Hazel B.

Luna II-AHRDM
Aisa R. Labisto

Art. 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 under-taking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry 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 his 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 () 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.
The underscored portion of Art. 283 governs the grant of separation benefits in case of
closures or cessation of operation of business establishments NOT due to serious
business losses or financial reverses. Where, however, the closure was due to business
losses - as in the instant case, in which the aggregate losses amounted to over P20 billion
- the Labor Code does not impose any obligation upon the employer to pay separation
benefits, for obvious reasons.

Advantages of Laying off Employees:

1. Ensures that you have the best employees on your team:

One of the biggest advantages of carrying out employee layoffs on the basis of
performance is that it ensures that only the best employees are retained. These
individuals, by virtue of how good they are at the job will surely be successful in taking
the company to the top once again.
Trying to build the company from rock bottom will require the services of the best
employees. A company will never be able to make it big again if its employees are not
fully devoted to the cause. The employees will need to work round the clock in order to
yield rich dividends.
2. It is good as you have mainly experienced employees on board:
Another major plus point of employee layoff, especially if done on the basis of seniority is
that, it ensures that only the most experienced people of the company are retained. Such
individuals have been around for the longest time and they know the ropes of the business
well.
By virtue of their wisdom as well as experience they can work well independently and that
do not constantly need to be micromanaged.
Owing to the fact that the manager or boss has known these individuals for a long time,
that is why they can easily be trusted. For a company to success, there must be an
element of trust between employee and employer.

3. Causes other employees to pull up their socks:

When a company resorts to laying off it employees, it means that all is not well and that
anyone who is not working in a proper manner will be asked to leave. Such mass layoffs,
to some extent do create a sense of fear in all the employees causing them to pull up
their socks and give their 100% under all circumstances.
In addition to this, employees know that if they do not pull their weight then it will not be
long before the company will have to shut their doors permanently. When this happens,
then they would all be rendered unemployed.

4. It is a very cost-effective option:

If a company is facing financial woes and is unsure about what to do in order to make
amends immediately, layoffs is a step which is very cost effective indeed and it ensures
that only those who are doing good work are kept on.
Laying off employees helps the company save a great deal of money instantly and helps
them to keep the company from sinking. In this day and age, money is a valuable resource
and no company should waste it or squander it off on useless things. If they do this then
they are sure to repent in time to come.

Disadvantages of Laying off Employees:

1. It involves a number of legal problems:

Laying off employees is something which needs to be done very carefully indeed. If the
company is not careful about every step which they are taking, then they are going to land
themselves in a lot of trouble.
The major disadvantage of laying off employees therefore is the legal woes that follow,
which often come with a huge fine. If a company is already facing money issues, then
fines like this become near impossible to pay.

2. Increases the burden of the employees who have been retained:

A major disadvantage of an employee layoff is that it increases the work load of the other
employees in the office. Increasing the workload of the others means that their stress
levels automatically increase causing them to come in for all kinds of health issues like
heart disease and even high blood pressure.
A mass layoff in order to save company money takes a toll on all the employees including
the boss.
As a result of this, the quality of work which is delivered by these burdened employees
deteriorates and they are unable to come up with exceptional ideas and thoughts.

3. Lowers the morale of all the employees in general:

Employee layoffs in general lowers the morale of all the employees especially those
whose close friends and acquaintances have been shown the door. Under such
circumstances working becomes rather tough and the general atmosphere in the office is
not upbeat.
To cope with such a situation companies should ensure that they have some workshops
or even some professional who can speak to the employees so that they can deal with
the problem.
Companies at this point should try and bring together the employees which have been
retained so that they can work as a comprehensive unit.

4. Employees may start seeking employment elsewhere:

A major disadvantage of mass layoffs is that the employees who have been retained know
that the company is in trouble and rather than working extra hard, they try and seek
employment in another company as soon as possible.

5. Shows the company in poor light:

Finally, layoffs do negatively affect the reputation of the company as it spells out loud and
clear that the company is having some shortage in funds. This in turn prevents clients
from investing their money in such a company.