Below is a comprehensive discussion of what every resigning employee in the Philippines should know about their rights to final pay and 13th month pay. Please note that this article is provided for general informational purposes only and does not constitute legal advice. For specific guidance, consult a qualified labor lawyer or contact the Department of Labor and Employment (DOLE) directly.

1. Legal Framework

Labor Code of the Philippines – Governs the employer-employee relationship in the Philippines and provides general directives regarding wages and benefits.
Presidential Decree No. 851 (P.D. 851) – Specifically mandates the 13th month pay benefit for covered employees.
DOLE Regulations and Advisories – The DOLE regularly issues guidelines, notices, and opinions on final pay, 13th month pay, and other statutory benefits.

2. Final Pay (Last Pay)

Final pay, sometimes referred to as “last pay,” is the total amount due to an employee when the employment relationship ends—whether due to resignation, termination, or end of contract. This typically includes:

Unpaid Salary or Wages
- This covers all compensation for days actually worked or for services rendered up to the last day of employment.
Pro-Rated 13th Month Pay
- Even though the 13th month pay is commonly given at the end of each year, a resigning employee is still entitled to a pro-rated amount corresponding to the portion of the calendar year they have worked. (Discussed in detail below.)
Unused Leave Conversions
- If the company’s policy or the collective bargaining agreement (CBA) states that unused vacation leaves or sick leaves are convertible to cash, these unused leaves should be converted and paid out in the final pay.
Other Benefits
- These can include bonuses, incentives, or allowances that have been contractually agreed upon or stipulated in a company policy (e.g., meal allowances, transportation allowances), provided the terms for entitlement are met.
Deductions
- Employers may deduct valid debts owed to the company, such as loans or the cost of unreturned company property (e.g., tools, equipment, mobile devices). However, these deductions must be properly accounted for, authorized by law or by the employee, and clearly documented.

2.1 When Should Final Pay Be Released?

According to DOLE guidelines, the recommended practice is to release the final pay within thirty (30) days from the date of separation from employment. However, there is no exact statutory deadline under the Labor Code prescribing the definitive release date. Delays often occur due to clearance procedures or administrative processes, but employers should endeavor to release the final pay promptly. Unreasonable or unjustified delay can be grounds for a labor complaint.

3. The 13th Month Pay

3.1 Who Is Entitled?

Under P.D. 851, all rank-and-file employees in the private sector who have worked for at least one (1) month during a calendar year are entitled to 13th month pay, regardless of the nature of their employment (regular, contractual, or project-based), so long as:

They receive a salary (fixed or guaranteed wage);
They are not considered excluded by the explicit exceptions under the decree (e.g., certain government employees, house helpers or “kasambahays” under specific regulations, employees receiving the equivalent of 13th month pay in the form of Christmas bonus already incorporated into their wages in a manner approved by DOLE, etc.).

Note: Managerial employees are also generally entitled to 13th month pay under Philippine labor laws, except in very specific circumstances that typically do not apply to most employers. In practice, many companies also voluntarily extend 13th month pay to managerial-level staff to maintain equitable benefits within the organization.

3.2 Computation of 13th Month Pay

The basic formula for a full year is: [ \text{13th Month Pay} = \frac{\text{Total Basic Salary Earned During the Year}}{12} ]

For a resigning employee who worked less than the full calendar year, the 13th month pay is pro-rated based on the number of months or days they have worked within that calendar year. A simplified approach would be: [ \text{Pro-Rated 13th Month Pay} = \frac{\text{Total Basic Salary Earned from January 1 to Last Day of Employment}}{12} ]

Where “basic salary” typically excludes allowances, overtime pay, and other monetary benefits unless specifically included by company policy or contract.

3.3 Deadline for 13th Month Pay

For employees still actively employed at year-end, employers are required to pay the 13th month pay on or before December 24 of each year. In the case of a resignation or separation before December, the proportionate 13th month pay is generally included in the final pay upon clearance or separation. This means that any due 13th month pay component should be settled together with all other last-pay entitlements.

4. Common Issues and Considerations

Clearance and Company Property
- Employers often implement a clearance process which involves returning company-issued items, settling any outstanding accountabilities, and obtaining signatures from different departments. While this is a standard practice, it should not be used to unduly delay the release of final pay and 13th month pay beyond a reasonable period.
Deductions From Final Pay
- Deductions are allowed only if there is a legal or contractual basis, such as documented cash advances or personal loans from the employer. Unauthorized or excessive deductions can be contested.
Contract or CBA Stipulations
- Some employment contracts or CBAs may grant additional benefits on top of the law-mandated ones. These should be reviewed and factored into the final pay if applicable.
Filing a Complaint
- If the employer refuses or unjustifiably delays payment of the final pay or 13th month pay, the employee may file a complaint with the DOLE or National Labor Relations Commission (NLRC). It is often advisable to attempt resolution with the employer first (e.g., through HR or an internal dispute-resolution mechanism) before resorting to formal proceedings.
Tax Implications
- As with regular wages, any taxable portion of the final pay (including pro-rated 13th month pay above the statutory non-taxable threshold of PHP 90,000.00, subject to changes by law) will be subject to withholding tax.

5. Practical Steps for Resigning Employees

Review Your Employment Contract and Company Policies
- Check specific clauses on final pay, computation of unused leaves, and other benefits.
Coordinate With Human Resources (HR)
- Notify HR in writing of your intent to resign, observe the required notice period (usually 30 days unless otherwise agreed or stipulated by law), and clarify how to settle any remaining obligations.
Submit Clearance Documents Promptly
- Return any company property (e.g., ID cards, laptops, tools) in good condition to avoid possible deductions or delays.
Keep All Documentation
- Keep pay slips, final computations from HR, and any official memos or emails stating how your final pay was computed. This will be useful if disputes arise.
Know Your Options
- If your employer fails to give the final pay or the 13th month pay within a reasonable period (generally considered around 30 days from separation), consider seeking mediation through DOLE or legal advice if necessary.

6. Conclusion

Upon resignation, a Philippine-based employee is entitled to final pay (covering outstanding salaries, pro-rated 13th month pay, and any accrued benefits) in accordance with the Labor Code, P.D. 851, and DOLE guidelines. Employers are obliged to release these amounts promptly—commonly within 30 days from the last day of work—unless there are legitimate grounds for deduction or delay (such as unresolved clearances or legitimate debts).

Being aware of your rights, fulfilling your obligations (e.g., proper notice, returning company property), and maintaining clear communication with your employer’s HR department can ensure a smoother transition out of the company. If disputes do arise, employees have legal remedies available through the DOLE and the NLRC.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Should you face any specific legal issues regarding final pay or 13th month pay, it is recommended to consult a legal professional or approach the Department of Labor and Employment for guidance.