1. Key Concepts in a Single Glance

Concept	Statutory / Regulatory Basis	When It Becomes Due	Basic Coverage	Computation Guide
Final Pay (a.k.a. “last pay” or “back pay”)	Labor Advisory No. 06-20 (DOLE, 2020); Articles 102-103, 116, 118 Labor Code	Within 30 calendar days from date of termination/ separation for any reason	• Unpaid wages to last working day • Pro-rated 13th-month pay • Cash conversion of unused service incentive leaves & VL/SL if company-policy grants them • Pro-rated share in bonuses that have become “earned” • Deductions/refunds properly authorized by employee • Other monetary benefits written in CBA/policies	Itemized; no single formula—each benefit follows its own rule (e.g., unused leave = daily rate × leave credits)
Separation Pay	Art. 298, 299, 301 [formerly 283, 284, 286]; DO 147-15; case law (e.g., Sebastian v. PAL, 2021)	Only when employee is dismissed for authorized causes (redundancy, retrenchment, installation of labor-saving devices, closure not due to serious losses, disease, or the employer’s failure to recall after the 6-month “floating” period)	Statutory benefit that is additional to final pay	Most common formulas: • Redundancy / Closure / LIFO: 1 month pay per year of service • Retrenchment / Closure due to losses / Disease: ½ month pay per year of service A fraction of at least 6 months = one full year.

2. Understanding “Floating Status”

Legal Foundation.
Article 301 of the Labor Code allows an employer to temporarily suspend operations (“bona fide suspension”) or to place employees on “off-detail”/“floating” status for up to six (6) months.
Employer Options During the 6-Month Window.
Recall to work or permanently dismiss the employee under an authorized cause with proper notice and separation pay.
Consequences of Inaction.
- No recall + no termination after 6 months → dismissal becomes illegal; employee may claim reinstatement + back wages or separation pay in lieu of reinstatement (Art. 294).
- Termination with separation pay within or after the 6-month limit → legal, provided procedural due process is observed (discussed in § 4).

3. Final Pay: Scope, Deadline & Interest for Delay

Component	Short Explanation
Basic wages & COLA	Salary earned up to the day immediately preceding floating status or termination.
Accrued 13th-month pay	Computed pro-rata: Total basic wages earned ÷ 12.
Unused Service Incentive Leave (SIL)	Art. 95 mandates conversion if un-availed; company leaves in excess of SIL convert only if policy/CBA so provides.
Pro-rated bonuses & profit sharing	Payable if the employee has already met the vesting condition (e.g., completion of fiscal year quarter).
Retirement benefits (if qualified)	Governed by Art. 302 or company retirement plan; released together with final pay.
Tax & SSS/PhilHealth/ Pag-IBIG clearances	Employer may deduct lawful taxes; separation benefits up to ₱10-million (RA 10963) are tax-exempt.

Deadline: Labor Advisory 06-20 sets 30 calendar days as the maximum for release, unless a more favorable CBA/policy applies. Unjustified delay draws 6 % legal interest per annum (Nacar v. Gallery Frames, G.R. 189871, 2013).

4. Separation Pay After Floating Status

Statutory Triggers

Authorized Cause	Link to Floating Status
Closure of business not due to serious losses	If employer opts to cease operations after suspension period.
Retrenchment to prevent losses	Common where business outlook worsens during floating.
Redundancy	Work is no longer necessary due to re-organization/automation post-suspension.
Disease	Employee contracted illness during suspension and can’t be cured within 6 months (Art. 299).

Procedural Due Process
- 30-day written notice to both employee and DOLE (Article 298).
- Proof of authorized cause (e.g., audited financial statements for retrenchment).
- Payment of separation pay on or before effectivity date.
Computation
- Use the employee’s latest “one-month pay” (basic wage + regular allowances).
- Count a fraction ≥ 6 months as one whole year of service (e.g., 5 years & 7 months = 6 years).
- Rounded up, not prorated by months.

