Employer Holding Salary Upon Resignation (Philippines)

Executive summary

In the Philippines, an employer may not withhold wages that have already been earned except for deductions expressly allowed by law or by the employee’s written authorization. When an employee resigns with proper notice, the company may implement clearance procedures and compute the final pay (e.g., remaining salary, pro-rated 13th month, conversion of unused service incentive leave, tax, and statutory deductions). As a practical benchmark under Department of Labor and Employment (DOLE) guidance, final pay is generally released within thirty (30) days from separation, unless a shorter period is provided by company policy/CBAs or the parties agree otherwise. Any delay beyond lawful reasons can constitute unlawful withholding of wages, for which the worker may seek DOLE assistance or file a monetary claim.

Legal foundations

Wage payment & frequency. The Labor Code requires wages to be paid at least twice a month at intervals not exceeding 16 days. Post-resignation, the pay for days already worked before the separation date remains regular wages and should follow the regular payday, subject only to lawful deductions.
Prohibition on unlawful withholding & illegal deductions. The Labor Code prohibits:
- withholding wages and taking kickbacks, and
- deductions unless: (a) required by law (withholding tax; SSS, PhilHealth, Pag-IBIG), (b) authorized by a court/agency, or (c) expressly authorized in writing by the employee for a specific purpose and amount (e.g., repayment of a clearly quantified company loan).
Final pay timeline & certificate of employment (COE). DOLE guidance (Labor Advisory on Payment of Final Pay and Issuance of COE) sets 30 days from separation as a general timeline to release final pay and requires issuing a COE within a few days upon request (commonly three [3] working days). Employers may adopt faster timelines.
Resignation notice. Voluntary resignation generally requires at least 30 days’ written notice, unless just causes for immediate resignation exist (e.g., serious insult, inhumane treatment, commission of a crime by the employer, etc.).
Service Incentive Leave (SIL). Employees covered by the Labor Code are entitled to 5 days of SIL per year, convertible to cash if unused. On resignation, accrued/unused SIL is typically monetized.
13th-Month Pay. Presidential Decree No. 851 mandates 13th-month pay for rank-and-file employees; upon resignation, the amount is pro-rated based on actual basic salary earned during the calendar year up to separation.
Separation pay. Not owed when an employee resigns, unless provided by law (for specific employer-initiated terminations), CBA, company policy, or individual contract.
Prescription. Money claims arising from employer-employee relations generally prescribe in three (3) years from when the cause of action accrues.

What employers can—and cannot—hold

Can be withheld or offset (subject to strict conditions)

Statutory deductions: Withholding tax; SSS, PhilHealth, Pag-IBIG contributions/loans (as applicable under implementing rules).
Court/agency-ordered deductions: e.g., garnishments.
Employee-authorized deductions: Written authorization for a definite amount to settle:
- Outstanding company loans or cash advances;
- Unreturned company property or accountable items, if the value is certain and supported by documentation;
- Shortages or losses clearly attributable to the employee and covered by an authorization or a lawful policy that meets due process standards.
Overpayments or clearly documented salary corrections.

Key guardrails:

Deductions must be lawful, documented, and quantified.

Employers should avoid “blanket” withholding of all pay pending clearance if they can quantify and deduct the exact amounts lawfully.

Any penalties or forfeitures not allowed by law, or unclear valuations of losses, are not valid grounds to hold wages.

Cannot be withheld

Earned wages for time already worked (e.g., last cutoff salary) just because the employee resigned.
Final pay beyond the period reasonably necessary to compute and process lawful deductions and clearance.
Amounts representing statutory benefits (e.g., pro-rated 13th month, SIL conversion) unless there is a lawful, quantified set-off.

Clearance policies and last-pay timing

Clearance is allowed to verify accountabilities (e.g., tools, laptops, corporate cards, client files).
A well-drafted clearance policy should:
1. identify custodians and timelines;
2. state what happens if items aren’t returned;
3. explain how values are computed;
4. provide a dispute path; and
5. commit to releasing final pay within a fixed period (benchmark: ≤ 30 days) after separation or completion of clearance, whichever is earlier and reasonable.
Good practice: Release the earned last salary on the next regular payday, then release the final pay (benefits/adjustments) after clearance—rather than holding everything.

Components of final pay (typical)

Unpaid basic salary up to the last working day.
Pro-rated 13th-month pay (basic pay only; allowances/OT excluded unless employer policy states otherwise).
Conversion of unused SIL (5 days/year minimum for covered employees; some employers grant more).
Other accrued benefits under CBA/policy (e.g., non-statutory leave credits).
Deductions: statutory, authorized, or adjudged; plus any lawful offsets for company property, loans, or advances with documentation.
Tax: apply the correct withholding tax rules (e.g., annualization if applicable).

