The Legality of Withholding Employee Reimbursements After Resignation in the Philippines
An in-depth guide for HR practitioners, employees, and counsel (updated June 2025)
1. What “employee reimbursements” really mean
| Concept | Typical examples | Key statutory anchor |
|---|---|---|
| Expense reimbursements | Airline tickets, hotel bills, representation meals, toll & fuel, petty-cash outlays, training fees settled by the employee | Civil Code Art. 1236-1238 (payment by a third person on behalf of the obligor gives rise to reimbursement); Labor Code principles on benefits as “monetary claims” |
| Cash advances/liquidations | Travelling allowance taken in advance and liquidated later; revolving funds for sales staff | DOF-COA-DBM Joint Circular 2012-001 (liquidation within 30 days) |
| Company-paid benefits converted to cash | Uniform or gadget allowance first shouldered by the worker then refunded by the company | Company policy / CBA, but treated as benefits under Labor Code Art. 297 [289] |
Practical takeaway: Regardless of label, a reimbursable out-of-pocket cost is a monetary claim that becomes part of the employee’s “final pay” once verified.
2. Core legal framework
| Instrument | Salient rule on withholding | Effect on reimbursements |
|---|---|---|
| 1987 Constitution, Art. XIII §3 | State shall afford full protection to labor, including payment of compensation | Non-payment or delay offends the constitutional guarantee |
| Labor Code | • Art. 102 – wages must be paid in legal tender and on time • Art. 113 – only three kinds of deductions are allowed (employee-authorized, insurance dues, union dues) • Art. 116 – unlawful withholding of wages is prohibited • Art. 128 & 129 – DOLE may summarily order payment of money claims ≤ ₱5 000 per employee |
Although reimbursements are not “wages” per se, jurisprudence treats them as “other monetary benefits,” hence subject to Arts. 113 & 116 anti-withholding rules |
| Labor Advisory No. 06-20 (DOLE, 18 Feb 2020) | “Final pay” must be released within 30 calendar days from separation, regardless of the cause, and covers “all wages, allowances and any other monetary claims… including those arising from company policies or CBAs.” | Reimbursements—once liquidated—are covered; delays beyond 30 days expose the employer to money-claim complaints and potential ₱1000-₱10 000 administrative fines |
| Labor Advisory No. 06-22 (DOLE, 10 Jun 2022) | Reiterates that clearance procedures cannot defeat the 30-day rule; employers may still conduct clearance but must pay uncontested amounts first | An employer may offset proven accountabilities (see §4) but may not “park” the entire reimbursement while awaiting clearance |
| Supreme Court doctrines | • InterContinental Broadcasting Corp. v. Pangan, G.R. 181858 (10 Aug 2016): benefits withheld pending clearance are recoverable with legal interest if delay is unjustified. • PNB v. CA, G.R. 121697 (3 Apr 2001): employer bears burden to show legal basis for deductions from final pay. • Pepsi-Cola Products Phils. v. Edwin Espiritu, G.R. 190640 (7 Apr 2014): unauthorised deductions violate Art. 113. |
These cases, though involving wages/bonuses, are applied by DOLE Hearing Officers to reimbursement disputes because both are “monetary claims” |
3. When may an employer lawfully hold or offset reimbursements?
Unliquidated cash advances
- • Under COA rules, advances must be liquidated within 30 days after return to official station.
- • If an employee resigns without liquidating, the net claim can be offset:
Reimbursement Due – Unliquidated Advance = Net Payable
Documented shortage, loss, or damage
• Allowed only if:
- The employee is clearly shown to be responsible (e.g., shortage proven by audit); and
- Deduction is with written consent or authorised by a CBA/ company policy crafted pursuant to Art. 113(b).
• Otherwise, recover via court/NLRC, not by unilateral withholding.
Tax or statutory liens
- • Rare for reimbursements, but BIR assessments, garnishments, or a writ of garnishment may cover “credits” owed to a taxpayer-employee.
Valid set-off recognized by Civil Code
- • Art. 1278-1290 allow compensation of debts when both parties are mutual debtors and creditors in their own right.
- • Set-off must be liquidated and demandable; mere allegation of damage is insufficient.
Red flag: Blanket policies that say “No clearance, no reimbursement” have repeatedly been struck down by Labor Arbiters because they reverse the burden of proof. The employer, not the worker, must demonstrate the existence of a legally deductible obligation.
