Temporary Layoff, Floating Status, Redundancy, Other Cost Saving Measures

Three Work Arrangements and  Cost-Saving Measures Worth Studying During The Pandemic

Costs and productivity matters. The impact of the COVID-19 crisis has driven several businesses to grave losses. Here are three cost-saving mechanisms and work arrangements that you may want to consider.

Flexible Work Arrangements

Companies can adopt Flexible Work Arrangements during the COVID-19 outbreak.  Companies may consider: (1) the Reduction of Workhours and/or Workdays, where the normal workhours or workdays per week are reduced; (2) the Rotation of Workers, where the employees are rotated or alternately provided work within the week; and (3) Forced Leave, where the employees are required to go on leave for several days or weeks utilizing their leave credits, if there are any[1]. DOLE also announced that leaves of absence during the community quarantine period shall be charged against existing leave credits, if any[2].

The employers shall notify their respective DOLE Regional or Field Office regarding the adoption of any of the above flexible work arrangements. They are also encouraged to explore other alternative arrangements in order to cushion and mitigate the effect of the loss of income of the employees.

Temporary Lay-Off or Floating Status

An employer may validly put its employees on forced leave or floating status upon bona fide suspension of the operation of its business for a period not exceeding six (6) months. In such a case, there is no termination of the employment of the employees, but only a temporary displacement. When the suspension of the business operations exceeds six (6) months, then the employment of the employees would be deemed terminated, and the employer will be held liable[3].

Retrenchment and Other Cost-Saving Measures

An employer may 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. Written notice must be served on the workers and DOLE at least one (1) month before the intended date.

Retrenchment is the termination of employment initiated by the employer through no fault of and without prejudice to the employees. It is resorted to during periods of business recession, industrial depression, or seasonal fluctuations. In case of retrenchment to prevent losses and in cases of closures or cessation of operations not due to serious business losses or financial reverses, payment of separation pay is required.

Redundancy exists when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise[4].  The employer must comply with the following requisites: (1) written notice served on both the employees and the DOLE at least one month prior to the intended date of retrenchment; (2) payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished[5]


[1] Labor Advisory No. 10 series of 2020 (issued 04 March 2020)

[2] Labor Advisory No. 11 series of 2020 issued 14 March 2020

[3] Innodata Knowledge Services Inc. vs. Inting [G.R. No. 211892, December 06, 2017]; Article 301 of the Labor Code

[4] Manggagawa ng Komunikasyon sa Pilipinas vs. PLDT, G.R. No. 190389, April 19, 2017

[5] Article 298, Labor Code; Alcohol Corporation vs. NLRC, G.R. No. 131108. March 25, 1999