RA 7641, the Retirement Pay Law, explained

RA 7641, the Retirement Pay Law of 1992, sets a minimum retirement pay for private-sector workers in the Philippines. It applies where the employer has no retirement plan, or has one that gives less. A worker who retires at 60 or older, but not beyond 65, after at least five years with the employer, gets at least one-half month salary for every year of service. The law amended Article 287 of the Labor Code, now numbered Article 302.

Work out your own figure with the retirement pay calculator.

Who is covered, and who is not

• Covered: employees in the private sector, including part-time workers. The DOLE Handbook (2024) says part-time workers also get retirement pay under RA 7641 if there is no plan, they are 60 or older, and they have five years of service.
• Not covered: government workers, who retire under GSIS; and “retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers”, which the law exempts.
• OFWs working for a foreign employer abroad: RA 7641 is Philippine labour law for employers in the Philippines. End-of-service pay abroad follows the law of the country you work in. See working abroad for the countries where OFWs work.

What “one-half month salary” means

The law defines it: “fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves”. The DOLE Handbook adds up the days:

Scroll the table sideways for more

So the minimum is daily rate x 22.5 days x years of service.

What counts as salary. The Handbook says the cost of living allowance (COLA) is not included, and cites a Supreme Court decision that “existing laws exclude allowances from the basic salary or wage in the computation of the amount of retirement and other benefits”. The employer and worker, or a collective bargaining agreement (CBA), can agree to include more.

Part years. The law counts “a fraction of at least six (6) months” as one whole year. Twelve years and seven months counts as 13 years.

Optional and compulsory retirement

• Optional: from 60, the worker may retire and claim the pay.
• Compulsory: 65, which the law declares “the compulsory retirement age”. BIR RMC 13-2024 covers workers who retire after 65: their pay is also tax-free if they were not paid retirement benefits at 65.
• Company plans and CBAs: an employee “may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract”. The benefits under such an agreement “shall not be less than” the law’s. If they are less, the Handbook says the employer pays the difference.

Mine workers

Two later laws lowered the ages for mine workers:

• Underground mine workers (RA 8558, 1998): may retire from 50, compulsory at 60, after at least five years as an underground mine worker.
• Surface mine workers in mill plant, electrical, mechanical and tailings pond work (RA 10757, 2016): may retire from 50, compulsory at 60.

Tax on retirement pay

The Tax Code excludes “retirement benefits received under Republic Act No. 7641” from income (Sec. 32(B)(6)(a)). The BIR’s current rules:

• No company plan: tax-free if you are at least 60 and not beyond 65, have served the employer for at least five years, and have not used a retirement tax exemption before. No BIR certificate is needed. Pay received when retiring after 65 is also tax-free if you were not already paid retirement benefits at 65 (BIR RMC 13-2024).
• Covered by a company plan or CBA: you “may not avail of the tax exemption benefit provided under RA No. 7641” (BIR RMC 5-2025). Pay from the plan is tax-free only under the plan rules: a plan the BIR finds reasonable, at least 50 years old and ten years of service, used once.

If your employer will not pay

Labour disputes in the Philippines start with a 30-day conciliation called the Single Entry Approach (SEnA). RA 10396 makes it mandatory: the labour arbiter “shall entertain only endorsed or referred cases”.

1. File a Request for Assistance (RFA). Under DOLE Department Order 249 (2025), you file it in person at the SEnA desk of the DOLE, NCMB or NLRC office nearest your home or your employer’s main office, or online through DOLE ARMS, which accepts requests from individual workers and OFWs and needs an active Philippine mobile number. You appear in person; if you cannot, someone you name in a special power of attorney can file for you. If the worker has died, an heir brings the death certificate and proof of relationship.
2. Conciliation. The first conference is set within five days (not more than ten). Conciliation runs for 30 calendar days from that first conference, and can be extended only if both sides agree, by up to 15 days.
3. If you do not settle, the case is referred to the NLRC. Labor Arbiters hear claims arising from employment above PHP 5,000. The NLRC’s Citizen’s Charter (October 2025) lists the SEnA referral slip, a valid ID and the sworn complaint form for filing, and lists no fee for filing a SEnA request or a complaint.

Act in time. The Labor Code says money claims from employment “shall be filed within three (3) years from the time the cause of action accrued” (Art. 291, now Art. 306).

This page is general information. For a dispute, talk to DOLE or a lawyer.

Related

• Retirement age in the Philippines, rule by rule
• Early retirement in the Philippines
• Planning your retirement in the Philippines as an OFW