4. Interaction with the 30-Day “Final Pay” rule
| Scenario | Recommended employer action | Legal risk if withheld beyond 30 days |
|---|---|---|
| Employee submits complete liquidation upon resignation | Pay reimbursement together with salary differential, 13ᵗʰ month, etc., within 30 days | • Money-claim complaint • Double indemnity under RA 6727 §12 if it qualifies as wage • Legal interest (currently 6 % p.a.) |
| Liquidation lacks one official receipt worth ₱800 | Pay uncontested amount; give written notice that ₱800 is disallowed and will be offset | Minimal, provided notice + documentary basis exist |
| Equipment loss (laptop ₱40 000) discovered only after exit interview | Cannot offset immediately; initiate investigation, issue show-cause, then deduct only after written admission or NLRC/Court judgment | Withholding entire reimbursement may be deemed illegal suspension of wages/benefits |
| Resignation effective immediately, no turn-over | Clearance may proceed, but Art. 286 (ten-day notice of resignation) only affects eligibility for service incentive leave etc., not the 30-day final-pay clock | DOLE routinely orders release absent proof of accountabilities |
5. Procedure for employees to recover withheld reimbursements
- Internal demand – Send HR a written follow-up citing Labor Advisory 06-20 and articulating the amount, purpose, and date of liquidation.
- Single-Entry Approach (SENA) filing – At the DOLE Regional Office; this schedules a conciliation conference within 5 days.
- NLRC Money-Claim case – File within three (3) years (Labor Code Art. 306 [291]). Claim may include moral damages if bad faith is clear.
- Small-claims court – If purely civil (e.g., not work-related), an employee may sue under the Rule on Small Claims (claims ≤ ₱400 000).
6. Penalties and employer exposure
| Violation | Governing rule | Typical assessment (2025 levels) |
|---|---|---|
| Unlawful withholding of wage-type benefit | Labor Code Art. 116 & DO 147-15 | ₱1000–₱10 000 fine per day/per employee + closure for repeat offenders |
| Failure to release final pay in 30 days | Labor Advisory 06-20 + Art. 128 visitorial power | Compliance order + payment of legal interest |
| Unauthorized deduction / set-off | Art. 113 | Refund of amount + nominal damages (₱30 000–₱50 000, discretionary) |
| Delay plus bad faith | SC precedents on moral/exemplary damages | Up to ₱50 000 moral + ₱50 000 exemplary (in NLRC practice) |
7. Best-practice checklist for employers
- Written expense policy – Define cut-off dates, required receipts, liquidation templates.
- Automated liquidation – Use apps that flag ageing advances; speeds up exit clearance.
- Two-track clearance – Release uncontested money claims within 30 days; continue investigating contested ones separately.
- Document everything – Send the resigning employee a reconciliation sheet (reimbursements, offsets, balances).
- Training for line managers – Most reimbursement delays stem from supervisors who sit on liquidation approvals.
8. Practical tips for employees
- Keep originals of receipts; scan them before submission.
- Submit liquidation before filing resignation to stop the 30-day clock from shifting.
- Ask for acknowledgment of receipt of liquidation documents—e-mail proof matters at NLRC.
- Calculate interest – If delay exceeds 30 days, add 6 % per annum from the 31ᵗʰ day until full payment (per Nacar v. Gallery Frames, G.R. 189871).
- Mind prescription – File the claim within 3 years from accrual (the day payment became due).
9. Frequently-asked questions
Are reimbursements considered “wages” for purposes of double indemnity? Generally yes if they form part of the employee’s compensation package or are a benefit substituting wages (e.g., per-diem allowances liquidated later).
Can the employer require a quitclaim before releasing reimbursements? A quitclaim is valid only if the amount is actually paid. Withholding the money while asking for a waiver is void for being contrary to public policy (SC: Goya, Inc. v. Golla, G.R. 211445, 3 Aug 2016).
Does resignation without 30-day notice justify withholding? No. The Labor Code imposes possible employer damages for abrupt resignation, not automatic set-off against existing monetary claims. The employer must sue separately.
What if the reimbursement is in foreign currency? Use the BSP closing rate on the date the expense was incurred; Article 124 of the Labor Code on wage payment in legal tender applies by analogy.
10. Conclusion
Under Philippine labor standards, payment of duly-liquidated employee reimbursements is mandatory and time-bound. Except for narrow offsets allowed by Articles 113 and 1278-1290 of the Civil Code, an employer who withholds reimbursements beyond the 30-day “final pay” window risks administrative fines, legal interest, and damages. Both sides can avoid disputes through clear policies, prompt liquidation, and documented communication.
Disclaimer: This article is for educational purposes and is not a substitute for individualized legal advice. For specific cases, consult competent Philippine counsel or the nearest DOLE Regional Office.