for the next two years.

Q12. What is your companys globalization strategy? Do you think this will
help in resolving your labor issues on retirement benefits?

A12.
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________



A13. What are your recommendations on how to effectively implement
retirement law in the Philippines, that will be beneficial to both labor
and capital. Please explain fully?

Q13.
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________

69

ANNEX - A
RETIREMENT BILLS FILLED IN 15
TH
CONGRESS
BILL NO. TITLE AUTHORS
10 AN ACT UPGRADING
THE RETIREMENT AND
DISABILITY BENEFITS
OF MILITARY
PERSONNEL AND FOR
OTHER PUPOSES
Hon. Rodolfo G.
Biazon

31

AN ACT REQUIRING ALL
GOVERNMENT OFFICES
TO ENSURE THE
RELEASE OF
RETIREMENT BENEFITS
OF ITS EMPLOYEES
WITHIN FIFTEEN DAYS
FROM RETIREMENT

Hon. Jane Tan
Castro

38 An act granting
retirement, health care
and death benefits to
professional Filipino
athletes who win world
championship titles in
international
professional sports
competitions or in other
equally prestigious
international
championship games and
providing funds therefor
Pedro B. Acharon
Jr.

165

An act amending article
287 of presidential
decree 442, as amended,
otherwise known as the
labor code of the
Philippines by adding a
new article 287- a
reducing the retirement
age of racehorse jockeys
from sixty (60) to fifty
five (55)





Atty. Magtanggol
T. Gunigundo I
70



284







410







An act requiring all
government offices to
ensure the release of the
retirement benefits of its
employees within fifteen
days from retirement

An act further amending
section three of republic
act numbered three
hundred and forty, as
amended, otherwise
known as the armed
forces retirement law
Rollo Golez







JuJuan Edgardo M.
Angara


412 An act establishing a
retirement benefit
system for prosecutors in
the national prosecution
service of the
department of justice
and in the office of the
ombudsman, providing
funds therefor, and for
the purposes
Juan Edgardo M.
Angara

449 An act reorganizing and
renaming the Philippine
retirement park system,
enlarging its powers and
for other purposes
Juan Edgardo M.
Angara

621

An act mandating the
payment of retirement
benefits to SSS or GSIS
members within a maxim
period of thirty (30) days
from the retirement date
and for other purposes

Juan Edgardo M.
Angara

623




An act further amending
section three of republic
act numbered three
hundred and forty,

Juan Edgardo M.
Angara


71






885







979











1035






1207











1266



amended, otherwise
known as the armed
forces retirement law

An act providing for a
mandatory clearance for
all government officials
upon their retirement
from public office, and
for other purposes



An act fixing the
retirement age of the
unformed personnel of
the Philippines act
numbered sixty-nine
hundred and seventy five
otherwise known as the
department of the
interior and local
government act of 1990


An act to upgrade the
salary scale of a retiring
government employee by
one grade for purposes
of him/her retirement


An act reducing the
retirement of
government employees,
amending for the
purposes republic act no.
8291 otherwise known
as the revised
government service
insurance act and for
other purposes


An act granting
retirement benefits to all
barangay to all barangay
officials who have





Augusto Boboy
Syjuco







Augusto Boboy
Syjuco











Augusto Boboy
Syjuco






Pedro P.
Romualdo











72







1296






1334






1434








1439









1436




1639



rendered at least fifteen
(15) years of continuos
service and providing
funds therefor



An act to upgrade the
salary scale of a retiring
government employee by
one grade for purposes
of hir/her retirement


An act establishing the
overseas Filipino workers
social secutiry and
retirement system and
appropriating funds
therefor

An act providing for five
years minimum
appointment with a
monthly salary, health
and retirement benefits
for day care workers and
appropriate fund thereof


An act providing monthly
salary, health and
retirement benefits for
barangay workers,
barangay nutrition
scholars and barangay
service point officers and
appropriating fund
thereof

