Labor Advisory No. 06-20 or the Guidelines on the Payment of Final Pay and Issuance of Certificate of Employment provides that Final Pay should be released within thirty (30) days from the date of separation or termination of employment, unless there is a more favorable company policy under a individual or collective agreement.

Because the issuance states “unless there is a more favorable company policy under a individual or collective agreement”, it may be construed that the longest that a former employee should expect his final pay should be 30 days from the expiration of his contract.

Final Pay, Last Pay, or Back Pay is defined as the sum of all wages or monetary benefits due the employee regardless of the cause of the termination of employment. This includes but is not limited to:

1. Unpaid earned salary of employee;
2. Cash conversion of unused Service Incentive Leave (SIL) pursuant to Article 95 of the Labor Code;
3. Cash conversions of remaining unused vacation, sick or other leaves pursuant to company policy, or individual or collective agreement, if applicable:
4. Pro-rated 13th month pay;
5. Separation pay, if applicable;
6. Retirement pay, if applicable;
7. Income tax claim for the excess of taxes withheld, if applicable;
8. Other types of compensation, if any;
9. Cash bonds or any kind of deposits due for return to the employee, if any;

The same issuance also provides that employers must issue a Certificate of Employment three (3) days from the time the employee requests it.

Certificate of Employment is defined as the certificate specifying the dates of an employee’s engagement and his termination, as well as the type of work in which he is employed. Note, however, that the employee may request this even if his employment has not yet been terminated.

What happens if the employer unjustifiably delays or refuses to give the final pay within the specified time?

The aggrieved employee may file a claim dispute before the nearest DOLE Regional/Provincial/Field Office which has jurisdiction over the workplace, invoking DOLE’s enforcement powers.

Does this apply to all types of employees?

Because of the phrase, “regardless of the cause of termination of employee”, it may be construed to apply to all types of employees, including project ones whose employment is coterminous with the contract or the engagement.

May the employer deduct from the employee’s wages before releasing his Final Pay?

Article 113, Chapter IV of the Labor Code provides that, “no employer… shall make any deduction from the wages of his employees, except… in cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment”.

As such, Department of Labor issued Department Order No. 195 (DO No. 195) which allows a deduction from wages upon written authorization of the employees for payment to the Employer. However, note that this is with limitation that payments must not give the employer any direct or indirect pecuniary benefit from the transaction.

In case that a company unduly denies or prolongs the payment of the employee’s final pay, DO No. 195 cannot apply because the corporation may be construed to unjustly enrich itself by retaining the employee’s money in his expense and against the fundamental principles of justice, equity and good conscience.