withholding of separation pay

Can an employer withhold payment of separation pay citing as reason that they are waiting for the release of the BIR Ruling for tax exemption? The separation pay is paid in installments with the last installment withheld by the employer. The last installment due February 15 had not been paid to date despite a request for BIR Ruling filed last December 2014.

meritgabriel33@yahoo.com wrote:Can an employer withhold payment of separation pay citing as reason that they are waiting for the release of the BIR Ruling for tax exemption? The separation pay is paid in installments with the last installment withheld by the employer. The last installment due February 15 had not been paid to date despite a request for BIR Ruling filed last December 2014.

Who requested for the ruling?

If there is a valid purpose for waiting for the ruling, and it is not unreasonable, then perhaps the wait would be justified.

If the last installment is paid, and the ruling is not in favor of the employee, it would be difficult to claim back any overpayment.

The request for a BIR ruling was made by the employee. You are saying that the ruling can go against the dismissed employee? Is this not unfair to the employee who lost his job? The BIR Memorandum Order 26-2011 already states that separation pay is tax exempt and that the BIR Ruling and the Certificate of Tax Exemption are confirmatory in nature. Is there a good tax lawyer out there who can assist in securing the BIR Ruling?

I recall that the NIRC mentions that -

"Any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer because of death sickness or other physical disability or for any cause beyond the control of the said official or employee."

This is what the employee should have insisted.

But perhaps we need a backgrounder on the employee's reason for separation in the first place.

But since the employee asks for a ruling regarding the taxable status of the separation pay, then it seems everyone will have to wait for it to come out so company will comply with procedure as laid down by the ruling.