1) The core issue

When an employee resigns, is separated, or is terminated, disputes often arise over “incentives”—performance bonuses, sales incentives, commissions, profit-sharing, retention or “stay” bonuses, and similar pay-outs. In Philippine labor law, the outcome usually turns on one question:

Is the incentive already “earned” (demandable) under law, contract, company policy, or established company practice—or is it still discretionary/conditional?

If it is earned, withholding it may be treated like non-payment of wages/benefits. If it is discretionary or subject to unmet conditions, the employer may be able to lawfully deny or defer it.

2) Know the vocabulary: wages, benefits, incentives, and bonuses

A. “Wages” and wage-related pay

Under Philippine labor principles, “wage” is not limited to basic salary. Many payments that are tied to work performed can be treated as wage or wage-related compensation. This matters because non-payment of wages is strongly regulated, and deductions/set-offs are limited.

Common examples that often qualify as wage-related:

Commissions (especially sales commissions based on closed/collected sales)
Piece-rate / productivity incentives that are formula-based and tied to output
Guaranteed allowances that function as part of pay (fact-specific)

B. Bonuses vs. incentives

In Philippine jurisprudence, a bonus is generally viewed as a gratuity—not demandable—unless it has become:

Contractual (expressly promised in an employment contract, incentive plan, job offer, or policy), or
Part of a collective bargaining agreement (CBA), or
A company practice that is consistent and deliberate over time such that employees can reasonably rely on it as part of compensation.

Many “incentives” are not purely gratuities. If the plan uses objective metrics (e.g., “5% of monthly collected billings” or “₱X if KPI score ≥ 90”), it increasingly looks like earned compensation rather than a mere gift.

3) Common incentive types—and how Philippine law typically treats them

1) Sales commissions

Usually demandable once earned under the plan terms. The fight is typically over:

When it is earned (upon booking vs. delivery vs. collection)
Whether the sale is attributable to the employee (lead ownership, split credit, team quota)
Whether the employee must still be employed on payout date (a frequent clause)

Key practical point: If the employee already satisfied the plan’s earning conditions before separation, the employer’s “you already resigned” argument is weaker—unless the plan clearly makes continued employment an explicit condition to vesting/payment.

2) Performance incentives (monthly/quarterly/annual)

These often depend on:

Completion of evaluation cycles
Company/department performance
Management approval or budget availability
Employment status on payout date

If the plan says it is discretionary, or “subject to management approval,” or “subject to company performance,” employers typically have more room to deny. If it is formula-based and routinely paid, employees may argue it has become a demandable benefit.

3) Profit-sharing / gainsharing

Usually highly plan-driven and often contingent on audited results, board approval, or profit thresholds. Often treated as not automatically demandable unless the plan clearly makes it a binding obligation.

4) Retention, sign-on, or “stay” bonuses

These are commonly conditional on staying until a specified date. If the employee leaves early, the employer can often deny the bonus if the condition is clear and reasonable.

5) 13th month pay (not an “incentive,” but often confused with bonuses)

The 13th month pay is a statutory benefit (for rank-and-file in the private sector, with recognized exceptions). If the employee resigns or is terminated before year-end, it is generally prorated and included in final pay (subject to rules/exemptions).

6) Service Incentive Leave (SIL) conversion to cash

SIL is statutory for covered employees. Unused SIL may be converted to cash per company policy/practice and is commonly included in final pay if convertible and due.

4) The “earned vs. conditional” framework (how disputes are usually decided)

A. Incentive is likely demandable if:

The incentive plan is written and clear, and the employee met all conditions; or
The incentive is computed by formula and tied to measurable output; or
The employer has a consistent practice of paying it (especially if communicated as part of compensation), and employees reasonably relied on it; or
The employer already recognized/recorded it as payable (e.g., HR/finance confirmation, payslip accrual, email approval, performance results released).

B. Incentive may be lawfully denied/withheld if:

It is clearly discretionary (e.g., “may be granted,” “at the sole discretion of management/board”); or
It depends on conditions not met (e.g., profitability threshold, minimum tenure, active employment on payout date, no pending admin case); or
It requires post-period events (e.g., collection from client did not occur); or
The employee was terminated for a cause covered by a valid forfeiture clause and the clause is reasonable and properly implemented.

C. Clauses requiring “must still be employed on payout date”

These are common. Their enforceability is fact-specific:

If the incentive is truly a retention tool, payout-date employment conditions are more defensible.
If the incentive is essentially payment for work already completed (e.g., commission for sales already collected), a strict “must be employed on payout date” clause can be attacked as an unfair forfeiture—especially if it defeats compensation already earned.

5) Final pay: what must be included and when it’s typically due

When employment ends, the employer must release final pay (also called final wages) and related clearances. Final pay commonly includes:

Unpaid salary up to last day worked
Pro-rated 13th month pay (if applicable)
Cash conversion of accrued/unused leave if company policy/practice provides
Reimbursements due
Any earned and due commissions/incentives (depending on the plan and proof)

As a practical matter, Philippine labor guidance commonly expects final pay to be released within a reasonable period (often referenced as around 30 days in many HR practices), but exact timing can depend on company clearance procedures and the nature of computations—without allowing unreasonable delay.

