A practical legal article for employees, employers, and HR practitioners

1) Why this matters

In the Philippines, separation from employment (whether resignation or termination) triggers two common flashpoints:

Final pay (“last pay”): the total amount the employer must settle for work already rendered and benefits already earned.
Unpaid incentives (bonuses, commissions, profit share, performance incentives, etc.): whether these are still collectible after the employment relationship ends.

Both issues sit at the intersection of the Labor Code, special labor laws (like the 13th month pay law), DOLE policies, employment contracts, CBAs, company practice, and Supreme Court doctrines on “earned benefits” versus “management prerogative.”

2) Key concepts and terminology

Final pay (last pay)

A settlement of all amounts due to the employee arising from employment up to the date of separation, minus lawful deductions.

Final pay is not the same as separation pay:

Final pay is due in almost all separations (resignation, termination for cause, end of contract, retirement, etc.), because it includes unpaid wages and earned benefits.
Separation pay is due only in specific legal situations (e.g., redundancy, retrenchment, authorized cause cases where the law requires it, or when granted by contract/CBA/company policy, or as a measure of social justice in rare jurisprudential contexts).

Incentives

“Incentives” is a broad business term. Legally, these typically fall into:

Commissions (often wage-related, especially for sales roles)
Productivity/performance incentives (may be conditional)
Bonuses (often treated as discretionary unless proven demandable)
Profit-sharing (depends on plan language and conditions)
Retention/signing bonuses (often time-bound, sometimes with clawbacks)
Stock-based incentives (governed by plan rules; not always “wages”)

What matters legally is (a) the source of the benefit (law vs contract vs practice) and (b) whether the employee already “earned” it under the applicable rules.

3) Legal framework in Philippine context (big picture)

Your entitlement usually comes from one or more of these sources:

Statutes and regulations
- Labor Code provisions on wages, deductions, money claims, and labor standards.
- The 13th Month Pay law (rank-and-file coverage; prorated entitlement upon separation).
- Service Incentive Leave (SIL) rules.
- Retirement pay law (for qualified employees under certain conditions).
- DOLE issuances on final pay timelines and release of employment documents.
Contractual sources
- Employment contract and addenda
- Incentive/commission plan documents
- Company handbook and policies
- Collective Bargaining Agreement (CBA), if unionized
Company practice
- A benefit repeatedly and consistently given over time may become a demandable company practice and cannot be unilaterally withdrawn or withheld if it has effectively ripened into a regular benefit (subject to conditions and proofs).
Equity and jurisprudence
- Courts and labor tribunals look at fairness, but generally still anchor decisions on the plan/policy terms and proof of “earned” benefits.

4) What typically belongs in “final pay”

Final pay commonly includes:

A) Unpaid wages up to last day worked

Salary for days worked but not yet paid
Unpaid overtime pay, holiday pay, premium pay, night shift differential (if applicable and earned)

B) Pro-rated 13th month pay

Rank-and-file employees are generally entitled to 13th month pay proportionate to the basic salary earned within the calendar year, even if they resign or are terminated before year-end.

Important notes:

13th month pay is based on basic salary (not usually including allowances and most bonuses, unless treated as part of basic salary by policy/practice).
Separation mid-year typically triggers pro-rated release.

C) Cash conversion of unused Service Incentive Leave (SIL), when applicable

If the employee is entitled to SIL and has unused SIL credits, the unused portion is commonly converted to cash upon separation, subject to lawful rules and the employer’s leave system.

D) Conversion/encashment of other leaves (vacation leave, etc.)

This depends on:

Company policy/handbook
Employment contract/CBA
Established practice (e.g., company regularly encashes unused VL on separation)

Not all leave credits are automatically convertible unless policy/practice says so.

E) Separation pay (only if due)

Separation pay is typical when separation is due to authorized causes like:

Redundancy
Retrenchment to prevent losses
Closure not due to serious losses (subject to rules)
Disease (when continued employment is prohibited by law or prejudicial to health) Or if contract/CBA/policy grants it.

F) Retirement pay (only if qualified)

If the employee is retiring and qualifies under the law or company retirement plan, retirement pay becomes part of the settlement.

G) Other earned monetary benefits

Examples:

Earned commissions
Reimbursements properly liquidated and approved
Allowances treated as part of wage by policy/contract (case-by-case)
Incentives already earned under the plan rules

5) Timing: when should final pay be released?

In practice, DOLE policy has used 30 days from the date of separation as a general guideline for releasing final pay, unless:

A more favorable company policy/CBA provides a shorter period, or
There are justified reasons requiring a different timeline (but “clearance” alone is not supposed to be used as a blanket reason to delay indefinitely).

Many employers still tie release to clearance processes. From a compliance and risk perspective, best practice is:

Release within the guideline period, and
Avoid using final pay as leverage for non-monetary disputes.

6) Lawful deductions and why “clearance” causes fights

A) What deductions are generally allowed

Philippine labor standards restrict deductions. Common lawful deductions include:

Statutory contributions and withholding tax
Deductions authorized by law or regulation
Deductions with employee’s written authorization (e.g., salary loans, company loans, uniform charges in some cases, etc.), subject to fairness and documentation
Deductions due to a judgment/tribunal order

B) Can the employer withhold final pay due to clearance, unreturned property, or “accountabilities”?

