In the Philippine labor landscape, the conclusion of an employer-employee relationship necessitates the settlement of all outstanding financial obligations. For years, the timing of this settlement was often a point of contention. However, the Department of Labor and Employment (DOLE) clarified these requirements through Labor Advisory No. 06, Series of 2020, providing a definitive framework for both employers and employees.

Definition of Final Pay

"Final Pay," often colloquially referred to as "back pay" or "last pay," refers to the sum total of all wages and monetary benefits due to an employee, regardless of the cause of termination (e.g., resignation, completion of contract, or termination for cause).

Under DOLE guidelines, final pay typically includes:

Unpaid earned salary: Wages for days actually worked prior to the separation.
Pro-rated 13th-month pay: Calculated from the beginning of the calendar year up to the last day of service.
Service Incentive Leave (SIL) pay: Cash conversion of unused SIL (for employees who have rendered at least one year of service).
Other earned benefits: This may include unused vacation or sick leave (if convertible to cash per company policy or CBA), commissions, or bonuses.
Separation pay: If the termination is due to authorized causes (e.g., redundancy or retrenchment), unless otherwise provided by law.
Income tax refund: If applicable, due to excess taxes withheld.

The Mandatory Deadline for Release

Before 2020, there was no uniform statutory deadline, leading many companies to adopt a "30-day" or "60-day" policy. Labor Advisory No. 06-20 established a clear rule:

Final pay must be released within thirty (30) days from the date of separation or termination of employment, unless a more favorable company policy or individual/collective bargaining agreement exists.

If a company policy dictates that final pay be released within 15 days, the employer must abide by that shorter period. However, they cannot exceed the 30-day ceiling provided by DOLE.

The Clearance Process and Accountability

While the 30-day rule is mandatory, it is inextricably linked to the clearance process. Employees are generally required to return company properties (e.g., laptops, IDs, uniforms) and settle any outstanding accountabilities before the final pay is processed.

Withholding of Final Pay: The Philippine Supreme Court has recognized the employer's right to withhold final pay only until the clearance process is completed. This is viewed as a "management prerogative" to protect the employer’s interest.
Limits on Deductions: Employers cannot make arbitrary deductions from the final pay. Deductions are only allowed if authorized by law (e.g., SSS, PhilHealth, Pag-IBIG), or if the employee has given written consent for specific debts or accountabilities.

Issuance of Certificate of Employment

Coinciding with the release of final pay, DOLE mandates that an employer must issue a Certificate of Employment (COE).

Deadline: The COE must be issued within three (3) days from the time of the employee’s request.
Content: The certificate should state the period of employment, the type of work performed, and the date of termination.

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 has several legal avenues:

Request for Assistance: The employee may file a request for assistance through the Single Entry Approach (SEnA) at the nearest DOLE Regional, Provincial, or Field Office.
Mediation-Conciliation: SEnA provides a 30-day window for mandatory mediation to settle the dispute amicably.
Formal Complaint: If mediation fails, the employee may escalate the matter by filing a formal position paper with the National Labor Relations Commission (NLRC).

Non-compliant employers may be held liable for the unpaid amount plus legal interest, and in some cases, moral and exemplary damages if the withholding was done in bad faith.