WITHHOLDING FINAL PAY FOR AWOL EMPLOYEES
A comprehensive guide under Philippine labor law
1. What counts as “AWOL” and why it matters
| Term | Basic meaning | Legal footing | Practical effect |
|---|---|---|---|
| AWOL | Absence without official leave or prior approval. | Not expressly defined in the Labor Code, but used in company rules and jurisprudence. | Gives the employer ground to issue a notice to explain and begin disciplinary proceedings. |
| Abandonment of work | AWOL plus a clear intention to sever the employment relationship. | Art. 297(b) (old Art. 282) – gross & habitual neglect of duty; dozens of cases (e.g., Erectors, Inc. v. NLRC, G.R. No. 160379, 2010). | A just cause for dismissal if proven through the twin-notice rule. |
Key point: AWOL is not automatically abandonment. The employer must still (a) require an explanation and (b) show the employee’s intent not to return.
2. What the law says about final pay
Statutory components – The Department of Labor and Employment (DOLE) Labor Advisory No. 06-20 lists the pay items that normally make up “final pay”:
- Unpaid basic salary up to the last day worked
- Pro-rated 13th-month pay (Pres. Decree 851)
- Cash conversion of unused service incentive leave (Art. 95)
- Separation or retirement pay, if applicable
- Tax refunds/over-withheld tax
- Any other company-agreed benefits
Deadline – The same Advisory instructs employers to release final pay within 30 calendar days from the date of separation, “or earlier, if possible,” subject to clearance procedures.
Wage-no-lien principle –
- Art. 116: It is unlawful to withhold wages.
- Art. 118(e): It is likewise illegal to compel employees to give up any part of their wages.
Permissible deductions (Art. 113):
- Government taxes, SSS/PhilHealth/Pag-IBIG premiums
- Union dues (check-off)
- Authorized deductions—those with the employee’s written consent and DOLE approval when required
- Employer’s claims only if (a) due process is observed, and (b) they arise from the employee’s fault (e.g., unreturned laptop, proven shortage).
3. May an employer withhold final pay because the employee went AWOL?
| Scenario | Is withholding allowed? | Legal basis / caveat |
|---|---|---|
| Employee is simply unreachable; clearance documents outstanding | Temporarily, but only to determine accountabilities and compute net amount. Must still pay within 30 days. | DOLE Labor Advisory 06-20; Art. 116/118. |
| Proven loss/damage attributable to employee (after due process) | The employer may offset the value against final pay. | Art. 113(c) & Civil Code Arts. 1278-1279 on compensation. |
| Employer withholds pay until the employee signs a quitclaim | Illegal. Quitclaims cannot be used as a condition precedent to payment. | Sevilla Trading v. Semana, G.R. 152456 (2005). |
| Employer withholds pay because “AWOL means forfeiture.” | Illegal. Wages are not forfeited; at most, the employee loses the chance to earn future wages. | Art. 102 & 116; numerous NLRC rulings. |
Bottom line: AWOL status never converts earned wages into company funds. The most an employer may do is delay release for a reasonable period, strictly following DOLE’s 30-day benchmark, while it (a) finishes clearance and (b) offsets documented liabilities.
4. Procedural roadmap for employers
| Day | Employer action | Why it matters |
|---|---|---|
| Day 1-2 | Discover AWOL. Email/SMS/call employee. | Establish good-faith effort to locate. |
| Day 3-5 | Notice to Explain (NTE) delivered to last known address and/or email. Give 5 calendar days to respond. | First notice under twin-notice rule (King of Kings Transport v. Mamac, 2007). |
| Day 10 | If no response, conduct ex-parte hearing or submit memorandum-report. | Shows opportunity to be heard. |
| Day 11-15 | Notice of Decision – Dismissal for abandonment. | Second notice completes due process. |
| Day 11-30 | Compute payroll items; confirm liabilities; finish clearance even without employee’s signature. | DOLE 30-day rule. |
| ≤ Day 30 | Release net final pay: |
- Deposit to bank on record or
- Issue check and send “please claim” letter to permanent address. | Demonstrates payment even if employee does not show up. |
5. Consequences of illegal withholding
| Forum | Remedy | Typical award |
|---|---|---|
| DOLE Field Office (Art. 129) | Money claims ≤ ₱5 M; summary proceedings. | Unpaid wages + legal interest (now 6 % p.a. from date of demand per Nacar v. Gallery Frames, 2013). |
| NLRC or Voluntary Arbitration | If the employee also contests the dismissal. | Reinstatement or separation pay in lieu; back-wages; plus unpaid final pay. |
| Criminal liability | Art. 303 & 305 on willful refusal to pay wages. | Fine ₱40,000-₱100,000 or imprisonment 2-4 years. |
Practice tip: The cost of litigation and penalties dwarfs any “savings” from holding back one month’s salary.
6. Frequently asked practical questions
| Question | Short answer |
|---|---|
| Do I need the employee’s written authorization to deduct the cost of an unreturned laptop? | Yes. Otherwise, secure a ruling or mediate with DOLE/NCMB. Deducting unilaterally invites a money-claim case. |
| We emailed the NTE but it bounced. Is service valid? | Send by courier or registered mail to the last address on 201-file; attach proofs. The law considers it constructive receipt. |
| The 30 days lapsed but our inventory audit isn’t done. What now? | Release the undisputed portion of wages and benefits; document the balance as “amount under protest,” then reconcile once audit finishes. |
| Can we tag the dismissed employee as “blacklisted” with our industry group? | Be careful: the Constitution protects privacy and reputation. Blacklisting can expose you to damages if not based on legitimate shared security concerns. |
7. Checklist for compliance
- Written policies – Spell out AWOL definitions, return-to-work procedures, and clearance timelines in the company handbook.
- Twin notices – Always issue NTE and termination notice; abandonment without notices = illegal dismissal.
- Document everything – Delivery receipts, emails, call logs, payroll computations.
- Observe 30-day rule – Even if the employee never reappears.
- Pay undisputed amounts – Release first; argue later.
- Compute taxes – Final pay is subject to normal withholding; issue BIR Form 2316 on or before 31 Jan of the following year.
- Issue Certificate of Employment (COE) – Within 3 business days of request (Labor Code, Art. 303-A; reinforced by Advisory 06-20).
8. Employer best-practice template (sample clause)
“In cases where an employee is absent without notice for three (3) consecutive workdays, HR shall issue a Notice to Explain within twenty-four (24) hours. Clearance processing shall begin on the 11th workday from the first absence. Final pay shall be computed and released not later than thirty (30) calendar days from the effectivity of termination, net of any duly proven accountabilities, the details of which shall be furnished to the employee at his/her last known email and residential address.”
Conclusion
Going AWOL may justify dismissal, but it never justifies forfeiture of wages and earned benefits. Philippine labor law strikes a balance: it lets employers protect themselves through clearance procedures and set-offs while compelling them to hand over what rightfully belongs to the employee—promptly, transparently, and with adequate documentation. Follow the twin-notice rule, finish clearance fast, and pay within DOLE’s 30-day window; anything less risks statutory penalties and years of litigation.