6) Can an employer “set off” incentives against debts, losses, or unreturned property?

Employers often withhold incentives saying the ex-employee has:

Unreturned laptop/ID
Accountabilities
Cash shortage
Company loan
Damages or losses

Philippine labor rules generally restrict deductions from wages. While certain deductions are allowed (e.g., taxes, authorized deductions, loans with consent, and limited situations recognized by law), unilateral set-offs—especially for unproven damages—are risky for employers.

Best practice (and common legal expectation):

The employer should prove the debt/liability,
Observe due process for accountability findings,
Use proper documentation (and in some cases written authorization), rather than simply withholding earned pay indefinitely.

7) Evidence that usually wins (for employees and employers)

For former employees claiming withheld incentives:

Gather:

Employment contract, job offer, incentive plan/handbook pages
Emails or memos announcing incentive rules and payout schedules
KPI scorecards, performance evaluation results
Sales reports, collection reports, CRM extracts, commission statements
Past payslips showing similar incentives were paid
Any written approval or computation from HR/Finance

For employers defending non-payment:

Maintain:

Signed incentive plan with clear “discretionary/conditional” wording
Clear definitions of “earned,” “vested,” and “payable”
Documents showing conditions weren’t met (e.g., collections not received)
Proof the practice was not consistent or was expressly discretionary
Proper accountability investigation records if invoking set-off/withholding

8) Where to file and what process to expect (Philippine setting)

A. Start with SEnA (Single Entry Approach)

Most labor money disputes commonly go through a mandatory conciliation-mediation step at the DOLE/NLRC level (depending on routing) to encourage settlement. This is often the fastest path.

B. DOLE vs. NLRC: which has jurisdiction?

In general:

Money claims arising from employer-employee relations can fall under the NLRC (Labor Arbiter), especially when the dispute is more than a simple labor standards compliance issue or involves contested entitlements.
DOLE can enforce certain labor standards matters through inspection/visitorial powers and may handle some money claims depending on the nature of the issue and applicable rules.

Because jurisdiction can be technical and fact-dependent, many claimants file through the accessible labor channels and get directed appropriately.

C. Prescription (time limits)

Money claims under Philippine labor law are commonly subject to a 3-year prescriptive period counted from the time the money became due (with some nuances depending on the nature of the claim). Waiting too long can forfeit an otherwise valid claim.

9) Typical legal arguments in incentive-withholding cases

Employee arguments

The incentive is part of wages or wage-related compensation (e.g., commissions) and was already earned.
The incentive became demandable due to contract/policy or consistent company practice.
The “must be employed on payout date” clause is an invalid forfeiture of earned pay (fact-specific).
Withholding is an illegal deduction/set-off without proper basis or due process.

Employer arguments

Incentive is discretionary or conditional and did not vest.
Conditions were not met (company performance threshold, collection not received, KPI not achieved).
Plan explicitly requires active employment on payout date.
Any withholding is tied to lawful deductions/accountabilities with documentation.

10) Settlement realities: what parties usually agree on

Common compromise structures:

Pay prorated incentives based on period actually worked
Pay commissions only for collected accounts attributable to the employee
Pay earned incentive now, reserve disputed amounts pending reconciliation
Offset only documented accountabilities with agreed computation
Convert disputes into a mutual release with clearly itemized payments

Be careful with quitclaims: Philippine labor policy scrutinizes quitclaims, especially if the employee did not receive a fair and voluntary settlement or did not understand what was waived. A quitclaim is not automatically ironclad if it appears unfair.

11) Practical “what to do” checklist (former employee)

Request a written breakdown of final pay and incentive computation (ask for the plan basis and metrics).
Compare the plan terms with your actual results (KPI, sales, collections).
Document demand: send a clear, professional email requesting payment by a specific date and asking what condition is allegedly unmet.
If unresolved, proceed to SEnA conciliation and bring your documents.
File a formal complaint if needed—especially before the 3-year prescriptive period runs.

12) Practical compliance checklist (employer/HR)

Write incentive plans with clear definitions: earned vs. payable vs. discretionary
Specify treatment upon resignation/termination (including pro-rating rules)
Avoid vague “management discretion” if you intend it to be performance pay
Don’t rely on informal practice—either formalize it or clearly disclaim it
Release final pay within a reasonable period; avoid indefinite holds for “clearance”
If asserting deductions/accountabilities, document due process and basis

13) Key takeaways

In the Philippines, not all incentives are automatically demandable, but many become demandable when they are earned, contractually promised, or established as a consistent company practice.
Commissions and formula-based incentives are more likely to be treated like earned compensation once conditions are met.
Employers must be careful with withholding as a tactic for alleged liabilities; wage deduction rules and due process expectations matter.
The usual remedy path is SEnA → DOLE/NLRC depending on the claim’s nature, and time limits (often 3 years) are critical.

This article is for general information in the Philippine context and is not a substitute for advice from a qualified lawyer who can review the exact incentive plan, separation circumstances, and documentation.