Final Pay Computation for an AWOL Employee in the Philippines

A practitioner-oriented legal article (updated as of July 2025)

1. What “AWOL” Means in Philippine Labor Law

Absence Without Official Leave (AWOL) is an absence that is:
1. unauthorized – no approved leave or permission; and
2. prolonged or repeated to the point that the employer can reasonably conclude the employee does not intend to return.
In litigation the term most often used is “abandonment of work,” a just cause for dismissal under Article 297 [b] (formerly Art. 282) of the Labor Code.
- Two elements must concur: (a) failure to report for work without valid reason; and (b) a clear intention to sever the employment relationship, proven by overt acts.
- Jurisprudence: Sea-Power Shipping v. Valencia, G.R. 152925 (29 June 2004); Domingo v. Rayala, G.R. 171704 (7 February 2017).

⚖️ Take-away: Even if AWOL constitutes a just cause, the employer must still observe procedural due process (twin-notice rule and a meaningful opportunity to be heard).

2. Legal Sources Governing Final Pay

Source	Key provision for final pay
Labor Code (Arts. 103 & 297)	Payment of wages at least twice monthly; list of just causes for dismissal
Labor Advisory No. 06-20 (DOLE, 2020)	Final pay to be released within 30 calendar days from date of separation, unless a shorter period is provided by CBA/company policy
PD 851 & DOLE Handbook	13ᵗʰ-Month Pay: every employee who has worked at least 1 month
Labor Advisory No. 18-18	Conversion to cash of unused Service Incentive Leave (SIL)
Tax Code, NIRC	Withholding tax (BIR Form 2316) on compensation income
SSS Law, PhilHealth Act, Pag-IBIG Law	Mandatory contributions and loan offsets

3. Items Included in—and Excluded from—Final Pay

3.1 Items Always Included

Basic salary earned up to last day actually worked
Pro-rated 13ᵗʰ-month pay
- Formula:
  
  $$ \text{Monthly Basic Salary} \times \frac{\text{Actual Days Worked}}{12 \text{ months}} $$
Cash conversion of unused SIL (Art. 95, Labor Code)
Other convertible leave benefits (if provided by company/CBA)
Add-ons expressly agreed upon and already earned—e.g., commissions, OT differentials, holiday premium

3.2 Items Conditionally Included

Benefit	Rule for AWOL separation
Separation pay	Not required for dismissal due to abandonment (just cause). Only payable if: (a) company policy/CBA grants it, or (b) employer opts to give financial assistance for compassionate reasons (Jaka Food v. Pacot, G.R. 151378, 10 March 2005).
Retirement benefits	Follow the CBA/retirement plan; statutory retirement under Art. 302 requires ≥60 yrs & ≥5 yrs service.
Incentive bonuses, profit-sharing, stock options	Payable only if already vested/earned prior to AWOL.

3.3 Authorized Deductions

Taxes – final withholding per Revenue Regulations 2-98.
SSS, PhilHealth, Pag-IBIG – employee share for the last applicable month.
Loans & cash advances – if documented and due.
Cost of unreturned company property / losses – only upon showing of clear evidence and after compliance with DOLE Rule VIII-A on deductions; otherwise, employer must sue separately.
Clearance Fees – permissible only if provided in policy, reasonable in amount, and applied uniformly.

🔎 Due process in deductions: For any offset other than taxes & statutory contributions, the employee must have signed authorization or there must be a final judgment (Art. 113-115, Labor Code).

4. Procedural Due Process & Its Impact on Final Pay

First Notice (Notice to Explain) – detail the AWOL/abandonment charge; give at least 5 calendar days to submit explanation.
Administrative conference – not mandatory but prudent.
Second Notice (Notice of Termination) – state facts, legal basis, and effectivity date.

If due process is skipped, dismissal remains valid (for abandonment) but the employer may be liable for nominal damages (₱30,000 is common) per Agabon v. NLRC, G.R. 158693 (17 November 2004). Nominal damages are separate from final pay and must be added to the computation.