5. How Final Pay & Separation Pay Interact in Floating-Status Cases

Scenario	Entitlement	Rationale
Employee resigns voluntarily while on floating status	Final pay only (plus pro-rated 13th month, accrued leaves, etc.)	Resignation is voluntary; Art. 298 separation pay doesn’t apply.
Employer recalls within 6 months	No separation pay; employee receives normal wages upon return.	Floating is temporary; employment continues.
Employer terminates after recall fails (employee refuses recall)	Final pay only unless CBA/policy grants separation benefit	Refusal without valid reason = abandonment / voluntary severance.
Employer fails to recall or terminate after 6 months	Employee may claim illegal dismissal; remedies: (a) reinstatement + back wages, or (b) separation pay in lieu + back wages until finality of judgment.	Art. 301 breach converts floating to constructive dismissal.
Employer validly terminates on the 6th month for redundancy/closure	Final pay + Separation pay	Authorized cause with due process.

6. Jurisprudence Round-Up

Case	G.R. No. / Date	Key Take-Away
Sebastian v. Philippine Airlines	G.R. 233894, 26 Jan 2021	Six-month floating cap is mandatory; failure to recall = illegal dismissal.
Exocet Security & Allied Services v. Serrano	G.R. 198464, 20 June 2018	Security guards “off-detail” beyond 6 months are entitled to separation pay as if dismissed for authorized cause.
Jaka Food Processing Corp. v. Pacot	G.R. 151378, 10 Mar 2005	Even if closure is bona fide, employer must prove the cause and still pay separation pay.
Asian Terminals v. Villanueva	G.R. 143219, 28 Nov 2006	Redundancy program during floating period valid if based on good-faith business re-engineering.

7. Tax Treatment

Separation Pay due to authorized causes is tax-exempt in full (Sec. 32(B)(6)(b), NIRC).
Voluntary resignation benefits above PHP 90,000 may be taxable as compensation.
Any payments classified as “back wages” from illegal-dismissal awards are taxable.

8. Practical Checklist for HR & Employees

For Employers

Document suspension order and business exigencies.

Serve two notices (employee & DOLE) 30 days before any authorized-cause dismissal.

Compute final pay and separation pay separately; release in one lump sum when possible.

Keep proof of receipt (quitclaim) – but remember a quitclaim can’t waive statutorily mandated separation pay.

For Employees

Mark the 6-month deadline from the start of floating status.

Keep salary slips, contracts, company policies—critical for computing claims.

If no recall/dismissal after 6 months, consider filing an NLRC complaint for illegal dismissal within 4 years.

Demand interest for delayed release (DOLE ND-01-20).

9. Frequently Asked Questions (FAQ)

Question	Short Answer
Is separation pay part of final pay?	No. Final pay is a catch-all of earned benefits; separation pay is a statutory grant triggered only by authorized causes.
Can a floating employee demand salary during suspension?	Generally no, unless CBA or policy promises a retainer; Art. 301 explicitly contemplates unpaid suspension.
What if the company offers to extend floating beyond six months with employee’s consent?	Not valid; the 6-month cap is not waivable (Sebastian case).
Is 13th-month pay part of separation pay computation?	No. “One-month pay” means the employee’s basic monthly salary plus regular allowances, not the 13th month.
Are commission-based employees entitled to separation pay?	Yes; compute the “one-month pay” by taking the average monthly commissions over the last 12 months.

10. Key Take-Aways

Final Pay ≠ Separation Pay. They have different legal anchors, triggers and formulas.
Floating status is temporary—six months, hard stop. After that, the ball is in the employer’s court: recall or pay separation benefits (or risk an illegal-dismissal suit).
Due process + prompt payment = the only safe harbor for employers.
Employees must watch the calendar and assert rights early; delay can erode evidence and remedies.

Disclaimer: This article is for educational purposes and does not constitute legal advice. For specific situations, consult a Philippine labor-law practitioner or the nearest DOLE field office.