Transfer of an Employee’s Last Pay to a Third Party (Philippines)

A full, practice-oriented guide for HR, payroll, and employees

Bottom line: The default rule is to release an employee’s final pay to the employee. Paying it to a third party is lawful only if there is a clear legal basis: (1) the employee’s informed, written authorization or power of attorney; (2) a court/agency order (e.g., writ of garnishment, support order); or (3) lawful representation (e.g., estate/heirs after death, guardian). Deductions from final pay are strictly limited to those authorized by law or by the employee in writing. Keep data privacy and withholding tax rules in mind, and pay within the final-pay timeline set by DOLE.

1) What counts as “final pay”

Final pay (a.k.a. last pay) typically includes, as applicable:

Unpaid basic wages up to separation date (including night diff, OT, holiday/rest-day premiums actually earned)
Pro-rated 13th month (Jan–Dec basis, proportionate to actual days/months worked)
Leave conversions per law/policy/CBA (e.g., SIL conversion; company VL/SL conversions if granted)
Separation pay (only if due: redundancy, retrenchment, closure, disease, etc.)
Commissions/incentives already earned under plan rules
Tax refund/adjustments after year-to-date recomputation
Other accrued benefits promised by policy/CBA (uniform allowance, travel reimbursements, etc.)

Timing: DOLE guidance expects final pay to be released within 30 days from separation, unless a more favorable company/CBA timeline applies. A Certificate of Employment should be issued promptly upon request.

2) Who can lawfully receive the last pay (and when)

A) The employee (default)

Pay to the employee by payroll bank credit, check, or cash with ID verification.

B) Employee-authorized third party

Lawful if ALL of these are present:

Specific written authority from the employee (or SPA for broader acts), identifying the recipient, amount or scope, and purpose (e.g., “receive and encash final pay/clearance check” or “credit to X bank/loan”).
KYC of recipient (valid ID); keep original authorization on file.
No legal hold (see §2D).

Common recipients: spouse/relative, bank (for a standing salary credit instruction), cooperative/creditor (via assignment of proceeds signed by the employee), or a law firm authorized to receive.

C) Lawful representative

Guardian (for minor or judicially declared incompetent)—present court order or guardianship papers.
Attorney-in-fact—SPA specifically empowering receipt of final pay or to transact payroll matters.

D) By mandate of law/court/agency

Writ of garnishment/execution (e.g., NLRC, regular courts): employer (as garnishee) must withhold and turn over the garnished portion as ordered.
Support orders (Family Courts): salary/last pay withholding or direct remittance to payee per order.
Government liens/levies (e.g., BIR assessments, GSIS/HDMF in public sector scenarios): follow the specific legal directive.
Probate/estate situations (see §4): pay to estate/heirs per rules.

Priority: Court and agency orders outrank private authorizations. If both exist, comply with the order and remit only any balance to the authorized recipient.

3) Deductions from final pay: what’s allowed vs. not

Allowed (typical)

Withholding tax (per BIR rules)
Government-mandated contributions due on wages actually paid (SSS, PhilHealth, Pag-IBIG)
Authorized deductions with the employee’s written consent: company loans/cash advances, cooperative loans, HMO card share, loss/damage assessed after due process, uniform/tool plan, etc.
Court/agency-ordered deductions (writs, support)
Lawful set-off of overpayments/clerical errors documented in payroll

Not allowed

Unilateral deductions without legal basis or written employee consent (e.g., “penalties” not in policy/CBA)
Blanket forfeitures for failure to complete clearance absent actual, provable accountabilities
Deductions for loss/damage without notice, investigation, and proof of fault (and without observing legal limits)

Clearance: You may withhold only the value of documented accountabilities (e.g., unreturned laptop) while releasing the undisputed remainder. Don’t hold the entire last pay indefinitely for “pending clearance.”

4) Special cases for third-party release

A) Employee is overseas / cannot appear

Accept SPA (consularized or apostilled if executed abroad) authorizing a named person to receive or deposit the last pay.
For bank credits, retain the employee’s written instruction (email with e-signature is fine if your policy permits and KYC matches).

B) Death of the employee (pay to heirs/estate)

Gather: Death certificate, proof of relationship (PSA marriage/birth certificates), valid IDs of heirs, and any estate documents (e.g., Extrajudicial Settlement or Affidavit of Heirship).
If small amounts, many employers pay upon affidavit of heirs + IDs; for contentious estates or larger sums, pay to the estate account or as the probate court directs.
Continue to compute earned wages, pro-rated 13th month, leave conversions, and applicable benefits up to date of death. Withhold taxes as required; issue BIR Form 2316 to the estate.

C) Child/spousal support orders

If the court directs salary withholding, apply it to the final pay too, remit per order, and document the net released to the employee/authorized party.

D) Assignments to creditors

Valid if there is a specific written assignment or payroll deduction authorization signed by the employee.
Absent such consent, pay the employee—not the creditor—unless a court order says otherwise.