An act increasing the
retirement benefits of
the members of the
judiciary


An act providing early
retirement and voluntary
Augusto Boboy
Syjuco









Augusto Boboy
Syjuco






Rodante D.
Marcoleta






Carmelo F.
Lazatin








Carmelo F.
Lazatin









73






1744







1830







1904







2094








2412









separation from the
government service,
providing a system of
funding thereof, and for
other purposes


An act providing
automatic promotion of
government officials and
employees upon
retirement from
government service and
for other purposes

An act to provide a
retirement benefit for the
overseas Filipino workers
otherwise known as the
migrant workers
retirement act of 2010


An act granting
retirement and health
care benefits Filipino
athletes who have won
world titles or world
championship and
providing funds thereof

An act granting
retirement incentives and
health care benefits to
professional Filipino
athletes who have won
titles or world
championships and
providing funds

An act granting a
promotion of one salary
grade higher to all
government granting
upon their promotion
retirement.


Carmelo F.
Lazatin




Rufus B.
Rodriguez








Salvador H.
Escudero III






Rex Gatchalian







Mark A. Villar







Mark Aceron H.
Sambar






74


2808











2526




2682









2973
















3016





An act lowering the
mandatory retirement
age of government
employees, amending for
this purpose sections
13(b) and 13-A Of R.A
8291, otherwise known
as the revised
government service
insurance act of 1997


An act additional
retirement benefits to all
barangay officials and for
other purposes

An act increasing the
monthly retirement
pension of all social
security system (SSS)
retirees to a minimum
level of six thousand
pesos (P6,000) under an
economic adjustment
pension program

An act amending section
13-A republic Act 8291
(GSIS ACT OF 1997) by
the prescribing other
conditions for
entitlement to the
retirement benefits,
under section 13 of the
same act, for
government employees
or officials being phased
out and/ or not retained
by his
office/bureau/corporation
due to
privatizing/abolishing his
office


Arnulfo F. Go










Randolph S. Ting











Wilfredo Mark M.
Enverga



Rogelio J. Espina









Salvador
Escudero III







75



3191







3236





3862
An act mandating the
payment of retirement
benefits to government
retirees on the date of
their retirement
An act granting
retirement benefits to all
barangay officials who
have renedered at leat 3
terms on continuos
service and providing
funds

An act to upgrade the
salary scale of a retiring
government employess
by one grade for
purposes of his.her
retirement

An act requiring all
government offices to
ensure the release of the
retirement benefits of its
employees within 15
days from retirement














Salvador
Escudero III




Imelda Calixto
Rubiano






Malapitan





Catro

















76

ANNEX - B
THE ROLE OF SOCIAL DIALOGUE IN RETIREMENT POLICY
ISSUE

A. Representation: Checklist for Social Dialogue, (as examined from the
Facts of the Case:

Supreme
Court
Case Profile
(2011)
PrEmployees
OrOrganization
exist?

W


How
differences
resolved
within the
workplace?
Are there
agreements/
Are there
mechanisms
exist for the
ratification and
enforcement of
agreements?
No. of
workers
Affected?
Benefitted?
Aggrieved?


Other
mechanism
exist to
involve
other
stakeholders
?
1. GR 165381
Nelson A. Caluli
vs. Eastern
Telephone Phil.
Inc.
Corona C. J.
Feb. 9, 2011
Yes;
Eastern
Telecommunic
ations
Employees
Union (ETEU)
- representing
employees
interest

Thru
meeting/dialogu
e explaining the
exact details of
right-sizing
program and
special
retirement
program
Yes; ETEU agreed
to the
implementation of
:
Special Retirement
Program with
corresponding
Retirement
Package of 21/2
mo. Salary per
year of service
102 workers
benefitted with
the agreement
;

1 worker
dissent hence
terminated in
the course of
reorganization.
Not
mentioned in
a case;

Submission of
dispute to
NLRC

2. GR 183889
Gen. Milling
Corporation-
Independent
labor Union
(GMC-ILU)
Vs. Gen. Milling
Corp.
Velasco J.
June 15, 2011

Yes;
General Milling
Corporation-
Independent
Labor Union

Thru Grievance
machinery;

exercise
procedure
within the
grievance
committee;

