Ending employment in the Philippines—whether by resignation, end of contract, retrenchment, redundancy, termination for cause, or closure—usually triggers two recurring concerns:

Final pay (sometimes called “last pay,” “back pay,” or “final pay and clearance pay”), and
13th month pay, including the prorated amount for the year of separation.

This article explains what you can claim, when you should receive it, how it’s computed, what employers may lawfully deduct, what “clearance” really means, and what to do if payment is delayed or refused.

1) What “Final Pay” Means

Final pay is the total amount due to an employee after separation from employment, after lawful deductions. It is not limited to your last salary cut-off; it is a bundle of all amounts still owed because the employment relationship has ended.

Common components of final pay

Depending on your situation and company policy/contract/CBA, final pay may include:

Unpaid salary/wages up to your last day (including unpaid cut-off wages)
Prorated 13th month pay for the year (if not yet fully paid)
Cash conversion of unused service incentive leave (SIL) (and/or unused vacation leave, if convertible under company policy/CBA/contract)
Separation pay, if legally due (e.g., authorized causes like redundancy, retrenchment, closure, disease termination, or as provided by company policy/CBA)
Retirement pay, if you qualify (law, CBA, or company retirement plan)
Refunds (e.g., excess tax withheld due to annualization, or other refundable deposits if any and lawful)
Other matured benefits due under company policy/CBA/contract (e.g., prorated allowances that are guaranteed and earned, commissions that are already earned, incentive payouts that have vested, etc.)

Final pay is often released after the employer completes its internal clearance process—but clearance cannot be used to defeat lawful claims; it should only verify accountabilities and compute the final amount correctly.

2) Timeline: When Final Pay Should Be Released

In practice, employers often cite “processing” and “clearance.” In Philippine labor standards guidance, the general expectation is that final pay should be released within a reasonable period, commonly within 30 days from the date of separation, unless a company policy/CBA/contract provides a more favorable period or there are justified reasons that are properly communicated.

Key point: Even if there is a clearance process, the employer should not unreasonably delay payment of amounts that are already determinable and due.

3) Your 13th Month Pay Rights (Including Proration)

Legal basis and basic rule

In the private sector, rank-and-file employees are generally entitled to 13th month pay. The rule is simple:

If you worked at least one month during the calendar year, you are entitled to prorated 13th month pay for that year.

Due date

13th month pay is required to be paid not later than December 24 each year. Many employers split it into two releases (e.g., mid-year and December), which is generally acceptable as long as the total is paid as required.

If you separate before year-end, the unpaid portion is typically included in final pay.

4) How 13th Month Pay Is Computed

Standard formula

13th Month Pay = (Total Basic Salary Earned During the Calendar Year) ÷ 12

If you did not work the full year:

Compute total basic salary actually earned from January 1 to your last day (or to the last payroll covered), then divide by 12.

What counts as “basic salary”

As a general rule, basic salary means pay for services rendered, excluding many extra pay items.

Typically included:

Your regular monthly/daily wage or salary
Regular wages for work actually performed
Pay for regular days that are treated as part of basic salary under your pay scheme

Typically excluded:

Overtime pay
Holiday pay (premium)
Night shift differential
Premium pay for rest days/special days
Most allowances and monetary benefits that are not integrated into basic salary
Discretionary bonuses and purely conditional incentives

Commissions and 13th month pay

Commissions can be tricky:

If the commission is part of the employee’s regular wage structure (i.e., it functions as part of salary for services rendered, not a purely discretionary bonus), it may be treated as part of “basic salary” for 13th month computation under some interpretations and fact patterns.
If it is purely incentive-based/contingent and not part of basic wage, it is usually excluded.

When in doubt, look at:

Your contract and payslips (how the item is labeled and paid),
Whether it is guaranteed or contingent,
Whether it is consistently treated as part of salary rather than a bonus.

5) Final Pay vs. 13th Month Pay: How They Interact

If you resign or are terminated mid-year, you don’t “lose” 13th month pay. Instead:

The employer computes your prorated 13th month pay for the year up to separation.
Any amount already advanced (e.g., mid-year 13th month release) is credited.
The remaining balance is usually included in final pay.

