A probationary employment is the period where an employee is on trial by an employer which determines whether he/she is qualified for permanent employment. Article 296 of the Labor Code of the Philippines states that probationary employment should not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement that specifies a longer period.
Probationary employees may be terminated for a just cause, or if they fail to meet the reasonable standards of the employer, which are communicated at the start of employment. These standards determine whether the employee will qualify as a regular employee. Employees who continue working beyond the probationary period are considered regular employees.
What are the Grounds to Terminate a Probationary Employee?
According to Article 297of the Labor Code, an employer may terminate an employee for any of the following causes:
- Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection of his work;
- Gross and habitual neglect by the employee of his duties;
- Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
- Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and
- Other causes analogous to the foregoing.
Moreover, under Article 298 of the same Code, the employer may also terminate an employee due to the following:
- Installation of labor-saving devices;
- Redundancy;
- Retrenchment to prevent losses; or
- Closing or cessation of operation.
Additionally, an employer may dismiss an employee who has been found to be suffering from a disease, and whose continued employment is either prohibited by law or is prejudicial to their health or the health of their co-workers.
How to Terminate a Probationary Employee?
When terminating a probationary employee, employers must adhere to a specific protocol to ensure the process is conducted fairly and legally. The termination procedures with just cause and authorized cause are different. Both employers and employees need to understand these differences to ensure that the termination process complies with labor laws and regulations.
Procedure for Just Cause Termination
- Identification of Reasons for Termination. Employers must identify and justify a valid reason for the termination, which is stated in the Labor Code. It is crucial for employers to document specific instances and gather evidence that supports their decision to terminate the employee.
- Issuance of Termination Notice. Once the reason has been identified, the employer should issue a termination notice to the employee. This notice must clearly state the reason for termination, providing a detailed explanation of the circumstances that led to the decision. This must also include the evidence to support the employer’s claim. It is necessary to inform the employee of their right to respond to the allegations and provide them with a period of five (5) days to submit a written explanation or defense.
- Schedule a Hearing or Conference. The employer is required to schedule a hearing or conference to give an employee an opportunity to present their side, explain their actions, and defend themselves against the allegations made by the employer. This also allows both parties to have a positive discussion and ensures that the employee’s perspective is taken into consideration before a final decision is made.
- Issuance of Final Decision. If the employee is found to have violated company policies or failed to meet the required standards during the probationary period, the employer can proceed with the termination.
Procedure for Authorized Cause Termination
- Identification of Reasons for Termination. The employer should clearly identify a valid and justifiable reason for termination, which is mentioned in the Labor Code. It is necessary to gather and document the evidence that supports the employer’s claims, which can be used in case of any disputes or legal proceedings.
- Issuance of Termination Notice. The employer needs to provide a formal written notice of termination to the employee. This notice must clearly state the specific grounds for dismissal and provide a detailed explanation of the circumstances that led to the decision. The notice should be given to the employee at least thirty (30) days prior to the effective date of termination. This 30-day notice period gives the employee the time to prepare for the transition and seek new employment opportunities.
- Submission of Notice to DOLE. A copy of the written notice of termination is required to be submitted to the regional office of the Department of Labor and Employment (DOLE) that has jurisdiction over the employer’s location. This notification ensures that the DOLE IS aware of the termination and can monitor compliance with labor laws and regulations.
- Provide Separation Pay. If the termination of employment is due to an authorized cause, the employer is required to provide the employee with separation pay. The amount of separation pay is determined by DOLE policies and calculations, which take into account the employee’s length of service and other relevant factors. The employer is obligated to ensure that the separation pay is calculated correctly and paid to the employee promptly.
Can the Employer Terminate an Employee without Going Through the Due Process?
The employer may be held liable if there is no procedural due process for termination. More importantly, the entire termination procedure must be documented to provide a clear and comprehensive record of the process and ensure transparency for both the employer and the employee.
Can a Probationary Employee Resign Immediately?
Probationary employees are generally required to render a 30-day notice under the Labor Code of the Philippines unless the employer waives the notice requirement or unless extraordinary circumstances justify the immediate resignation such as insult or inhumane treatment. Failure to render the required 30-day notice period may result in the employer withholding up the salary due to liquidated damages.
Are Probationary Employees Entitled to Separation Pay?
According to Article 297 of the Labor Code, probationary employees are entitled to separation pay when their employment is terminated due to authorized causes. However, if the termination is due to just cause, they are not entitled to separation pay.
When to Receive Separation Pay?
Based on Labor Advisory No. 6, employers are expected to release separation pay within thirty (30) days from the date of separation or termination of employment, unless there is more favorable company policy and if the employee agreed upon to. If an employer fails to release the separation pay, the employee may file a complaint to the Department of Labor and Employment (DOLE) or seek legal action to practice their employment rights.
How Much Tax is Deducted from Separation Pay?
Under Section 32(B)(6)(b) of the 1997 Tax Code, tax deductions do not apply for employees who were dismissed due to sickness, death, or any other physical disability, or for reasons beyond their control, such as retrenchment, redundancy, or cessation of business operations. While other income received by the employee before separation is subject to tax, as specified in Section 24 of the said Code.
How to Compute Separation Pay?
Separation pay is calculated based on the reason for termination and the employee’s length of service. The computation should be based on the employee’s latest salary rate.
If the employee got terminated because of the installation of labor-saving devices or redundancy, he/she must receive the equivalent of one (1) month pay for every year of service, with the formula:
One month salary x Year of service = Total amount of Separation Pay
While if the employee got terminated because of closure of the business or health reasons, he/she must receive at least one (1) month pay or half a month pay for every year of service (a fraction of 6 months is considered one year), whichever is higher and is computed as:
One month salary ÷ 2 x Years of service = Total amount of Separation Pay
What are the Statutory Benefits for Probationary Employees?
Probationary employees must receive the same treatment and benefits with regular employees. They are entitled to receive statutory benefits, such as Social Security System (SSS), PhilHealth and Pag-IBIG Fund contributions. They should also receive overtime pay for hours worked beyond the required eight (8) hours workday, night shift differential pay if they work during the night shift, and holiday pay when working on declared holidays. Additionally, probationary employees are entitled to receive 13th month pay as long as they have worked for at least one (1) month.
What are the Employee Rights During the Probationary Period?
In the Philippines, probationary employment can last from one (1) to six (6) months, but may only be extended if the nature of the job requires an apprenticeship. During this period, employers can decide whether to retain or terminate employees based on pre-agreed conditions discussed at the start of the probation.
Even during probation, employees have basic legal rights, including protection against unfair dismissal, and cannot be terminated asserting statutory benefits like
Employers cannot discriminate and deny probationary employees for contractual benefits. Upon completing their probationary period, employees must receive standard employee benefits as mandated by labor law.
Despite their probationary status, employees are protected by labor laws and cannot be unfairly dismissed. If an employee gets terminated without clear reasons, the employer may be held liable for illegal termination. In this case, the employee can file a complaint with the Department of Labor and Employment (DOLE).
Need further information and assistance regarding Termination of Probationary Employees? Talk to our team at Duran & Duran-Schulze Law in Bonifacio Global City, Taguig, Philippines to know more about the requirements and process. Call us today at (+632) 8478 5826 or +63 917 194 0482, or send an email to info@duranschulze.com for more information.