E) Duplicate SSS loans on separation

Employers stop regular loan deductions at separation and report to SSS/coop. Do not zero-out an entire final pay for a loan unless there is written authorization allowing netting from separation benefits (or a court order).

5) Data privacy & documentation (RA 10173)

Lawful basis: Process and disclose payroll data to third parties only on (a) the employee’s signed authorization/SPA, (b) legal obligation (e.g., BIR, SSS), or (c) court/agency order.
Data minimization: Share only what the recipient needs (e.g., net amount, check number).
Records: Keep the authorization/SPA, IDs, and proof of release/remittance (OR, deposit slip) for audit.
Employee access: Allow the employee (or lawful representative) to access their final pay computation and documents.

6) Taxes & payroll mechanics

Compute taxes on the final payroll period in the usual way; factor year-to-date figures for possible tax refund or shortfall.
Issue the final payslip and BIR Form 2316 at year-end or upon request.
Withholding on separation pay:
- Statutory separation pay (redundancy, retrenchment, closure, disease) is generally tax-exempt up to lawful amounts.
- Ex-gratia/separation incentives beyond statutory may be taxable—apply current BIR rules.
Bank transfers: If crediting to a third-party account at the employee’s request, keep the written instruction with account details and ID verification.

7) Practical playbooks

(A) Employee wants last pay credited to spouse’s account

Employee signs specific authorization (or SPA) naming the spouse, the bank and account number, and scope (receipt/credit of final pay).
HR verifies employee identity and keeps IDs of both parties.
Payroll credits net final pay to the spouse’s account; issues payslip to the employee’s email; files all documents.

(B) Cooperative presents a loan assignment

Check if the employee signed a clear authorization/assignment for final pay deduction and remittance to the coop.
If yes, deduct and remit within the limit authorized; release balance to the employee (or authorized payee).
If no authorization, pay the employee; advise the coop to coordinate with the member or obtain a court order.

(C) Writ of garnishment arrives before release

Freeze the amount up to the garnish amount; notify the employee.
Remit garnished sum to the sheriff/creditor as ordered; release any excess as per the employee’s instruction/authorization.
Keep the return of service/OR with the payroll packet.

(D) Deceased employee, heirs request release

Identify heirs/estate; gather documents (see §4B).
Settle accountabilities, compute final pay, and withhold taxes properly.
Release to estate or heirs per documents (or court order). Keep receipts signed by recipients.

8) HR compliance checklist

Final-pay policy states timeline (≤30 days), computation items, and permissible deductions.
Third-party release SOP requiring: written authorization/SPA, recipient ID, and screening for legal holds.
Court-order protocol (garnishments/support): designate a custodian; respond within deadlines.
Data-privacy controls: share on need-to-know basis; secure storage of authorizations and IDs.
Tax controls: correct withholding; timely issuance of 2316 and payslips.
Clearance practice: only reasonable, documented offsets; no indefinite withholding.

9) Templates (short forms you can adapt)

Employee Authorization to Release/Transfer Final Pay

I, [Full Name], SSS [No.], hereby authorize [Company] to release/credit my final pay (net of lawful deductions) to [Name of Recipient / Bank & Account No.] for [purpose]. I hold [Recipient] as my authorized representative to receive said amount. This authorization covers [specific amount or “the entire net final pay”] and is valid for [date range]. I understand this does not affect lawful court/agency orders or required tax withholdings. Signature / Date • Attached: valid IDs of me and my recipient.

SPA (outline): empower attorney-in-fact “to follow up, receive, and sign for the release of my final pay, including checks/bank credits, and to acknowledge receipt on my behalf,” with specimen signatures and IDs; notarize (or consularize/apostille if executed abroad).

10) Common pitfalls (and fixes)

Paying a creditor without employee consent or court order → Risk of liability to the employee. Fix: Require written assignment/authorization or a writ.
Holding the entire last pay for ‘uncleared’ items → Unlawful withholding. Fix: Offset only documented accountabilities; release the rest.
Using a blanket quitclaim to justify wide deductions → Quitclaims cannot waive statutory benefits or legal pay. Fix: Keep deductions within legal/consented items.
Data-privacy leak (sending payslip/amount to a spouse without consent) → DPA violation. Fix: Get employee written consent; limit disclosures.
Ignoring writs/support orders → Contempt/penalties. Fix: Prioritize court/agency orders, document remittance.

11) Takeaways

Default to the employee. Pay a third party only with written authority, lawful representation, or a binding order.
Deduct lawfully, not broadly. Stick to authorized or legally mandated deductions; document them.
Mind privacy and taxes. Keep authorizations/IDs; withhold and report correctly.
Release on time. Aim for ≤30 days from separation; don’t hold the entire amount for open clearance items.
Orders outrank authorizations. Court/agency directives take priority; remit as ordered and give any balance per the employee’s instructions.

This article is for general guidance. For edge cases (e.g., competing writs, complex estates, cross-border remittances, CBAs), coordinate with counsel, your payroll bank, and the proper court/agency for document formats and sequencing.