A practitioner-oriented guide for workers and HR on what must be paid at separation even when no signed contract exists—covering timelines, what’s included, lawful deductions, separation pay scenarios, taxes, documentation, and remedies.

Big picture

No contract ≠ no rights. Philippine labor standards apply based on the fact of employment (control test), not on the existence of a written agreement.
“Final pay” (a.k.a. last pay/clearance pay/back pay) is the total amount due upon separation, regardless of the mode of separation.
Baseline release time: within 30 calendar days from separation, unless a more favorable policy/CBA applies.
Employers must also issue a Certificate of Employment (COE) within 3 working days upon request, and customary tax documents (e.g., BIR Form 2316).

What final pay must include (as applicable)

Unpaid basic wages up to the last day worked.
Premiums already earned: overtime, night shift differential, holiday pay, special day premiums, and any wage differentials (e.g., wage order increases).
Pro-rated 13th month pay (computed on basic salary actually earned within the calendar year up to the separation date).
Monetized unused Service Incentive Leave (SIL)—5 days/year minimum for eligible employees (those who have rendered at least 1 year and are not legally exempt). Company policies/CBA may grant more.
Other accrued benefits promised by policy/CBA/company practice (e.g., non-statutory allowances already earned, unused leave convertible to cash, sales incentives actually earned).
Tax adjustments and SSS/PhilHealth/Pag-IBIG contribution reconciliations if needed.
Separation pay, only if the mode of separation legally entitles the employee (see matrix below).
Make-whole items ordered by law or judgment (e.g., backwages for illegal dismissal, differentials) if applicable.

No written contract? The minimum standards above still apply. An employer cannot disclaim SIL, 13th month, or wage law compliance on the ground that “nothing was written.”

Lawful deductions (and what’s not allowed)

Permissible to deduct from final pay if supported by documentation and the employee’s lawful consent/authority or by law:

Statutory withholding tax; SSS/PhilHealth/Pag-IBIG arrears authorized by law.
Accountable property not returned (e.g., tools, devices) at documented fair value after due process.
Salary loans/advances with a written authorization; court-ordered garnishments.
Absences/under-time as allowed by policy and law.

Not permissible:

Blanket “penalties,” liquidated damages, or “training bonds” that are unconscionable, unrelated to actual loss, or lack prior written consent.
Withholding all final pay pending “clearance” beyond the 30-day release window. Clearance may proceed, but release must still be timely minus only lawful, liquidated deductions.

Separation pay: when it’s due (with or without a contract)

Mode of separation	Separation pay entitlement
Resignation (voluntary)	None by law, unless granted by policy/CBA/contract/practice. Final pay still includes earned wages, SIL, 13th month, etc.
Just-cause dismissal (serious misconduct, fraud, etc.)	None (but all earned wages/SIL/13th month still payable).
Authorized causes	Yes, as follows:
– Redundancy or Installation of labor-saving devices	At least 1 month pay or 1 month per year of service, whichever is higher.
– Retrenchment to prevent losses or Closure (not due to serious losses) or Disease (with proper public-health certification)	At least 1 month pay or ½ month per year of service, whichever is higher.
– Closure due to serious business losses	No separation pay required (the burden to prove serious losses is on the employer).
Project/fixed-term end (natural expiration)	None by law, unless the contract/policy/CBA grants it or there is illegal shortening.
Probationary failure (valid standards, due process)	None by law; final pay items still due.
Illegal dismissal (no cause or due process failure with no cause)	Backwages + reinstatement or separation pay in lieu (equitable, often 1 month per year of service) + damages/attorney’s fees as warranted.

Important: Disease as a ground requires a competent public health authority certification that continued employment is prohibited/prejudicial and the disease cannot be cured within 6 months. Company-doctor notes alone are insufficient.

Taxes on final pay (quick guide)

13th month and other benefits are tax-exempt up to the statutory ceiling (any excess is taxable).
Separation benefits due to authorized causes, death, sickness, or physical disability are generally tax-exempt under tax rules; check characterization.
Backwages/damages follow tax jurisprudence; coordinate with payroll/Tax for correct withholding and BIR 2316 issuance.

Timelines & documents the employer must meet

Final pay release: within 30 calendar days from separation (earlier if company policy/CBA).
COE: within 3 working days upon employee’s request.
BIR Form 2316: furnish upon separation/year-end as applicable.
RKS Form 5 (DOLE termination report): employer files for record-keeping (reason coding depends on separation mode).