Yes; CBA
Collective
Bargaining
Agreements

(failure to comply
to some agreed
benefits)

-77 newly hired
employees ; 30
N0v. 1993;
- 36 daily-paid
employees;
- 234
separated
employees

Not
mentioned

-submission of
issue to NLRC

3. GR 182397
Alert Security
and
Investigation
Agency, Inc. vs.
SaidaliPasaliwa
n,
WilfredoVercele
s, and
MelchorBulusan
Corana C. J.
September 14,

None;
Employees
just defended
themselves









Exercise of
management
Prerogatives;



none

3 workers
aggrieved

Not
mentioned;

Submission of
issue to NLRC
77

2011


Supreme
Court
2011 Case
Profile
PrePresence of
Employees
Orgaaninization
?
How
differences
resolved
within the
workplace?
Are there
mechanisms
exist for the
ratification and
enforcement of
agreements?
No. of
workers
benefitted to
mutual
agreement?
No. of
workers
aggrieved/di
ssent?

Othermecha
nism exist to
involve
other
stakeholders
?

4. GR
186209
United
Laboratories
Inc., vs.
Jaime
Domingo,
CarmencitaPunz
alan Domingo,
AnonuevoRemi
gio, Rodolfo
AnnonuevoRem
igio, Rodolfo
Marcelo, Raul
Norico, Eugenio
Ozaraga
Velasco, JR; J.
Brion

None;
Not
mentioned in
the case

Exercise of
management
prerogatives;

Failure to
resolve
grievance at the
workplace.

None;

PDMP- is a
company initiated
cost restructuring
measure which
resulted in the
redundancy of the
job functions of
the employees
working in the
provincial depots.

Employees in
16 regional
branches;



Issue
submitted to
NLRC
5. GR 167787
Masing and
Sons
Development
Corporation
and Crispin
Chan v.
Gregorio P.
Rogelio
Corona C. J
April 27, 2011

None Exercise of
management
prerogatives
none 12 employees
aggrieved
Issue
submitted to
NLRC





78


I. Dynamics of Social Dialogue

Brief description on how the phases of social dialogue are initiated in the
workplace before ripening into a case:


Issues/Business
Problem

Social Dialogue Phases
Planning Initiating Implementing Monitoring Evaluating Feedback

1. GR
165381-
Eastern Tel.
Phil Case:

Labor issue: Reduction
of workers due to
rightsizing

Business Problem: In
1998, due to business
troubles and losses,
ETPI was compelled to
implement a
Rightsizing Program
which consisted of two
phase: first phase
involved reduction of
ETPIs workforce to
only those employees
that were necessary
and ETPI could
sustain;Second phase
companywide
reorganization which
would result to
transfer, merger,
absorption, or abolition
of certain departments
of ETPI


Yes;

Special
retirement
Plan for
affected
employee

Yes ;

by offering
employees
who had
rendered
at least 15
years of
service to
have a
Special
Retirement
Program;

Yes
- the offer was
initially rejected
by ETEU, a
recognized
bargaining
agent;
threatened to
stage a strike;

- consultations
with ETEU
existed;
Agreement
signed Feb. 9
1999 bet. ETPI
and ETEU

Not
mentioned
in the case

Not
mentioned

One case
existed;
-One
employee do
not agree
with the
offer and
chose to
stay;
however on
the second
phase which
is the
company
wide
reorganizatio
n, the
division
functions
itself was
absorbed by
other
divisions, the
position was
deleted;
hence this
SC decision
2. GR
183889-

Labor Issue: CBA non-
compliance of some
economic benefits, ie.
retirement;

Problem: Union is
espousing a
computation which
extends the benefits of
imposed CBA beyond
Not
existed
Not
existed
Not existed Not existed Not existed Issues
ripened to a
case
79

the remaining two-year
duration of the original
CBA;
- the computation of
benefits beyong Nov.
1993, be threshed out
with the Grievance
Procedure of the CBA

