When Must an Employer Pay the Final Pay of a Resigned Employee in the Philippines?

DISCLAIMER: This article is for general informational purposes only and does not constitute legal advice. Where a real dispute exists, always consult a Philippine‐licensed lawyer or the Department of Labor and Employment (DOLE).

1. Snapshot of the Rule

Under DOLE Labor Advisory No. 06‑20 (“Guidelines on the Payment of Final Pay and Issuance of Certificate of Employment”), employers must release an employee’s final pay within thirty (30) calendar days from the date of resignation, termination, or completion of contract unless:

a company policy, Collective Bargaining Agreement (CBA), or employment contract sets a shorter period; or
a longer period is expressly approved in writing by the employee (rare).

Thirty days is therefore the maximum—not the default—timeline.

2. Governing Legal Sources

Instrument	Key Provision(s)
Labor Code of the Philippines	Art. 103 – Wages must be paid at least twice a month and “within a reasonable time” after the work is done. Art. 102 / 116 – Prohibits unauthorized withholding of wages and imposes penalties.
Presidential Decree 851	Guarantees 13th‑month pay (prorated if the employee leaves mid‑year).
Labor Advisory No. 06‑20 (2020)	Establishes the “30‑day rule” for final pay and the 3‑working‑day rule for the Certificate of Employment.
Supreme Court Jurisprudence	Numerous cases (e.g., Intercontinental Broadcasting Corp. v. Court of Appeals, G.R. 144104, 2005) underscore that money claims for wages and benefits earn 6 % legal interest if payment is delayed.
BIR Revenue Regs. No. 11‑2018	Requires issuance of BIR Form 2316 within 30 days from resignation so the employee can file taxes or transfer tax credits.

3. What Counts as “Final Pay”?

DOLE defines “final pay” (sometimes called last pay) as all monetary benefits owed to the employee, including—but not limited to—the following:

Unpaid basic salary up to the last actual day worked;
Pro‑rated 13th‑month pay (January 1–last day worked ÷ 12);
Unused Service Incentive Leave (SIL) conversion – at least 5 days’ leave per year is convertible to cash under Art. 95;
Separation pay (if applicable) – only for authorized‐cause terminations such as redundancy, retrenchment, closure, or disease, not for voluntary resignation;
Retirement pay – where the employee is at least 60 years old or under a company/union retirement plan;
Cash equivalents of other benefits – e.g., unpaid commissions, cost‑of‑living allowances (COLA), or share of service charges (for hospitality workers);
Tax refund or tax payable adjustments for the year‐to‐date withholding;
Monetary awards under a final judgment or voluntary settlement;
Other stipulations under a CBA or company policy (e.g., sign‑on bonuses that have been “earned”).

4. How to Compute the Key Components

Component	Typical Formula
Unpaid Salary	Daily Rate × No. of un‑paid days (use the factor 26‑day/365‑day scheme consistent with DOLE handbook).
13th‑Month Pay	(Total basic salary earned from Jan 1 – last day / 12). Use basic salary, not allowances, unless practice/CBA says otherwise.
SIL Conversion	Daily Rate × Unused SIL days (max 5 carry‑over per year unless a better company policy applies).
Separation Pay (if due)	½‑month pay per year of service (retrenchment/closure) or 1‑month pay per year (redundancy/installation of labor‑saving devices), fraction of at least 6 months = 1 year.
Retirement Pay	At least ½‑month pay per year of service, Art. 302, unless the company plan is more generous.
Legal Interest	6 % p.a. starting June 30, 2013 (Nacar v. Gallery Frames) until full satisfaction if ordered by a court/DOLE.

5. Procedure & Employer Obligations

Employee files a written resignation (usually 30 days’ notice under Art. 300 and most contracts).
Turnover & clearance – The employer may require clearance for accountabilities (e.g., return of laptop), but:
- it cannot exceed the 30‑day payout window; and
- it cannot impose deductions unless the liability is certain, liquidated, and agreed to in writing.
Final Pay computation – Payroll or HR prepares a breakdown; both parties acknowledge via a quitclaim/release (optional but customary).
Issuance of Certificate of Employment (COE) – must be given within 3 working days from request per Labor Advisory 06‑20.
BIR Form 2316 – employer provides within 30 days so the employee can carry over tax credits.

