Separation Pay Law and Legal Definition

Separation Pay is the payment to a worker who is permanently laid off his or her job without his or her fault.

An employee who voluntarily resigns from his or her work is not entitled to separation pay. There is no provision in the Labor Code which grants separation pay to voluntarily resigning employees.

Separation pay as a rule is paid only in those instances where the severance of employment is due to factors beyond the control of the employee. Thus, in case of retrenchment to prevent losses where the employee is forced to depart from the company due to no fault on his or her part, separation pay is required by law to be paid to the dismissed employee.