This is where cases often arise.

General principles:

Final pay represents earned compensation and accrued benefits; it should not be unreasonably withheld.
Employers may address accountabilities, but doing so should be:
- Documented
- Quantified
- Lawfully deductible (ideally with written authorization or a clearly supported basis)
- With due process (especially if alleging employee fault)

Practical approach that reduces disputes:

Release undisputed amounts promptly.
If there is a disputed accountability (e.g., alleged loss/damage), handle it through proper internal investigation and, if needed, legal action—rather than blanket withholding.

7) Unpaid incentives after termination: what’s collectible and what isn’t

This is highly fact-specific. The core question is:

Was the incentive already earned under the governing rules before separation, or is it discretionary/conditional and not yet vested?

A) Commissions (most common collectible incentive)

Commissions are often treated as wage-related, especially for sales roles, when they are a direct compensation for sales closed/collected.

Common rules:

If the sale was completed and the commission became due under the commission plan before separation, it is typically collectible.
If the plan says commission is only payable upon collection/installation/acceptance—then entitlement depends on whether those conditions were met.
If the plan says you must still be employed on payout date, tribunals may scrutinize whether that clause is fair or is being used to defeat already-earned commissions.

Best evidence for commission claims:

Signed commission plan
Sales reports, invoices, proof of closed deals, collection records
Email approvals, CRM extracts, performance dashboards
Past payouts showing consistent formula and timing

B) Performance incentives / productivity bonuses

These are commonly conditional:

Must meet performance metrics (KPIs)
Must be employed as of a certain date
Must not be under disciplinary action
Subject to management approval

Collectible if: the plan/policy shows the employee already satisfied conditions and the incentive is not purely discretionary.

Not collectible if: it is clearly discretionary and not a promised part of compensation, or conditions weren’t met.

C) Bonuses: discretionary vs demandable

Philippine labor doctrine often distinguishes:

Discretionary bonus
- Given out of generosity or as a reward without a promise or fixed criteria
- Generally not demandable as a matter of right
Demandable bonus A bonus can become demandable if:
- It is expressly promised in a contract/CBA/policy, or
- It is tied to a fixed formula or clear criteria and the employee meets them, or
- It has become a company practice—consistently and deliberately given over time such that employees reasonably expect it as part of compensation

Separation impact:

If the bonus is demandable and the employee met the requirements, it may be collectible even after termination (often pro-rated if the plan provides).
If discretionary, separation usually ends the claim unless the employer already committed to pay (e.g., announced bonus with defined recipients/amounts and conditions met).

D) Profit-sharing

Profit-sharing is usually governed strictly by the plan rules:

If profit-sharing is conditional on employment status at payout date, it may be contested depending on whether the share was already earned/vested.
If the plan says the company “may” grant profit-sharing subject to board approval, it is harder to claim as a right unless practice/representation makes it effectively promised.

E) Retention bonuses and signing bonuses (and clawbacks)

These often have explicit conditions:

“Payable if still employed on [date]”
“Clawback if you resign within [X months]”
“Must complete project milestone and remain employed through closeout”

These conditions are frequently enforced if clearly written and consistently applied, but they can be challenged if:

The employee was separated involuntarily in a way that defeats the purpose unfairly, or
The employer acted in bad faith to avoid payout

F) Stock options / RSUs / equity incentives

These are generally not treated as ordinary wages and are governed by:

The equity incentive plan rules
Vesting schedules
Good leaver/bad leaver provisions
Exercise periods and forfeiture clauses

Termination typically affects vesting and exercisability. The “collectibility” depends almost entirely on plan language.

8) Pro-rating: when it applies and when it doesn’t

Employees often assume “everything is pro-rated.” That’s not always true.

Usually pro-rated by law or standard practice:

13th month pay (rank-and-file; based on basic salary earned in the year)

Sometimes pro-rated depending on policy/plan:

Annual performance incentives (if plan allows pro-rating upon separation)
Certain bonuses (if historically pro-rated or if plan provides)

Often not pro-rated unless plan says so:

Discretionary bonuses
Retention bonuses (usually all-or-nothing)
Equity awards (vesting-driven)

9) What documents an employee should ask for (and keep)

For final pay and incentive disputes, documentation wins cases.

Request/secure:

Final pay computation/breakdown (line-by-line)
Payslips, payroll register extracts (if available)
Time records (OT/ND claims)
Leave ledger (SIL/VL balances and policy on conversion)
Commission/incentive plan document and amendments
Performance scorecards/KPI results
Emails approving payouts or confirming eligibility
COE and BIR Form 2316 (tax form), and separation documents if applicable

Employers are also expected to issue employment documents like a Certificate of Employment within a short period upon request as a matter of labor policy.

10) How to compute common final pay components (working guide)

A) Unpaid salary

[ \text{Unpaid Salary} = \text{Daily rate} \times \text{unpaid days worked} ] Daily rate depends on the wage basis (monthly-rated vs daily-rated) and payroll rules.

