I. Introduction
Resignation is a common way for employment relationships to end in the Philippines. Yet many employees are unsure what they are actually entitled to receive once they resign—especially in terms of back pay, unpaid benefits, and other terminal pay. On the employer’s side, mistakes in computing or delaying final pay can result in complaints before the Department of Labor and Employment (DOLE) or the National Labor Relations Commission (NLRC).
This article explains, in Philippine legal context, what happens when an employee resigns:
- what “back pay” or final pay legally includes,
- which benefits are mandatory and which depend on company policy,
- deadlines and process for release,
- how unpaid back pay and benefits can be claimed, and
- common legal issues (deductions, quitclaims, constructive dismissal, etc.).
II. Legal Framework on Resignation
A. Resignation as a Mode of Termination
Under the Labor Code (as renumbered), resignation is a voluntary act of the employee, by which they end the employment relationship. It is employee-initiated and is distinct from:
- Dismissal for just cause (e.g., serious misconduct), and
- Termination for authorized causes (e.g., redundancy, retrenchment, closure).
B. 30-Day Notice Requirement
As a general rule, an employee must give the employer written notice at least 30 days before the intended date of resignation. This is to allow the employer to look for a replacement and ensure continuity of business.
The Labor Code recognizes two broad scenarios:
Resignation without just cause
- Employee simply chooses to leave (personal reasons, new job, relocation, etc.).
- 30-day prior written notice is required, unless employer waives it.
Resignation with just cause
The employee may resign without needing to serve the full 30 days if the resignation is for reasons attributable to the employer, such as:
- Serious insult by the employer or representative,
- Inhuman or unbearable treatment,
- Commission of a crime or offense by the employer against the employee or near relative,
- Other analogous causes.
In these “just cause” cases, the employee may resign immediately, although in practice many still give some notice.
Important: Whether or not the resignation is with just cause does not usually affect the basic entitlement to earned wages and accrued statutory benefits. It is more relevant when the employee later claims constructive dismissal or damages.
III. “Back Pay” / Final Pay: What It Actually Means
In Philippine HR practice, “back pay” or “final pay” is the lump-sum amount given to an employee after separation (including resignation), representing all monetary entitlements due up to the last day of work, minus lawful deductions.
There is no single provision in the Labor Code that uses the term “back pay”. Instead, the law and regulations require the employer to pay:
- all earned but unpaid statutory and contractual benefits;
- any monetized leave credits;
- any other amounts due under company policy, CBA, or contract.
Typically, the final pay is released after clearance (to check company property, loans, etc.), but the employer cannot indefinitely delay payment under the guise of clearance.
IV. Mandatory Monetary Entitlements Upon Resignation
Upon valid resignation, an employee is ordinarily entitled to the following, at a minimum:
1. Unpaid Wages / Salary up to the Last Day
The employer must pay all earned wages up to the employee’s actual last day of work, including:
- Basic salary for days already worked;
- Wage differentials (if applicable);
- Any regular allowances that form part of wages (e.g., COLA, if considered part of wage package).
If the employer allowed the employee to go on “garden leave” (i.e., no work during the notice period but still paid), those days should likewise be paid as long as the employee remains technically employed.
2. Overtime, Holiday Pay, and Premiums
If the employee worked:
- Overtime,
- On regular holidays,
- On special non-working days, or
- On rest days with applicable premium pay,
and these have not yet been paid, they must be included in the final pay based on the applicable Labor Code provisions and wage orders.
3. Pro-rated 13th Month Pay
Under Presidential Decree No. 851, employees are entitled to 13th month pay, at least 1/12 of their total basic salary within the calendar year, for those who worked at least one month.
Upon resignation, the employee is entitled to pro-rated 13th month pay computed from January 1 up to the last day of work in that year, unless the employee already received an advance 13th month or equivalent bonus that clearly covers the period.
4. Service Incentive Leave (SIL) Monetization
Under the Labor Code, employees who have rendered at least one year of service and are not otherwise exempt are entitled to five (5) days of Service Incentive Leave with pay per year. Many companies grant more leave (e.g., 10–20 days vacation/sick leave), but the minimum statutory SIL is 5 days.
At the end of employment, unused SIL must be converted to its cash equivalent, using the employee’s daily rate at the time of separation.
- If the company policy or CBA provides for “vacation leave convertible to cash upon separation,” that can increase the amount beyond the statutory 5 days.
- If the company has a strict “use-it-or-lose-it” policy for leave that complies with law and has been consistently implemented, some leave credits may lawfully expire; however, SIL itself is generally convertible upon separation.
5. Other Accrued Benefits Under Company Policy, Contract, or CBA
The employer must also pay any accrued contractual benefits, for example:
- Earned commissions on sales already completed while the employee was still employed;
- Earned incentives or performance pay for periods already closed and not contingently withheld;
- Non-discretionary bonuses that the company is contractually or customarily bound to pay (e.g., midyear bonus if conditions are met);
- Differentials from wage increases or promotions retroactive to a date before the resignation.