6. Can the Employer Hold Final Pay Beyond 30 Days?

Only on narrow grounds:

Force Majeure or Business Closure – Documented circumstances beyond control (e.g., bank suspension) may justify brief delay, but the employer must still provide partial payments and keep records.
Pending Wage or Benefit Offset – If the employee admits a cash shortage or company loan, the amount may be offset up to allowed legal limits (generally 20 % of wages, Art. 113), or fully if authorized in writing.
Disputed Accountabilities – The company may not unilaterally withhold the entire final pay. It should pay the undisputed portion and deposit the disputed balance in escrow or await a DOLE order.

Failing to pay within 30 days, without valid reason, exposes the employer to:

Money claims before DOLE Regional Office (Single Entry Approach – SEAD) or NLRC;
Wage Administrators’ fines (₱10 000–₱100 000 per offense) under Art. 302‑C; and
Legal interest plus possible moral/exemplary damages if bad faith is proven.

7. Special Situations

Scenario	Impact on Final Pay
Employee abandons post	Still entitled to wages earned to last day actually worked; employer may treat as dismissal for just cause and no separation pay.
Constructive Dismissal (forced resignation)	Employee may claim backwages, separation pay in lieu of reinstatement, and damages beyond ordinary final pay.
Fixed‑Term Contract Ends Early	Final pay includes either: (a) wages up to completion of term; or (b) unexpired portion if termination is illegal.
OFWs / Overseas Employees	Still covered if employment contract chooses Philippine law; payment may be coursed through the bank or POEA‐mandated escrow.
Government Employees	Covered by separate Civil Service rules; usually require payment within 15 days and clearance from accounting/audit units.

8. Prescriptive Period for Claims

Three‑year window from accrual of cause of action for ordinary money claims (Art. 306, formerly 291).
Four‑year window for quitclaims challenged on grounds of vitiated consent or fraud (Civil Code, Art. 1391).
Filing an action interrupts prescription.

9. Best‑Practice Tips

For Employers

Draft a clear final‑pay policy shortening the payout period (e.g., within 15 days) to boost goodwill.
Automate clearance and payroll computations to avoid “manual bottlenecks.”
Always issue a detailed payslip and COE simultaneously with the release.

For Employees

Give formal notice and request a computation in writing; keep copies.
During clearance, return assets promptly and obtain a “no‑accountability” slip.
If the 30‑day period lapses without payment, file a SEAD request at the nearest DOLE field office (cheap, non‑adversarial, usually settled in a week).

10. Frequently Asked Questions

Question	Short Answer
Does resigning waive separation pay?	Separation pay is not due to voluntary resignation—unless granted by CBA, employer practice, or as consideration in a settlement.
Can the company deduct training bond costs?	Only if the bond is valid (reasonable amount, freely consented) and the employee agreed in writing; otherwise any deduction is illegal.
Must unused vacation leave beyond the SIL minimum be paid?	Yes, if company policy or practice treats excess leave as convertible; otherwise, only the statutory 5 SIL days are mandatory.
Is tax withheld on final pay?	Yes. Regular withholding tax tables apply; subsequent tax refund or liability will be reflected in BIR 2316.
Can final pay be given by check or bank transfer?	Yes. Art. 102 allows checks or electronic transfer if customary and at no cost to the employee.

11. Conclusion

The Philippine labor framework strikes a balance by giving employers a 30‑day window—and no more—to settle everything an employee has rightfully earned. Observing this timetable is not optional; delayed payment transforms a routine off‑boarding into a labor violation that can snowball into interest, damages, and reputational harm. Employers should streamline clearance and payroll processes, while employees should monitor the calendar and assert their rights when deadlines slip.

In short: Pay everything, pay accurately, and pay within 30 days—or face the consequences.