The Department of Labor and Employment (DOLE) regulates the prompt settlement of an employee’s monetary benefits and the issuance of employment records upon separation in the private sector. These obligations prevent undue hardship on workers transitioning to new employment or addressing personal needs and uphold the Labor Code’s principles of prompt wage payment and fair labor practices. The primary governing issuance is Labor Advisory No. 06, Series of 2020 (LA 06-20), which standardizes timelines that were previously unclear or subject to varying company practices.

Legal Framework

The Labor Code of the Philippines (Presidential Decree No. 442, as amended) provides the foundational rules. Key provisions include:

Articles on payment of wages (prompt payment and prohibition against withholding).
Article 95 (Service Incentive Leave).
Articles 298-299 (separation pay for authorized causes).
Presidential Decree No. 851 (13th-month pay).

LA 06-20 clarifies the periods for final pay release and Certificate of Employment (COE) issuance. It applies to all private-sector employers and employees, regardless of the cause of separation (resignation, termination, end of contract, retirement, or others). Violations may result in administrative penalties, fines, and employee claims for damages, attorney’s fees, or double indemnity in cases of unlawful withholding of wages or benefits.

Rules on Final Pay

Definition and Components
Final pay (also called last pay or back pay) refers to the total sum of all wages and monetary benefits due to the employee upon separation, irrespective of the reason for termination. It includes:

Unpaid earned salary up to the last day of work.
Cash equivalent of unused Service Incentive Leave (SIL) under Article 95 of the Labor Code.
Cash equivalents of unused vacation, sick, or other leaves, if convertible under company policy, employment contract, or collective bargaining agreement (CBA).
Pro-rated 13th-month pay under PD 851.
Separation or retirement pay, where applicable under the Labor Code (e.g., for authorized causes such as redundancy, retrenchment, or installation of labor-saving devices), company policy, or agreement.
Other accrued benefits stipulated in company policies, individual contracts, or CBAs (e.g., bonuses, commissions, tax refunds, or other compensations).

Separation pay is distinct from final pay and is generally not due in cases of voluntary resignation or termination for just cause, unless mandated by company policy, CBA, or contract.

Timeline for Release
Employers must release the final pay within 30 calendar days from the date of separation or termination of employment. This period applies unless a more favorable company policy, individual contract, or CBA provides for an earlier release. The 30-day rule promotes uniformity and protects employees from prolonged delays.

The timeline runs from the effective date of separation (e.g., last day of the notice period in resignation cases or the date specified in the termination notice). Employers may conduct a standard clearance process (return of company property, turnover of responsibilities, or accountabilities), but this procedure cannot justify extending the release beyond 30 days.

Deductions and Withholding
Only legally authorized deductions are permitted, such as:

Government-mandated contributions (SSS, PhilHealth, Pag-IBIG) not yet remitted.
Withholding taxes (final pay is generally subject to applicable income tax rules, though certain portions like de minimis benefits may be exempt).
Legitimate debts or advances with employee consent or legal basis.

Employers cannot withhold the entire final pay to offset alleged damages, unreturned property, or to compel signing of a release, waiver, or quitclaim. Such actions violate prohibitions against withholding wages. The proper recourse for employers is to pursue separate legal action for recovery. Unjustified delays or withholding can expose employers to liability for the full amount plus penalties.

Rules on Certificate of Employment (COE)

Obligation and Purpose
A Certificate of Employment is an official document issued by the employer that verifies the employee’s service. It assists former employees in securing new employment, applying for loans, visas, or other requirements. Employers must issue a COE upon request by any current or former employee, without regard to the reason for separation or ongoing disputes.

Timeline for Issuance
The COE must be issued within three (3) days from the employee’s request. A simple verbal or written request suffices; no formal demand letter is required. The three-day period applies even during employment (e.g., for loan applications) or after separation.

Content
The COE should specify:

Employee’s full name.
Position or designation.
Inclusive dates of employment (start and end dates).
Type or types of work performed.

Employers may include additional details such as salary (with consent), performance remarks, or reason for separation only if requested and mutually agreed. The document must be provided free of charge.

Prohibitions
Employers cannot condition issuance on:

Completion of clearances.
Signing of quitclaims or waivers.
Settlement of alleged obligations.

Withholding the COE is unlawful and contrary to public policy. It constitutes a labor standards violation, even if the employee has outstanding accountabilities.

Specific Scenarios

Voluntary Resignation
Employees must provide at least 30 days’ written notice under Article 300 (formerly 285) of the Labor Code, unless the employer waives it. Final pay (without separation pay, unless policy provides otherwise) is due within 30 days from the effective resignation date. The COE must be issued within 3 days of request.

Termination for Just Cause
For causes such as serious misconduct, willful disobedience, or gross negligence (after observance of due process: notice and hearing), the employee receives final pay (including accrued benefits) but generally no separation pay. Timelines for final pay and COE remain the same.

Termination for Authorized Cause
In cases like redundancy, retrenchment, or closure, the employer must provide 30 days’ notice to the employee and DOLE, plus separation pay (one month or one-half month per year of service, whichever is higher, in most cases). Final pay includes this separation pay and must be released within 30 days. COE issuance follows the 3-day rule.

End of Contract / Project Employment
For fixed-term or project employees, separation occurs upon contract completion. The same 30-day final pay and 3-day COE rules apply. No additional separation pay is due unless the contract or law provides otherwise.

Retirement, Death, or Other Cases
Retirement benefits follow company policy, CBA, or the Retirement Pay Law (if applicable). Upon an employee’s death, final pay and benefits go to legal heirs or designated beneficiaries. In abandonment cases, employers should still prepare final pay and issue COE upon request, though practical challenges may arise.

Employee Rights and Remedies

Employees whose final pay is delayed beyond 30 days or whose COE is not issued within 3 days may:

File a complaint at the nearest DOLE Regional Office under the Single Entry Approach (SEnA) for mediation.
Escalate to the National Labor Relations Commission (NLRC) for adjudication if monetary claims exceed certain thresholds or involve illegal dismissal.
Claim the full amount due, plus attorney’s fees (typically 10%), moral and exemplary damages in appropriate cases, and potential double indemnity for willful non-payment of wages/benefits.

DOLE regularly reminds employers that non-compliance ranks among the top labor concerns, and penalties can include fines and corrective orders.

Employer Compliance and Best Practices

Employers should:

Maintain clear policies on final pay computation, clearance procedures, and COE issuance in employee handbooks or contracts.
Prepare computations and documents in advance of the separation date.
Document requests for COE and clearances.
Ensure deductions are properly authorized and recorded.
Train HR personnel on LA 06-20 requirements to avoid inadvertent violations.

Adherence to these rules minimizes disputes, promotes goodwill, and aligns with the constitutional and statutory mandate to protect labor.

This framework under DOLE regulations ensures that separating employees receive what is due to them without unnecessary delay, balancing employer operational needs with worker protections.