Devising a retrenchment pay model that minimizes company losses and protects labor

• Main Author: Baybay, Benedict Dominic Q.
• Format: text
• Language: English
• Published: Animo Repository 2011
• Subjects: Severance pay—Philippines; Employees—Dismissal of—Law and legislation—Philippines; Benefits and Compensation
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/6490; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=12901&context=etd_masteral
• Institution: De La Salle University

The retrenchment is more that a guarantee to employees to receive benefits when they are separated from work. It is also a form of recovery tool for businesses. However, Philippine laws on retrenchment do not make retrenchment an effective recovery tool. The retrenchment rate only factors in the years of service of an employee without considering a company’s financial standing. Integrating the financial statements through the use of ratio analysis creates a retrenchment rate unique to each company which is based on its financial capability to pay its workers without compromising its ability to recover. This ensures that retrenchment becomes an effective recovery tool and not a precursor for a business that is winding down. To ensure that labor is protected, reemployment guarantees are provided to retrenched employees. Employers are prohibited by law to hire new workers without first allowing formerly retrenched employees to have their former jobs back should they decide to. Whatever inequalities this may result in between employers and employees is aptly justified by Rawl’s Theory on Justice and Corporate Social Responsibility. In summary, the law perpetuates a problem for businesses. Business principles are then applied to amend the law creating the new retrenchment rate that not only protect labor but also helps companies minimize losses and recover. The process becomes full circle.