Here, the key test is: has the benefit already accrued or vested under the contract, policy, or established company practice? If yes, it should form part of the back pay.
V. Benefits That Are Not Automatically Due Upon Resignation
There are common misconceptions about what a resigning employee must receive. Some benefits are not automatically owed by law when the employee resigns.
1. Separation Pay
As a rule:
- Resigning employees are not automatically entitled to separation pay under the Labor Code.
- Separation pay is generally mandated only when the employer terminates the employee for certain authorized causes (e.g., redundancy, retrenchment, closure not due to serious losses, disease, etc.).
However, a resigning employee may still receive separation pay if:
- A CBA explicitly grants separation pay upon resignation;
- A written company policy or employment contract provides separation pay upon voluntary resignation; or
- There is a clear and long-standing company practice granting it (and the employer may not arbitrarily withdraw it without notice/consultation).
Otherwise, the legal minimum does not require separation pay for resignation alone.
2. Retirement Pay
Under RA 7641 (the Retirement Pay Law), employees may be entitled to retirement benefits upon reaching the compulsory or optional retirement age and fulfilling service requirements.
If an employee resigns before reaching retirement age:
- They are not automatically entitled to retirement pay under RA 7641,
- Unless the retirement plan, CBA, or company policy allows “early retirement” or pro-rated retirement benefits.
Retirement benefits are separate from ordinary back pay.
3. Discretionary Bonuses
Companies often grant:
- Christmas bonuses beyond the mandatory 13th month,
- Profit-sharing bonuses,
- Other ex gratia payments.
If the bonus is explicitly stated as purely discretionary, or historically given voluntarily with clear indications that it’s not a fixed obligation, employees cannot demand it as a matter of right.
On the other hand, if:
- The bonus amount or formula is clearly set in a contract, CBA, or formal company policy; and
- The conditions have been met before resignation;
then the bonus may have accrued and become demandable, and it should form part of the employee’s entitlements.
VI. Government-Mandated Contributions and Related Rights
Resignation affects the employment status but does not erase contributions already paid.
A. SSS (Social Security System)
- The employee does not receive a refund of SSS contributions upon resignation.
- Contributions remain credited to the employee and form part of the basis for sickness, maternity, disability, retirement, and death benefits in the future.
- The employer must ensure that all SSS contributions up to the last month of actual employment have been properly remitted. Failure to do so can give rise to liability, and the employee may file a complaint with SSS and/or DOLE.
B. PhilHealth
Similar to SSS:
- No automatic cash refund upon resignation.
- Contributions remain credited to the member and affect entitlement to PhilHealth benefits for hospitalization and certain medical procedures.
- The employer must remit all due contributions; otherwise, they may be liable for penalties, and the employee may have grounds for a complaint.
C. Pag-IBIG (HDMF)
- The employee does not automatically get their Pag-IBIG contributions upon resignation alone.
- Withdrawal of accumulated Pag-IBIG savings is governed by Pag-IBIG’s own rules (e.g., reaching 20 years of membership, total disability, retirement, etc.).
- Any salary loan balances may be deducted from final pay if there is a written authorization or valid agreement, subject to labor law rules on deductions.
D. Tax Documentation
Even after resignation, the employer must:
- Issue the employee’s BIR Form 2316 for the year (Certificate of Compensation and Tax Withheld), and
- Reflect accurate compensation and taxes withheld up to the last month of employment.
The employee will need this for future employment or tax filing.
VII. Timing and Process of Release of Final Pay
A. Release Period
DOLE has issued guidelines that final pay should generally be released not later than 30 days from the date of separation, or earlier if the company policy or contract provides a shorter period.
Although some employers insist on completing clearance first, this does not justify unreasonable delays or indefinite withholding of wages.
B. Clearance Procedures
Common company practices include:
- Returning company property (laptop, ID, tools, uniforms);
- Settling cash advances and company loans;
- Turning over documents and unfinished tasks.
These are legitimate business requirements, but:
- Deductions for lost or unreturned property must be supported by clear evidence,
- The employee should be given a chance to explain,
- Deductions cannot reduce wages below zero in a way that violates labor standards or is without written authorization (except for mandatory deductions like tax and statutory contributions).
C. Certificate of Employment (COE)
Upon request, a resigned employee is entitled to a Certificate of Employment, indicating:
- Duration of employment, and
- Nature or position held.
Employers are generally obliged to issue this within a reasonable time upon request; it is not discretionary.
VIII. Deductions and Offsets from Back Pay
Employers may make certain lawful deductions from the final pay, such as:
- Statutory deductions (tax, SSS, PhilHealth, Pag-IBIG) for the final payroll period;
- Court- or government-ordered deductions (e.g., garnishments);
- Company loans or salary advances, where the employee has given written authorization;
- Cost of lost or damaged company property, if liability is clearly established, and the employee has been given due process (investigation, explanation).
