Planters’ Products, Inc. vs. NLRC G.R. No. 78524, January 20, 1989.

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Planters’ Products, Inc. vs. NLRC  

G.R. No. 78524, January 20, 1989.

THIRD DIVISION, GUTIERREZ, JR., J.

 

Inclusion of Regular Allowances in Separation Pay Computation 

The salary base properly used in computing the separation pay should include not just the basic salary but also the regular allowances that an employee has been receiving.

 

Planters Products, Inc. (PPI) implemented a Retirement and Pension Plan (RPP) in 1984, which was approved by the Bureau of Internal Revenue. In 1985, PPI retrenched several employees due to operational downsizing, providing them with separation benefits calculated based on their basic salary, excluding regular allowances. The retrenched employees contested this computation, arguing that their separation pay should include regular allowances, and filed a complaint before the Labor Arbiter. The Labor Arbiter ruled in favor of the employees, a decision later affirmed by the National Labor Relations Commission (NLRC). PPI challenged this ruling, asserting that the computation was correct and that the NLRC lacked jurisdiction over the case.

 

Whether the computation of separation pay should include regular allowances in addition to the basic salary. 

Yes. The Supreme Court upheld the Labor Arbiter and NLRC’s decision, ruling that separation pay must be computed based on both basic salary and regular allowances. It held that the salary base for computing separation pay should not be limited to basic salary alone but must include all regular allowances an employee has been receiving. The Court also affirmed that the Labor Arbiter and NLRC had proper jurisdiction over the case, as it arose from an employer-employee relationship. Consequently, PPI was ordered to recompute the retrenched employees' separation pay to include regular allowances.

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