Final pay


▪ Final pay is required to be paid within 30 calendar days from termination or separation from employment.

▪ Payment of final pay may be subjected to clearance process.

1. Concept

Final pay, last pay, or back pay, all of which refer to the same thing as “the sum or totality of all the wages or monetary benefits due the employee regardless of the cause of the termination of employment, including but not limited to:

1) Unpaid earned salary of the employee;

2) Cash conversion of unused Service Incentive Leave (SIL) pursuant to Article 95 of the Labor Code;

3) Cash conversions or remaining unused vacation, sick or other leaves pursuant to a company policy, or individual or collective agreement, if applicable;

4) Pro-rated 13th month pay pursuant to Presidential Decree No. 851 (PD 851);

5) Separation pay pursuant to Articles 298-299 of the Labor Code, as renumbered, company policy, or individual or collective agreement, if applicable;

6) Retirement pay pursuant to Article 302 of the Labor Code, as renumbered, if appliable;

7) Income tax claim for the excess of taxes withheld, if applicable;

8) Other types of compensation stipulated in an individual or collective agreement, if any; and,

9) Cash Bond/s or any kind of deposit/s due for return to the employee, if any. (Section 2, Article I, DOLE Labor Advisory No. 06, Series of 2010, henceforth “DOLE LA 06-10”)

2. When paid

The final pay shall be released within thirty (30) days from the date of separation or termination of employment, unless there is a more favorable company policy, individual or collective agreement thereto. (Article I, DOLE LA 06-10)

3. Subject to clearance process

“Requiring clearance before the release of last payments to the employee is a standard procedure among employers, whether public or private. Clearance procedures are instituted to ensure that the properties, real or personal, belonging to the employer but are in the possession of the separated employee, are returned to the employer before the employee’s departure.” (Milan v. NLRC, Solid Mills, Inc., G.R. No. 202961, 04 February 2015)

a. No clearance, no final pay

“The law does not sanction a situation where employees who do not even assert any claim over the employer’s property are allowed to take all the benefits out of their employment while they simultaneously withhold possession of their employer’s property for no rightful reason. Withholding of payment by the employer does not mean that the employer may renege on its obligation to pay employees their wages, termination payments, and due benefits. The employees’ benefits are also not being reduced. It is only subjected to the condition that the employees return properties properly belonging to the employer. This is only consistent with the equitable principle that ‘no one shall be unjustly enriched or benefited at the expense of another.’” (Ibid.)

4. ATM for payroll

The employee will have to check the terms and conditions provided the bank forms when he/she filled it up to create the account. While referred to as “ATM payroll account”, the bank forms usually provide that the account is actually the personal bank account of the employee as the account holder – i.e. the account is not owned by the employer but by the employee. Accordingly, the employee as the account holder is responsible for the account.

Further, the said employee account is like any other regular account, which may be used for deposit and other banking transactions. However, while linked to the employer’s payroll, it comes with certain privileges such as no maintaining balance requirement. When the employee account is no longer linked to payroll, certain privileges are cut off and it becomes like any other regular account subject to similar terms, such as the requirement for a maintaining balance, penalties, and closure for violations.


DOLE Labor Advisory No. 06, Series of 2010

▪ Jurisprudence or Supreme Court Decisions

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