6) Leave Conversions: Service Incentive Leave (SIL), Vacation Leave, and Company Leave

Service Incentive Leave (SIL)

Under Philippine labor standards, employees who have rendered at least one year of service are generally entitled to 5 days SIL annually, unless exempt (e.g., certain categories of employees and establishments). Unused SIL is commutable to cash.

Vacation leave / sick leave / other leave

These are often company-granted benefits. Whether unused leave is convertible depends on:

Company policy/handbook,
CBA,
Employment contract, or
Established company practice.

A common scenario:

SIL is legally cash-convertible if unused.
VL may be cash-convertible if policy allows conversion or if it has become company practice.

7) Separation Pay: When It Is (and Isn’t) Included in Final Pay

Separation pay is not automatic for every resignation or termination.

Usually not due

Voluntary resignation, unless the company policy/CBA/contract grants it
Termination for just causes (serious misconduct, willful disobedience, etc.), as a general rule

Often due (subject to conditions)

Separation pay is commonly due for authorized causes, such as:

Redundancy
Retrenchment to prevent losses
Closure or cessation of business (not due to serious losses, depending on circumstances)
Termination due to disease (subject to legal requirements)

Each authorized cause has its own computation rules. Your paperwork (notice, DOLE filing where applicable, and termination documents) matters.

8) Lawful Deductions: What Employers May Deduct from Final Pay

Employers may deduct amounts from wages/final pay only when lawful. Common lawful deductions include:

Government-mandated deductions (as applicable to the final payroll period)
Withholding tax (final/annualized computation)
SSS/PhilHealth/Pag-IBIG employee share for applicable payroll periods
Deductions authorized by law
Deductions with the employee’s written authorization, such as:
- Company loans
- Salary advances
- Validly documented obligations

Clearance/accountabilities

Employers may deduct for loss/damage only if there is a legal and evidentiary basis and the deduction complies with labor standards rules (e.g., due process, proof, and authorization where required). Blanket deductions without documentation are vulnerable to challenge.

Training bonds

If you signed a training agreement with a repayment clause, the employer may attempt to deduct repayment, but enforceability depends on:

Clear written agreement
Reasonableness of the amount
Proof of employer costs covered
Proof you triggered the repayment condition
Whether the clause is not contrary to law, morals, or public policy

9) Clearance and Release Documents (Quitclaims)

What is a quitclaim?

A quitclaim/release is a document where the employee acknowledges receipt of final pay and may waive further claims.

Are quitclaims always valid?

Philippine labor policy generally treats quitclaims with caution. A quitclaim is more likely to be upheld when:

It was voluntarily executed,
The employee fully understood it,
Consideration is reasonable (not unconscionably low),
There was no fraud, duress, or undue pressure.

Practical advice: Don’t sign a quitclaim if:

You haven’t received the money stated,
You disagree with the computation,
You were forced to sign to get any amount at all,
You were not allowed time to read/ask questions.

You can request:

A detailed computation sheet,
A breakdown of deductions,
A chance to review before signing.

10) Certificate of Employment (COE) and Other Exit Documents

Even after separation, employees commonly request:

Certificate of Employment (COE)
BIR Form 2316 (if applicable)
Final payslip/computation
Clearance certificate

A COE is generally something you can request as proof of employment, and employers are expected to provide it within a reasonable time.

11) Step-by-Step: How to Claim Final Pay and Prorated 13th Month Pay

Step 1: Gather your records

Collect:

Employment contract, job offer, and any amendments
Payslips and payroll records
Company handbook/CBA provisions (if you have them)
Resignation letter and acceptance (or termination notice)
Time records, leave balances, incentive/commission statements
Any loan/advance documents
Prior 13th month pay releases (proof of partial payment)

Step 2: Request a written final pay computation

Ask HR/payroll for:

Itemized breakdown (wages, prorated 13th month, leave conversions, separation/retirement pay if any)
Itemized deductions with basis

Keep communications in writing (email is ideal).

Step 3: Complete reasonable clearance requirements

Return company property, settle documented accountabilities, and get sign-offs. If the employer imposes irrelevant conditions (e.g., “you must withdraw complaints” before release), that’s a red flag.

Step 4: Set a clear follow-up date

If final pay is not released within a reasonable period (often referenced as 30 days), follow up in writing and request a release schedule.