However:
- Employers cannot impose arbitrary fines or penalties that are not authorized by the Labor Code or DOLE-approved rules.
- Deductions must be reasonable and should not be used to deprive employees of their basic wage rights.
- Using back pay to “punish” an employee by withholding it without legal basis can lead to labor claims.
IX. Quitclaims, Waivers, and Releases
It is common practice for employers to require resigning employees to sign a Quitclaim, Release, and Waiver when claiming their back pay.
Philippine jurisprudence generally recognizes quitclaims as valid and binding if:
- The waiver is voluntarily executed without fraud, duress, or undue influence;
- The employee has a full understanding of the terms and consequences;
- The consideration (amount paid) is reasonable and not unconscionably low; and
- The waiver does not cover future claims or rights that cannot be waived (e.g., certain minimum labor standards).
Even with a signed quitclaim, courts may set it aside if:
- The amount paid is clearly inadequate compared to what the law requires;
- The employee can show they signed under pressure, intimidation, or deceit; or
- The quitclaim attempts to waive non-waivable rights, such as minimum wage, 13th month pay, or SIL.
Employees should carefully review quitclaims before signing. Employers, on the other hand, should ensure the amounts are accurate and supported by lawful computations to avoid later disputes.
X. Resignation vs. Constructive Dismissal
Sometimes an employer’s conduct forces an employee to “resign,” for example:
- Harassment or humiliation,
- Unlawful demotion or drastic pay cut,
- Intolerable working conditions imposed deliberately.
In such cases, the supposed “resignation” may actually amount to constructive dismissal. If a court or labor arbiter finds constructive dismissal, the employee may be entitled not just to ordinary back pay, but to remedies similar to illegal dismissal, such as:
- Reinstatement (or separation pay in lieu of reinstatement),
- Full backwages from the time of constructive dismissal until reinstatement or finality of decision,
- Possible moral and exemplary damages, and
- Attorney’s fees.
Thus, resignation letters or quitclaims do not absolutely bar a worker from asserting that the separation was effectively forced and illegal—if they can prove it.
XI. Remedies for Unpaid Back Pay and Benefits
If an employee resigns and does not receive full entitlements, they have several options:
1. Internal Remedies
- Raise the issue with HR or management in writing, itemizing the amounts claimed (unpaid salary, 13th month, leave credits, etc.).
- Request a detailed breakdown of the final pay computation and the basis for any deductions.
Sometimes errors are clerical or due to miscommunication and can be corrected internally.
2. DOLE Single-Entry Approach (SEnA)
The employee may file a Request for Assistance (RFA) under DOLE’s SEnA program, which uses conciliation-mediation to resolve disputes quickly and informally. Many issues involving delayed or incomplete final pay are resolved at this level.
3. Labor Complaint with the NLRC / DOLE
If settlement fails, the employee may file a formal labor complaint (e.g., for nonpayment of wages, underpayment, non-payment of 13th month or leave benefits).
- Most money claims under the Labor Code prescribe in three (3) years from the time the cause of action accrued (usually, from the time the wages or benefits became due).
- Claims for illegal dismissal and related reliefs generally prescribe in four (4) years as actions upon an injury to rights.
Employees should keep:
- Payslips,
- Employment contract,
- Company policies or manuals,
- Any written communication (resignation letter, HR replies),
- Their own records of workdays and overtime,
as evidence for these claims.
XII. Practical Guidance
For Employees
Submit a written resignation clearly stating your intended last day, and keep a copy.
Before leaving, request a computation of your expected final pay and ask how it was computed.
Clarify what will happen to:
- Your unused leave credits,
- Commissions or bonuses that are pending,
- Any company loans or property.
Request your Certificate of Employment and BIR Form 2316.
If the company delays or underpays your final pay without valid reason, consider seeking assistance from DOLE or legal counsel.
For Employers
- Maintain clear written policies on resignation, final pay, leave monetization, bonuses, and clearance.
- Ensure that HR and payroll teams are trained on labor standards and DOLE regulations on release of final pay.
- Provide a transparent breakdown of final pay and deductions to the resigning employee.
- If requiring a quitclaim, be sure the amount paid is accurate and reasonable and that employees are not coerced into signing.
XIII. Conclusion
In the Philippines, an employee who resigns is unquestionably entitled to receive all earned wages and accrued statutory benefits, including unpaid salary, pro-rated 13th month pay, and cash conversion of unused SIL, plus any other vested benefits under contract, company policy, or CBA.
While separation pay and retirement benefits are not automatically due upon resignation, they may arise from company-specific rules. Employers must release final pay within a reasonable period (typically not beyond 30 days) and may only make lawful, well-documented deductions.
When disputes arise over unpaid back pay or benefits, employees have both internal and legal remedies, and quitclaims—though common—are not ironclad shields for employers when minimum labor standards are violated or consent is defective.
Understanding these rules helps employees leave with what the law guarantees them and guides employers in ensuring compliance, fairness, and reduced legal risk when an employee moves on.