Termination of Employees in the Philippines

Termination of Employees in the Philippines–A Guideline to Foreign Employers

In the recent years, the Philippine government has supported campaigns in attracting foreign investments into the country. With these foreign investments, the problem of unemployment and underemployment is considerably solved. In welcoming foreigners in doing business in the Philippines, adequate information must be given to them, not just as regards the fiscal concerns of business, but also with the employment laws of the country.

Employing a worker is often a very happy event both for the employer and the employee. On the reverse, terminating an employee may be a nightmare not just for the employee, but even for the employer. The foreign employer must be reminded to keep guard of Philippine labor laws when dismissing an employee.

Terminating an employee in the Philippines is valid only when these two factors are present: 1) the attendance of a cause for dismissal, and 2) observance of due process.

Causes for terminating an employee are classified as Just Cause and Authorized Cause. JUST CAUSES are acts chargeable to the employee which will result to his termination. Enumerated as such are: a) serious misconduct, b) willful disobedience to lawful orders, c) gross and habitual neglect of duties, d) fraud or willful breach of trust or loss of confidence; e) commission of a crime or offense, and f) other analogous causes.

On the other hand, AUTHORIZED CAUSES of dismissal are those which pertain to the employer. This is further classified into two types – business and disease. The business reasons include: a) installation of labor-saving devices, b) redundancy, c) retrenchment and closure or cessation of business operation. The health reason pertains to the infliction of a disease which, as ascertained by a competent public authority, is incurable within six months, and one which is prejudicial to the health of the employee and his co-workers if employment is continued.

DUE PROCESS in terminating an employee in the Philippines is known as the TWO-NOTICE or TWIN-NOTICE RULE.

The FIRST NOTICE is that which is sent to the employee apprising him in detail of the basis for his possible termination. It must give the employee at least five days from receipt of the notice to prepare his answer.

A Hearing or Conference is schedules after the employee submits his answer. During the hearing, both employer and employee will have the equal chance to present evidence or refute the claims of the other party. This is also an opportunity for a possible amicable settlement between them.

After the hearing, a SECOND NOTICE is sent to the employee apprising him of the decision to terminate his employment. It must indicate how the decision was reached , and that upon careful consideration of all circumstances, basis has been established to justify the termination.

Corporation versus Partnership

CORPORATION is a juridical person created by operation of law under the Corporation Code. It has a personality separate and distinct from that of its stockholders. It consists of at least five (5) to fifteen (15) incorporators each of whom must hold at least one share. It must be registered with the Securities and Exchange Commission (SEC). The minimum paid-up capital is five thousand pesos (Php 5,000.00). It has a right of succession.


PARTNERSHIP is treated as an artificial being created by operation of law with a separate legal personality from that of its members. It may either be general or limited, depending on the liability of the partners. It consists of two (2) or more partners. A partnership must be register with the Securities and Exchange Commission (SEC) with a minimum capitalization of three thousand pesos (Php 3,000.00). It has no right of succession.


CORPORATION acquires juridical personality from the date of issuance of the certificate of incorporation by the Securities and Exchange Commission. PARTNERSHIP acquires juridical personality from the moment of execution of the contract of partnership.

CORPORATION can exercise only the powers expressly granted by law or implied from those granted or incident to its existence. PARTNERSHIP may exercise any power authorized by the partners (provided it is not contrary to law, morals, good customs, public order and public policy).

In a CORPORATION, a stockholder has generally the right to transfer his shares without prior consent of the other stockholders. Whereas, in PARTNERSHIP, a partner cannot transfer his interest in the partnership to make the transferee a partner without the unanimous consent of all existing partners because the partnership is based on the principle of delectus personarum.

In a CORPORATION, the power to do business and manage its affairs is vested in the Board of Directors and trustees. In PARTNERSHIP, when management is not agreed upon, every partner is an agent of the partnership.

CORPORATION may adopt any name provided it is not the same as or similar to any registered firm name. In PARTNERSHIP, limited partnership is required by law to add the word “Ltd” to its name.

CORPORATION can only be dissolved with the consent of the State. PARTNERSHIP may be dissolved at any time by or all of the partners.

CORPORATION is governed by the Corporation Code while PARTNERSHIP is governed by the Civil Code.

The term of existence of a CORPORATION must not exceed fifty (50) years but extendible to not more than 50 years in any one instance, whereas, in PARTNERSHIP, may be established for any period of time stipulated by the partners.

If you are planning to set up a corporation or partnership in the Philippines, our firm will gladly assist you to organize the documentation and liaise with the concerned government agencies in your behalf. You can contact us to help you with all your queries and concerns at 310-1020.