Step 5: Escalate through labor mechanisms if unpaid

If the employer ignores or refuses payment, you can pursue labor assistance/mediation and, if needed, formal claims.

12) Remedies If Your Former Employer Doesn’t Pay

A) Labor standards assistance / mediation (often fastest)

A common route is to seek assistance/conciliation through the labor department’s mechanisms designed for workplace disputes and money claims. These processes typically aim for settlement first.

B) Filing a money claim

If settlement fails, you may file a claim with the appropriate labor forum depending on:

The nature of the claim (pure money claim, reinstatement, damages),
Whether employer-employee relationship issues are involved,
The appropriate jurisdiction under labor rules.

Practical effect: Many straightforward final pay/13th month disputes resolve through early mediation when you present payslips, contract terms, and a clean computation.

13) Prescriptive Period: Don’t Wait Too Long

Money claims arising from employer-employee relations are subject to prescription (a deadline). As a general rule, many wage-related money claims prescribe in three (3) years from the time the claim accrued. That means if final pay or 13th month pay was due and unpaid, the clock generally starts when it became due.

Because prescription rules can vary depending on the type of claim, it’s best not to delay once payment becomes overdue.

14) Special Situations

End of contract / project-based employment

Project-based and fixed-term employees are still entitled to:

Unpaid wages
Prorated 13th month pay
Cash conversion of SIL (if covered and earned) Other benefits depend on policy/contract.

AWOL / abandonment allegations

Even if the employer disputes the manner of separation, wages already earned and prorated 13th month (for time worked) do not simply vanish. Disputes may affect timelines and documentation, but earned benefits remain claimable.

Employee death

Final pay may be claimable by legal heirs/authorized representatives, typically with documentation (death certificate, proof of relationship, and employer requirements).

Employer closure or insolvency

Claims may still be filed, but collection can be more complex. Documentation becomes even more important.

15) Quick Computation Examples

Example 1: Prorated 13th month (monthly paid)

Monthly basic salary: ₱30,000
Worked January to June (6 months) and resigned end of June
Total basic salary earned in year: ₱30,000 × 6 = ₱180,000
Prorated 13th month: ₱180,000 ÷ 12 = ₱15,000

If the employer already paid ₱10,000 as a mid-year partial release, balance due: ₱5,000.

Example 2: SIL conversion (illustrative)

Unused SIL: 5 days
Daily rate: ₱1,200
SIL cash equivalent (basic illustration): 5 × ₱1,200 = ₱6,000 (Actual conversion can vary based on how the company computes daily rate and whether there are inclusions/exclusions.)

16) Practical Checklist Before You Sign “Received Full Payment”

Before signing any quitclaim or “release and waiver,” make sure you have:

The money actually received (not just promised)
A written computation with breakdown
A breakdown of deductions and proof/basis
Confirmation of your prorated 13th month balance
Confirmation of leave conversions (SIL and any convertible VL)
Your COE and tax forms if applicable (or written commitment for release)
A copy of whatever you sign

17) Common Red Flags (When to Push Back)

“We will only release your final pay if you sign a waiver first,” without showing computations
Deductions that are unexplained or undocumented
Penalties that are not in your contract/policy or not lawfully imposed
Indefinite delays (“processing” with no date)
Demands unrelated to exit obligations (e.g., requiring you to give up statutory rights)

18) A Simple Demand Letter Structure (Non-Combative)

If follow-ups go nowhere, a short written demand can help. Keep it factual:

Date of separation
Amounts you believe are due (or request itemized computation if unknown)
Request for release within a specific reasonable period
Request for breakdown of deductions
Note that you will seek labor assistance if not resolved

(Keep a copy and send through email for a timestamp.)

Bottom Line

You are generally entitled to final pay consisting of all earned wages and matured benefits, plus prorated 13th month pay for the year of separation.
Employers may require clearance, but should not unreasonably delay payment, and deductions must be lawful and documented.
If unpaid, you can pursue mediation and labor claims, and you should be mindful of prescription periods (often 3 years for many money claims).

If you want, paste (1) your last day of work, (2) your salary rate and pay frequency, (3) whether you already received any 13th month portion this year, and (4) your leave balance—then I can compute a clean estimate of what your former employer likely still owes based on the standard rules.