Practical computations (illustrative)

Assume monthly basic pay = ₱30,000; daily rate (for a 313-day factor) ≈ ₱95,850/yr ÷ 313? Because companies use different work-day factors (e.g., 313, 261, 365), always follow the factor specified in company policy or CBA, as long as it is consistent and lawful. The same applies to the 13th-month formula (generally: total basic salary earned for the year ÷ 12).

Checklist before release:

Verify last day worked and cutoff hours.
Confirm leave balances and monetization rules.
Compute pro-rated 13th month.
Identify outstanding loans/advances with signed authorizations.
Value any unreturned items using documented valuations.
Prepare COE and tax certificates (BIR 2316 update at year-end or upon subsequent employment, as applicable).

Common gray areas—and how to handle them

“We’ll release only after you sign a quitclaim.” A quitclaim/release is not a license to withhold statutory or earned pay. A quitclaim may be valid only if: (a) voluntarily executed, (b) for reasonable consideration, and (c) the employee fully understood its terms. It cannot waive labor standards rights (minimum wage, overtime, 13th month, SIL).
Unreturned laptop/ID/tools. Employer may deduct the documented value (or repair cost) if supported by policy and written authorization or by agreement at separation. Avoid speculative amounts; give the employee a chance to return the item and contest valuations.
Commissioned or field employees. Commissions actually earned and determinable before separation form part of wages. If the entitlement depends on events after separation (e.g., client payment within X days), follow the written compensation plan and pay once conditions are met.
Cash bonds and deposits. If validly collected (e.g., with proper policy and receipts), they should be accounted for and returned minus lawful offsets once accountabilities are cleared.
Company claims for damages. Purely alleged losses are not grounds to withhold pay. Pursue claims through proper processes; do not convert wages into a damages bond.

Employee remedies for delayed or withheld pay

Internal escalation. Write HR/Payroll citing: (a) items due, (b) lawful deductions you acknowledge, and (c) request a release date and a final pay computation.
Single-Entry Approach (SEnA) with DOLE. File a Request for Assistance at the DOLE Field/Regional Office where the employer is located. SEnA is conciliation-mediation and often results in quick releases.
File a money claim / labor standards complaint. If unresolved, pursue a complaint before the proper forum (DOLE or NLRC, depending on the nature/amount and whether there are termination or CBA issues). Claims for unpaid wages, 13th month, SIL conversion, and illegal deductions are standard monetary claims.
Prescriptive period. Act within 3 years from when the employer failed to pay or unlawfully deducted.

Compliance roadmap for employers

Before resignation:
- Keep clear, written compensation and property-accountability policies;
- Obtain specific, written authorizations for any salary offsets tied to loans/advances.
Upon notice of resignation:
- Acknowledge receipt; furnish a clearance checklist with named approvers and deadlines;
- Freeze further cash advances; audit accountabilities immediately.
On or before last day:
- Capture cut-off hours and leave balances; retrieve company property (or agree on return timeline/valuation).
Within 30 days from separation (or earlier by policy):
- Release final pay with payslip breakdown; issue COE promptly upon request; provide receipts/summaries for all deductions; return any cash bonds as appropriate.
Documentation:
- Keep the final computation sheet, signed clearance, return-of-property forms, and any written deduction authorizations in the 201 file.

Quick answers to frequent questions

Can my employer hold my last salary because I resigned? Not the earned wages for days already worked. They may process final pay within a reasonable period (commonly ≤ 30 days) to account for clearance and lawful deductions.
Can they deduct the cost of the laptop I lost? Yes, if the value is documented and there’s a lawful basis (policy + written authorization or agreement). You must be given a fair chance to dispute or return the item.
Am I entitled to separation pay when I resign? Generally no, unless granted by CBA, company policy, or contract.
Do I get 13th-month and SIL if I resign mid-year? Yes. Pro-rated 13th month and cash conversion of unused SIL (if entitled) are part of final pay.
They’re delaying beyond 30 days with no explanation—what now? Escalate in writing; if unresolved, file SEnA at DOLE and/or a money claim. Keep all emails, payslips, IDs of approvers, and your resignation letter.

Model demand letter (short form)

Subject: Request for Release of Final Pay and Certificate of Employment Dear HR/Payroll, I resigned effective [date] with proper notice. As of today, my earned wages up to [date], pro-rated 13th-month, and SIL conversion remain unpaid. Please release my final pay and COE within the standard period and provide a breakdown of lawful deductions (statutory, authorized, or adjudged). If there are claimed accountabilities, kindly itemize and quantify them with supporting policies and my written authorizations, if any. Thank you. [Name] / Employee No. [###]

Final notes

Company practice cannot override labor standards.
Clearance should facilitate computation, not justify indefinite withholding.
Keep communications in writing and preserve records.
For complex cases (large property losses, commissions, or non-standard plans), seek tailored legal advice.