Most often they were interchangeably used so I decided to differentiate them visually, easier for me to discern the difference. This is for my own personal guidance as enunciated in a Supreme Court Ruling cited below.
To complete the comparison, it’s better to include the rules recently provided by the Department of Labor and Employment. It’s important to know the requirements of law before one can execute the decision to terminate based on Redundancy and Retrenchment. As stated under Department Order 147-15, to be a valid termination, the following must be present and complied with:
- There must be superfluous positions or services of employees;
- The positions or services are in excess of what is reasonably demanded by the actual requirements of the enterprise to operate in an economical and efficient manner;
- There must be good faith in abolishing redundant positions;
- There must be fair and reasonable criteria in selecting the employees to be terminated; and
- There must be an adequate proof of redundancy such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management of the restructuring.
Retrenchment or Downsizing
- The retrenchment must be reasonably necessary and likely to prevent business losses;
- The losses, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent;
- The expected or actual losses must be proved by sufficient and convincing evidence;
- The retrenchment must be in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and
- There must be fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
In addition, the following must also be complied with:
A. Payment of Separation Pay
Redundancy – at least one (1) month pay or at least one (1) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.
Retrenchment – one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.
OTHER AUTHORIZED CAUSES which requires payment of separation pay:
Closure or Cessation of Business Operation not due to serious business losses – one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year. Where closure is due to serious business losses or financial reverses, no separation pay is required.
Disease -at least one (1) month salary or one-half (1/2) month salary for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.
B. LAST IN FIRST OUT
In cases of installation of labor-saving devices, redundancy and retrenchment, the “Last-In, First-Out Rule” shall apply except when an employee volunteers to be separated from employment.
[When there are two employees occupying the same position in the company affected by the retrenchment program, the last one employed will necessarily be the first to go (Maya Farms Employees Organization v. NLRC, G.R. No. 106256, December 28, 1994).]
C. DUE PROCESS (NOTICE)
The requirements of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment (DOLE) at least thirty days (30) before the effectivity of the termination, specifying the ground or grounds for termination.
Reference: SC Decision, DO 147-15