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When there is a reduction of the employee’s salary prior to his termination, e.g., the employee has been demoted resulting to a reduction of salary, such reduced salary rate, which is his ‘last salary’ shall be the basis of the computation.It is computed beginning from the time of his engagement up to the date of his termination. The amount of separation pay may vary depending on the specific ground relied upon for the termination.A fraction of at least 6 months shall be considered as one whole year. An employee terminated based on installation of labor-saving devices or redundancy is entitled to at least one-month salary or to at least one-month salary for every year of service, whichever is higher.Actually, we will arrive at the same result even if the length of service is only 10 months or 7 1/2 months, etc., as long as it is 6 months or more.This is because a fraction of at least 6-months is considered as 1 whole year.

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However, only the employee’s last continuous years of service should be considered in the computation (See Carandang vs. (See Article 283, Labor Code) For termination based on retrenchment to prevent losses and closure of business, the employee affected is entitled to at least one month salary or 1/2 month salary for every year of service, whichever is higher.

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