3. GR 182397

Issue:
complaint for
underpayment
of
wages;illegal
dismissal;

Not
existed

Not
existed

Not existed

Not existed

Not existed

Issues
ripened into
case



Issues/Business
Problem

Social Dialogue Phases
Planning Initiating Implementing Monitoring Evaluating Feedback

4. GR 186209

Labor Issue; Reduction of
workers due to
organizational flexibility of
the company. 3
employees demanding
severance of their function
to avail of retirement plan
package

Business Problem: Unilab
implemented a Physical
Distribution Master Plan
(PDMP) by consolidating
its finished goods
inventories and logistics
activities, (warehousing,
order processing, and
shipping) into one
distribution center in
Manila. Jobs function were
declared redundant and
their position were
abolished.
Redundant employees
separation package =
21/2 mo. Per every year
of service;
-Unilab closed down 16
provincial depot and gave
the redundant employees
a package of 21/2 mo/yr.

SD not
existed;

PDMP Plan
was
implemented
thru
companys
initiative.


PDMP Plan
is self
initiated
by the
company

employee
s
demandin
g for a
severance
pay of
their
employme
nt on
redundanc
y of their
work.

No SD
Implemented;

The job
functions of
employees
working thereat
were declared
redundant and
their positions
were abolished.

Not existed

Not existed

Issues ripened
to a case
80

of service;


5. GR 161787MSDCs
case

Labor Issue: Rogelio
brought against Chan a
complaint for retirement
in pursuant to RA 7641 in
relation to Art. 287 of the
Labor Code.

Business Problem; the
payment of retirement
benefit from date of
employment 1949 up to
1997;

Rogelio was employed in
1949 by Pan Phil. Copra
dealer, MSDCs
predecessor, which
engaged in the buying
and selling of coprain
IbajayAklan, with its main
office, being in Kalibo,
Aklan. It changed its
business name several
times, in 1990
MasingChan , the
manager of the entire
business was replaced by
his son, Crispin Chan.
Rogelio worked in Ibajay
branch from 1949 until
1997. At that time he was
67 years old. Rogelio did
not receive any retirement
benefit from MSDC, hence
for such claim and other
benefits due them.

Decision actually affecting
the RA 7641
The benefits under RA
7641, which was enacted
as labor protection
measure and as curative
statute to respond, in part
at least, to the financial
well-being of workers
during the twilight years
soon following the life of
labor, can be extended
not only from the date
of its enactment but
retroactively to the
time the employment



SD not
existed



SD Not
existed



SD Not existed

At the age of
67, employees
was separated
by the company
without giving
the retirement
pay benefits



SD Not
existed;




SD Not
existed



Issues ripened
to a case;


81

contract started.
*Facilitating Factor:

- organized presence of
unions initiating
consultation process;
- with pre-approved plan
Special retirement Plan;
- plan discussed,
agreement had passed
consultations before
implementing the plan;
- presence of the
companys grievance
procedure.



* Mitigating Factor:

- Implementation of
workers reduction
without Plan and
consultations;
- When the workers not
involved in business
decision;
- Separation without
prior consultation to
workers.


I. Recommendations
Based on companiescase experience, what gaps in practice and in law are
necessary to make R.A. 7641 more effective.













82



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Bridging Research, Policy and Practice

The Institute for Labor Studies (ILS),
an attached agency of the Department
of Labor and Employment (DOLE),
was created through Executive Order
No. 251 in 1987.

It is the think tank, consultant, broker
and knowledge incubator of DOLE.
The ILS informs policy via its
researches and advocacies on nascent
and critical labor and employment
issues and concerns.
INSTITUTE FOR LABOR STUDIES
5/f DOLE Building, Gen. Luna Wing,
Intramuros, Manila

Tel.: +63 2 527-3456, 527-3490, 527-3452
Fax: +63 527-3491
Website: www.ilsdole.gov.ph

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