Proving employment when there’s no contract

Courts and DOLE look at control and actual work:

Time records, payslips, bank payroll credits, IDs, work chats/emails, gate logs, supervisor messages, assignment sheets, co-worker affidavits, photos on site, etc.
If the employer fails to keep/payroll records, doubts are resolved in favor of labor and reasonable estimates are allowed.

Common disputes—how they’re resolved

Final pay withheld pending clearance → Employer must still release within 30 days, net of liquidated lawful deductions.
No 13th month because “no contract” → Wrong; 13th month is statutory.
No SIL conversion → If employee rendered ≥1 year and not in an exempt category, pay conversion for unused days.
Separation pay misapplied → Use the correct formula for the authorized cause; round up service of ≥6 months as 1 year in separation-pay computations.
Misclassification (contractor/“freelancer”) → If control test shows employment, statutory final pay components attach despite labels.

Clean computation examples

Example 1: Resignation (no separation pay)

Last basic: ₱20,000/month; resigned June 15; SIL unused: 3 days; OT due: ₱2,000; 13th month pro-rated Jan–Jun 15.
Final pay = half-month salary (₱10,000) + SIL (3/26×₱20,000 ≈ ₱2,308) + OT (₱2,000) + 13th month (₱20,000×5.5/12 = ₱9,167) − lawful deductions = ₱23,475 (approx.) less taxes/SSS etc. as applicable.

Example 2: Redundancy (with separation pay)

Last basic: ₱30,000; service: 4 years 8 months → 5 years for computation.
Separation pay = max(1 month, 1 month × 5) = ₱150,000.
Add unpaid wages, SIL conversion, 13th month pro-rated; apply tax rules (typically separation pay tax-exempt for authorized cause).

Employer compliance checklist (no contract on file)

Verify employment facts (control test) and separation mode.
Compute final pay and, where due, separation pay using the correct formula.
Process SIL conversion and 13th month pro-rating.
Limit deductions to lawful, liquidated items with proof/consent.
Release within 30 days; issue COE within 3 working days upon request; prepare BIR 2316.
Keep proof of payment and receipt; file RKS Form 5.

Worker action plan (if final pay isn’t released)

Send a written demand: ask for the full breakdown (wages, SIL, 13th, separation pay if any), tax treatment, and release within 5 days.
SEnA at DOLE (Single-Entry Approach): fast conciliation; many cases settle here.
File money claims/illegal dismissal (as applicable) before the NLRC or DOLE Regional Arbitration Branch.
- Prescriptive periods: 3 years for money claims; 4 years for illegal dismissal.
Bring proof: payslips, chats, time records, co-worker affidavits, bank credits, HR emails.
Interest & fees: ask for legal interest and attorney’s fees (when forced to litigate).

Short templates you can adapt

A) Demand for Final Pay (Employee → HR/Payroll)

Re: Final Pay & COE – [Name], separated [Date] Please release my final pay within 5 days, including: unpaid wages, OT/ND/holiday pay, pro-rated 13th month, SIL conversion, and separation pay (if applicable), with an itemized computation and appropriate tax treatment. Kindly issue my COE within 3 working days as required.

B) Final Pay Computation Notice (Employer → Employee)

Re: Final Pay – [Name] Breakdown: Unpaid wages ₱; OT/ND/holiday ₱; SIL conversion ₱; 13th month ₱; Separation pay ₱; Less lawful deductions ₱ (attach details). Net payable ₱___, to be released on [date ≤30 days]. COE enclosed/available upon request.

FAQs

Q: We never signed a contract—can HR deny 13th month/SIL? A: No. Statutory benefits apply based on actual employment, not paperwork.

Q: Can the company hold my entire pay until I return a laptop? A: They may deduct the documented value after due process, but cannot hold all pay beyond 30 days.

Q: Do I get separation pay if I resigned? A: Not by law, unless granted by policy/CBA/contract/practice.

Q: Is final pay taxable? A: Wages and most allowances are; 13th month and separation pay for authorized causes have preferential/ exempt treatment within legal limits.

Bottom line

Even without a written contract, Philippine law guarantees final pay: earned wages and premiums, pro-rated 13th month, SIL conversion, and separation pay where the law requires—released within 30 days. Keep your records, demand an itemized breakdown, and use SEnA → NLRC remedies if payment is delayed or short. Employers who standardize their computations and release on time avoid disputes—contract or no contract.