Kodigo Labs ToolsWhat is included in final pay
Final pay (also called "back pay" or "last pay") is everything your employer still owes you when you leave the company, whether you resigned, your contract ended, or you were terminated. It usually includes:
- Unpaid salary for days you worked after your last payday.
- Pro-rated 13th month pay: basic salary earned this year ÷ 12, less any 13th month pay already given.
- Cash conversion of unused Service Incentive Leave (5 days a year for employees with at least one year of service), plus other leave credits if company policy allows.
- Separation pay, if you were separated for an authorized cause.
- Tax refund, cash bond and other amounts due to you, minus loans and accountabilities.
Separation pay rules
Under Articles 298 and 299 of the Labor Code, separation pay depends on the reason:
- Redundancy or installation of labor-saving devices: one month pay or one month pay for every year of service, whichever is higher.
- Retrenchment to prevent losses, closure not due to serious losses, or disease: one month pay or half a month pay for every year of service, whichever is higher.
A fraction of at least 6 months counts as one whole year. Closure due to serious business losses does not require separation pay.
Worked example
Ana earns ₱26,100 a month at a 5-day-a-week company (factor 261), so her daily rate is ₱26,100 × 12 ÷ 261 = ₱1,200. Her position was declared redundant effective September 30 after 3 years and 7 months of service.
- Unpaid salary for 10 days: 10 × ₱1,200 = ₱12,000
- 13th month pay for 9 months: ₱26,100 × 9 ÷ 12 = ₱19,575
- 5 unused SIL days: 5 × ₱1,200 = ₱6,000
- Separation pay: 3 years 7 months counts as 4 years, so 4 × ₱26,100 = ₱104,400
- Less company loan: ₱5,000
Estimated final pay: ₱12,000 + ₱19,575 + ₱6,000 + ₱104,400 − ₱5,000 = ₱136,975.
Clearance, timing and your Certificate of Employment
Most companies require you to finish a clearance process (returning laptops, IDs and other company property) before releasing final pay. Even so, DOLE Labor Advisory No. 06, Series of 2020 says final pay should be released within 30 days from separation, unless a more favorable company policy or agreement applies. You may also request a Certificate of Employment, which must be issued within 3 days of your request. If your final pay is delayed without reason, you can seek help through DOLE's Single Entry Approach (SEnA) at the nearest DOLE field office.
Frequently asked questions
When should I receive my final pay?
Under DOLE Labor Advisory No. 06, Series of 2020, employers should release final pay within 30 days from the date of separation, unless a company policy, employment contract or collective bargaining agreement gives a shorter period.
Do I get separation pay if I resign?
Generally no. Separation pay under the Labor Code is for employees separated due to authorized causes such as redundancy, retrenchment, closure or disease. If you resign voluntarily, you get separation pay only if your contract, company policy or CBA provides for it. Employees dismissed for just cause (like serious misconduct) are also generally not entitled to it.
Can unused leaves be converted to cash?
Yes, for the 5-day Service Incentive Leave (SIL) under Article 95 of the Labor Code: unused SIL must be converted to cash at the end of the year or upon separation. Other company leaves (extra vacation or sick leave) are converted only if the company policy or contract says so.
Is final pay taxable?
Unpaid salary and taxable leave conversions are subject to the usual withholding tax. 13th month pay and other benefits are tax-free up to ₱90,000. Separation pay due to causes beyond your control, such as redundancy, retrenchment, closure or disease, is generally tax-exempt. Your employer will also compute your annual tax and may give a refund or deduct a shortfall.
How do I get a Certificate of Employment?
Request it from HR. Under the same DOLE advisory, the employer must issue a Certificate of Employment within 3 days from your request. It only states your dates of employment and position, and can be requested whether or not you have cleared your accountabilities.
Does this apply to government employees?
No. Final pay, separation pay and leave conversion here follow the Labor Code for private-sector employees. Government employees receive terminal leave pay and benefits under Civil Service Commission and GSIS rules. Ask your agency's HR office for the exact amount.