Updated October 2026. Based on the Labor Code of the Philippines, PD 851 and DOLE Labor Advisory No. 06, Series of 2020.
Final pay, often called back pay, is everything an employer still owes an employee when the job ends. In the Philippines it must be released within 30 days from the date of separation, unless a company policy or agreement gives the employee something more favorable. It usually covers the last unpaid salary, the pro-rated 13th-month pay, the cash value of unused leave, and separation pay when the law requires it. The calculator below adds up each line, and the rules behind every line follow it.
Final pay calculator (Philippines)
| Line | Basis | Amount |
|---|---|---|
| Daily rate | - | |
| Unpaid salary | ||
| Pro-rated 13th-month pay | ||
| Leave conversion | ||
| Separation pay | ||
| Other amounts owed | - | |
| Less deductions | - | |
| Final pay |
Statutory minimums only. Separation pay here uses basic salary; company policy, the employment contract or a CBA may give more, never less. Not legal advice.
What final pay includes
DOLE Labor Advisory No. 06-2020 defines final pay as the sum of all wages and monetary benefits due to the employee regardless of why the employment ended. In practice that means:
- Unpaid salary for days actually worked up to the last day.
- Pro-rated 13th-month pay under PD 851: total basic salary earned in the calendar year divided by 12, less any 13th-month amount already released.
- Cash conversion of unused service incentive leave: 5 days a year for employees with at least one year of service (Article 95), plus any vacation or sick leave the company policy or contract says is convertible.
- Separation pay, only for authorized causes or where a contract, policy or CBA provides it.
- Retirement pay, if the employee is retiring.
- Tax refund from year-end annualization when too much tax was withheld during the year.
- Other amounts owed under the contract, policy or CBA, such as unpaid overtime, allowances or commissions.
Allowed deductions are withholding tax still due after annualization, the final SSS, PhilHealth and Pag-IBIG share, and debts the employee owes the company that are documented and authorized, such as a company loan or an unreturned laptop.
The 30-day deadline and the Certificate of Employment
- Final pay must be released within 30 days from the date of separation or termination, unless a more favorable company policy, contract or CBA applies.
- Certificate of Employment must be issued within 3 days from the employee's request.
- BIR Form 2316 should be given to the separating employee so the next employer can annualize their tax correctly.
A clearance process is fine and common, but plan it so it finishes inside the 30 days. Holding final pay indefinitely while clearance drags on is one of the most frequent reasons employees file a Single Entry Approach (SEnA) request at DOLE.
Separation pay: who gets it and how much
| Reason for separation | Statutory separation pay | Legal basis |
|---|---|---|
| Installation of labor-saving devices | 1 month pay or 1 month per year of service, whichever is higher | Art. 298 |
| Redundancy | 1 month pay or 1 month per year of service, whichever is higher | Art. 298 |
| Retrenchment to prevent losses | 1 month pay or ½ month per year of service, whichever is higher | Art. 298 |
| Closure not due to serious losses | 1 month pay or ½ month per year of service, whichever is higher | Art. 298 |
| Closure due to serious business losses | None | Art. 298 |
| Disease that cannot be cured within 6 months | 1 month pay or ½ month per year of service, whichever is higher | Art. 299 |
| Resignation | None, unless contract, policy or CBA | Art. 300 |
| Dismissal for just cause | None | Art. 297 |
A fraction of at least six months counts as one whole year. Six years and seven months of service is therefore seven years.
The formulas
- Daily rate = monthly salary × 12 ÷ divisor (261 for a 5-day week, 313 for a 6-day week, 365 if rest days are paid).
- Unpaid salary = daily rate × unpaid days worked.
- Pro-rated 13th month = basic salary earned from January 1 to the last day ÷ 12, less any 13th-month amount already paid. Overtime, holiday premiums, night differential and allowances are excluded.
- Leave conversion = daily rate × unused convertible leave days.
- Separation pay = monthly salary × (1 or ½) × credited years of service, but never less than one month's salary.
- Retirement pay (RA 7641, age 60 to 65 with at least 5 years of service, where there is no better retirement plan) = 22.5 days' pay × years of service. The 22.5 days are 15 days' salary, plus 5 days of service incentive leave, plus 1/12 of the 13th-month pay.
Worked example
An employee earning ₱25,000 a month on a 5-day week resigns effective October 31, 2026. Twelve working days in the October 16 to 31 cutoff are unpaid, no 13th-month pay has been released, and five days of service incentive leave are unused.
- Daily rate: ₱25,000 × 12 ÷ 261 = ₱1,149.43
- Unpaid salary: ₱1,149.43 × 12 = ₱13,793.10
- Pro-rated 13th month: ₱25,000 × 10 months ÷ 12 = ₱20,833.33
- Leave conversion: ₱1,149.43 × 5 = ₱5,747.13
- Gross final pay: ₱40,373.56, before tax adjustments and any authorized deductions.
If the same employee had instead been let go for redundancy after six years and seven months, separation pay of ₱25,000 × 7 = ₱175,000 would be added, and that amount is tax-exempt.
How final pay is taxed
- Separation pay is exempt from income tax when the separation is due to death, sickness, physical disability or any cause beyond the employee's control, such as redundancy, retrenchment or closure (NIRC Section 32(B)(6)(b)).
- 13th-month pay and other benefits are exempt up to ₱90,000 combined for the year. Anything above is taxable.
- Unused leave conversion: monetized unused vacation leave of up to 10 days a year is a tax-exempt de minimis benefit for private employees. Conversions above that are taxable compensation.
- Unpaid salary is regular taxable compensation, except for statutory minimum wage earners.
Run the year-end annualization in the final pay. The result is either a refund that goes into the final pay or tax still due that is deducted from it.
Frequently asked questions
How many days does an employer have to release final pay in the Philippines?
30 days from the date of separation or termination, under DOLE Labor Advisory No. 06-2020, unless a company policy, contract or CBA gives a shorter period.
Is a resigning employee entitled to back pay?
Yes. Every separating employee, including one who resigned or was dismissed for just cause, is owed final pay for work already done: unpaid salary, pro-rated 13th-month pay and convertible leave. What a resigning employee generally does not get is separation pay.
Is a resigning employee entitled to separation pay?
No, not under the Labor Code. Separation pay for a resignation is due only if the employment contract, company policy, an established practice or a CBA provides it.
Can an employer withhold final pay until clearance is complete?
Employers may require clearance, and the Supreme Court has upheld clearance as a reasonable condition. It should still be completed within the 30-day window. Holding final pay indefinitely invites a DOLE complaint.
Is unused leave converted to cash on resignation?
Unused service incentive leave (5 days a year after one year of service) is convertible to cash by law. Other vacation or sick leave is converted only if the company policy, contract or CBA says so.
Is the 13th-month pay included in final pay?
Yes. Employees who resign or are separated before the 13th-month payout get it pro-rated: basic salary earned during the year divided by 12. See the 13th-month pay guide.
How is separation pay computed?
Monthly salary multiplied by one month (redundancy, labor-saving devices) or half a month (retrenchment, closure not due to serious losses, disease) for each year of service, with six months or more counted as a year, and never less than one month's salary.
Let the system build the final pay. Tropa already holds every employee's attendance, leave balances and year-to-date pay, so the last salary, pro-rated 13th month, leave conversion and tax annualization come out of one payslip instead of a spreadsheet. See automated payroll, the take-home pay calculator, the payroll compliance checklist, or pricing from ₱99 per user per month.