Separation pay

Separation pay refers to the amount due to the employee who has been terminated from service for causes authorized by law (not due to employees fault or wrong-doing) such as installation of labor-saving devices,redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking. An employee illegally terminated from service is entitled to separation pay in lieu of reinstatement.

Separation pay is intended to provide the employee with the wherewithal during the period he is looking for another employment.

Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

Article 284. Disease as ground for termination. An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one month salary or to one-half month salary for every year of service, whichever is greater, a fraction of at least six months being considered as one whole year. 

please see the following links : 

STA. CATALINA COLLEGE and SR. LORETA ORANZA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and HILARIA G. TERCERO, respondents.

HONORABLE CEFERINO E. DULAY, MIRASOL V. CORLETO AND ROBERTO P. TOLENTINO, as Commissioners of the NATIONAL LABOR RELATIONS COMMISSION, DIOCESAN SCHOOLS OF LA UNION AND CECILIA N. RIVERA, respondents.

Source: Labor Laws of the Philippines