What is the separation pay for employees separated due to retrenchment?

The correct answer is one month pay or one-half month pay for every year of service. This formula for separation pay is commonly adopted in various jurisdictions as a fair compensation method for employees who have been retrenched, taking into account both the duration of their employment and the impact of the job loss.

This approach recognizes the principle of proportionality, where employees receive compensation that reflects their time spent with the company. Providing one-half month of pay for each year of service allows for a considerate balance, ensuring that longer-serving employees get compensated more robustly while still offering some level of support to those with shorter tenures.

This calculation serves to mitigate the financial burden on employees faced with unexpected unemployment due to company downsizing or restructuring, which is often beyond their control. It adheres to the general intent of labor laws that prioritize worker welfare during such transitions.

Other options present different calculations that do not align with commonly accepted practices regarding retrenchment pay.