B) Pro-rated 13th month pay (typical approach)

[ \text{13th month (pro-rated)} = \frac{\text{Total basic salary earned in the calendar year}}{12} ] If separated mid-year, “total basic salary earned” is from January 1 to last day worked within that year.

C) SIL cash conversion (typical)

[ \text{SIL cash value} = \text{Daily rate} \times \text{unused SIL days} ] Subject to coverage rules and the employer’s leave accounting.

D) Commission

Use the plan formula, and identify the triggering event:

booking date vs collection date vs delivery/installation date
who gets credit (split sales, team quotas, territory rules)
forfeiture clauses (if any) and whether they apply fairly

11) If final pay or incentives aren’t paid: remedies and where to file

Step 1: Written demand / HR escalation

Ask for the final pay breakdown and the exact release date.
Specifically identify unpaid items (e.g., “pro-rated 13th month pay,” “SIL conversion,” “commission for Invoice #___”).

Step 2: DOLE SENA (Single Entry Approach)

SENA is a mandatory/standard pre-litigation conciliation-mediation mechanism in many labor disputes. It’s often the fastest way to trigger settlement discussions.

Step 3: Appropriate forum if unresolved

Depending on the claim:

Money claims involving termination-related issues are commonly within the jurisdiction of the NLRC (Labor Arbiter).
Simpler money claims may sometimes be handled at the DOLE Regional level under specific thresholds and conditions, but once termination and complex issues are involved, the NLRC track is typical.

Prescriptive periods (deadlines)

Many monetary claims under labor standards prescribe in 3 years from the time the cause of action accrued.
Certain actions (like illegal dismissal framed as an “injury to rights”) are often treated differently in prescription analysis.

Because prescription can be outcome-determinative, employees should act promptly when final pay/incentive issues arise.

12) Common scenarios and how they usually play out

Scenario A: Resigned employee, final pay delayed due to clearance

Employee is still entitled to final pay and documents.
Clearance can be a process, but delaying indefinitely increases employer exposure.
Best practice: pay undisputed amounts and separately resolve accountabilities.

Scenario B: Terminated for cause, employer refuses to pay “anything”

Even if validly terminated, the employee is typically still entitled to:
- unpaid wages earned
- pro-rated 13th month (if covered)
- earned benefits accrued under policy/law
Separation pay usually won’t apply for just causes, but final pay still exists.

Scenario C: Sales commission unpaid because collection happened after resignation

If the plan states commission is payable only upon collection, the key is:
- Did the employee satisfy all conditions?
- Is the “must be employed at payout” clause reasonable given the nature of the commission?
Evidence of past practice is important.

Scenario D: Bonus announced company-wide, then employee resigned before payout date

If the bonus is discretionary with an employment-on-payout-date rule, the claim is weaker.
If the bonus was already earned under a promised formula and the only barrier is timing, the claim strengthens.

Scenario E: Incentive is labeled “discretionary,” but paid every year for many years

The employee may argue “company practice” and reasonable expectation.
Employer will counter that it was always conditional/discretionary and dependent on profits/board approval.
Proof and consistent criteria matter.

13) Employer compliance checklist (risk-reducing)

Provide a clear written final pay breakdown.
Release final pay within the policy guideline timeframe.
Issue COE promptly upon request.
Maintain clear incentive plan documents (eligibility, triggers, forfeiture, proration, payout timing).
Avoid ambiguous “must be employed on payout date” clauses for commissions that were clearly earned earlier—these are magnets for disputes.
Document accountabilities and obtain lawful authorization for deductions.
Pay undisputed amounts even if other items are contested.

14) Employee checklist (claim-strengthening)

Request your final pay computation in writing.
Keep copies of payslips, time records, leave balances, commission dashboards.
Ask for the controlling incentive plan document and any amendments.
Document the dates when incentives were earned (sale closed, collection date, KPI completion).
If delayed beyond a reasonable period, initiate SENA early to avoid prescription issues and evidence loss.

15) Quick FAQs

Is final pay always required?

Almost always, because it covers unpaid wages and earned benefits. The debate is usually about how much and which items are included.

Is 13th month pay always included in final pay?

If the employee is covered by 13th month rules (commonly rank-and-file), then a pro-rated amount is typically due upon separation.

Can an employer offset debts against final pay?

Only with a lawful basis—commonly written authorization or another recognized legal ground—and it should be properly documented and not used as a blanket excuse to withhold everything.

Are bonuses payable after termination?

Depends whether the bonus is demandable (promised, formula-based, or company practice) and earned/vested under the rules before separation.

Are commissions payable after termination?

Often yes if already earned under the plan; but entitlement can depend on the plan’s trigger (booking vs collection vs delivery) and the fairness/enforceability of employment-status conditions.

16) Bottom line

In the Philippines, final pay is fundamentally about settling what was already earned—unpaid wages and accrued benefits—while unpaid incentives hinge on whether the benefit is demandable and already earned/vested under law, contract, policy, or company practice.

If you want, share (1) the separation type (resignation, redundancy, etc.), (2) your incentive plan wording (even just the key clauses), and (3) which items were withheld, and I can map which components are typically strongest to claim and what evidence best supports each.