5. When Does the 30-Day Clock Start?

Scenario	Start of 30-day countdown for releasing final pay
Employee completes clearance promptly	Date clearance form is submitted
Employee ignores clearance	Date of termination stated in the second notice
Employee later resurfaces & requests pay	30 days from date of request, if employer withheld pay in good faith due to pending liabilities

Non-compliance risks an illegal withholding complaint and possible attorney’s fees (Art. 220, Labor Code).

6. Sample Computation (Illustrative)

Facts

Monthly salary: ₱25,000
AWOL began 3 May 2025; last day actually worked 2 May 2025
Dismissal (second notice) effective 17 May 2025
Unused SIL: 5 days
No other benefits; no liabilities; proper due process observed.

1. Salary Earned

Daily rate: ₱25,000 ÷ 22 = ₱1,136.36 Days worked in May: 2 Salary = 1,136.36 × 2 = ₱2,272.72

2. Pro-rated 13ᵗʰ-Month Pay

Total basic earned Jan 1 – May 2 = ₱25,000 × 4 months + ₱2,272.72 = ₱102,272.72 13ᵗʰ-month = ₱102,272.72 ÷ 12 = ₱8,522.73

3. SIL Conversion

Daily rate (computed above) × 5 days = ₱5,681.80

GROSS FINAL PAY = 2,272.72 + 8,522.73 + 5,681.80 = ₱16,477.25

4. Less Withholding Tax & Statutory Contributions

(Assume ₱500 total)

NET FINAL PAY DUE = ₱15,977.25

Employer must release this on or before 16 June 2025 (30 days from 17 May 2025).

7. Employer Deliverables Besides Money

Document	Timeline
Certificate of Employment (COE)	Within 3 working days from request (Labor Advisory 06-20)
BIR Form 2316	On or before final pay release or 31 Jan following year
SSS Employment Report (R-1A)	Next contribution month
Clearance or Quitclaim	Optional; employee may refuse to sign if terms are unconscionable

8. Common Pitfalls and Best Practices

Pitfall	How to avoid
Treating AWOL as automatic resignation	Always issue twin notices; do not assume abandonment.
Delaying final pay until employee clears all property liabilities	Compute pay first, then deduct only proven amounts.
Blanket forfeiture of benefits	Only benefits not yet earned may be forfeited.
Forcing employee to sign a quitclaim without paying	Quitclaim is valid only if payment is actually received.
Ignoring requests for COE	Liability under Art. 264 for refusal to issue employment records.

9. Special Situations

AWOL during probationary period – same rules; 13ᵗʰ-month and SIL cash conversion still apply if earned.
AWOL due to medical emergency – absence may be justified; dismissal may be illegal; final pay then governed by resignation or mutually agreed separation.
Company closure or redundancy followed by AWOL – separation pay under Arts. 298-299 may still be due if the authorized cause came before abandonment.

10. Practical Checklist for HR / Payroll

Confirm last day actually worked and dismissal/abandonment effective date.
Issue NTE and termination notices; keep proof of service.
Compute: salary due, pro-rated 13ᵗʰ-month, unused leave, other earned benefits.
Validate and document allowable deductions.
Prepare BIR 2316, COE, quitclaim form (optional).
Release net final pay within 30 days.
Record payment (OR, payslip) and submit mandatory reports (SSS, PhilHealth, Pag-IBIG).

11. Conclusion

An employee’s unauthorized absence does not excuse an employer from promptly computing and releasing all earned monetary benefits. While an AWOL dismissal generally bars separation pay, the employer must still:

Observe procedural due process;
Make only lawful deductions; and
Release final pay and employment documents within the DOLE-mandated period.

Complying with these rules minimizes litigation risk and demonstrates good-faith employer conduct.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. For advice on specific cases, consult a lawyer or the Department of Labor and Employment.