Computation and Release of Final Pay

PUBLISHED ON: September 24, 2020
LAST UPDATED ON: May 1, 2021

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The computation of Final Pay is the remaining monetary benefits due to the employee and to be released with 30 days from the date of separation.

Both computation and release of the Final Pay has been clarified by Department of Labor and Employment (DOLE) through the issuance of Labor Advisory No. 6, series of 2020 regarding Final Pay.

Defining Final pay

What is Final Pay?

Final Pay is defined as the "sum or totality of all the wages or monetary benefits due to the employee regardless of the cause of the termination of employment". The advisory has also mentioned that "Last Pay" or "Back Pay" is analogous or equivalent to that of Final Pay.

Computation of Final Pay

How to compute Final Pay?

The Department of Labor and Employment (DOLE) has stated that that Final Pay is composed of, but not limited to, the following monetary benefit:

  • Unpaid earned salary of the employee;
  • Cash conversion of unused Service Incentive Leave (SIL) pursuant to Article 95 of the Labor Code;
  • Cash conversions of remaining unused vacation, sick or other leaves pursuant to a company policy, or individual or collective agreement if applicable;
  • Pro-rated 13th month pay pursuant to Presidential Decree No. 851 (PD 851);
  • Separation pay pursuant to Articles 298 - 299 of the Labor Code, as renumbered, company policy or individual or collective agreement, if applicable;
  • Retirement pay pursuant to Article 302 of the Labor Code, as renumbered, if applicable;
  • Income tax claim for the excess of taxes withheld, if applicable;
  • Other types of compensation stipulated in an individual or collective agreement, if any, and
  • Cash Bond/s or any kind of deposit/s due for return to the employee, if any.

The above are all pending or unused benefits that an employee has earned throughout his employment,

Entitlement to Final Pay

Who is entitled to Final Pay?

All employees, regardless of classification of employment or method of termination of employment, are entitled to Final Pay.

Is an employee whose employment has been terminated due to Just or Authorized causes entitled to Final Pay?

The Labor Advisory issued by Department of Labor and Management (DOLE) is clear on this that the receipt of the Final Pay should be received by the employee regardless of the manner which the termination of employment has been made, whether it be via Just or Authorized causes.

Is an employee whose employment has been terminated due to "Absence without Leave" (AWOL) entitled to Final Pay?

Yes, an employee whose was Absent without Leave (AWOL) from their job is still entitled to Final Pay.

Is an employee that has not yet been cleared from his liabilities still entitled to their Final Pay?

The clearance process and other policies should be adjusted to conform to the mandate of the Department of Labor and Employment (DOLE) that the Final Pay would be released within the timeframe.

Time of Release of Final Pay

When should Final Pay be released?

Final pay should be released 30 days within the date of separation of the employee unless there is a more favorable company policy. The 30 days indicated is calendar days meaning it includes non-working days. Some employers try to avoid or extend the payment of the Final Pay by interpreting the definition as working days but it should not be so.

Is the release of the Final Pay reckoned from date of submission of clearance or date of separation?

The provision explicitly states that it is within 30 days from the date of separation.

What if my company has not released the Final Pay within 30 days?

If your company has not yet released the Final Pay within the allotted period, you should send a message to the Human Resource Officer of the company to follow-up on the matter and make sure it is documented via email or other means of communication.

It would be easier to properly settle the matter between you and your employer first before elevating the matter to the Department of Labor and Employment (DOLE).

Miscellaneous

How to compute back pay?

Back Pay is similar to Final Pay and therefore the computation shall be the same with the abovementioned.

Should bonuses be included in the Final Pay?

Bonus are not mandated to be included in the Final Pay of the employee. However, employers should be aware if such bonuses or other compensations released have ripened into practice that it should be included in the Final Pay.

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