In the Philippine labor landscape, the separation of an employee from a company—whether through voluntary resignation or termination—triggers a legal obligation for the employer to release what is colloquially known as "Backpay" or "Final Pay." Under Labor Advisory No. 06, Series of 2020, the Department of Labor and Employment (DOLE) defines and regulates the timely release and components of these payments.

I. The Definition of Final Pay

Final pay refers to the sum total of all wages and monetary benefits due to an employee, regardless of the cause of termination of employment. Upon resignation, an employee is entitled to the settlement of all earned but unpaid compensation.

II. Mandatory Components of Final Pay

While individual companies may offer additional perks, the following are the legally mandated components under the Labor Code of the Philippines:

Unpaid Earned Salary: The pro-rated portion of the employee’s salary from the last cut-off up to the final day of work.
Cash Conversion of Leave Credits: * Service Incentive Leave (SIL): Under Article 95 of the Labor Code, employees who have rendered at least one year of service are entitled to five (5) days of SIL with pay. Any unused portion of these 5 days must be converted to cash upon resignation.
Note: Conversion of vacation/sick leaves beyond the statutory 5 days depends on the company policy or the Collective Bargaining Agreement (CBA).
Pro-rated 13th Month Pay: Pursuant to Presidential Decree No. 851, all rank-and-file employees are entitled to a 13th-month pay. If an employee resigns before the end of the year, they are entitled to a pro-rated amount calculated as:

(Total Basic Salary Earned during the Calendar Year) / 12 months
Tax Refunds: If the total tax withheld from the employee’s salary throughout the year exceeds the actual tax due (often the case for those resigning mid-year), the employer must refund the excess amount.
Other Benefits: This includes other earned compensations such as commissions, honoraria, or productivity incentives, provided they are stipulated in the employment contract.

III. Statutory Contributions and Remittances

The employer is obligated to ensure that all mandatory deductions have been remitted to the appropriate government agencies up to the last month of employment. These include:

Social Security System (SSS)
Philippine Health Insurance Corporation (PhilHealth)
Home Development Mutual Fund (Pag-IBIG Fund)

Upon resignation, the employer should provide the employee with updated records of these contributions to facilitate a smooth transition to the next employer.

IV. The "Clearance" Process and Deductions

The release of final pay is usually contingent upon the completion of a Company Clearance. This process ensures that the employee has returned all company property (laptops, IDs, uniforms) and turned over all pending tasks or documents.

Allowable Deductions: Employers are permitted to deduct "debts" or liabilities from the final pay, such as unliquidated cash advances, the value of lost equipment, or unpaid loans internal to the company.
Withholding of Pay: While an employer may temporarily withhold final pay pending the completion of the clearance process, they cannot withhold it indefinitely.

V. Timeline for Release

According to DOLE Labor Advisory No. 06-20, the final pay must be released within thirty (30) calendar days from the date of separation or termination of employment, unless a more favorable company policy or individual/collective agreement exists.

VI. Issuance of Certificate of Employment

Regardless of the nature of the resignation (even if "not in good standing"), Article 6 of DOLE’s Labor Advisory 06-20 mandates that the employer must issue a Certificate of Employment (COE) within three (3) days from the time of the employee's request.

VII. Legal Remedies for Non-Compliance

If an employer fails to release the final pay within the 30-day window or refuses to issue a COE, the employee may seek assistance through the Single Entry Approach (SEnA) of the DOLE. This is a form of conciliation-mediation designed to provide a speedy, impartial, and inexpensive settlement for labor issues before they escalate into formal legal cases.