Every employment relationship ends eventually, through resignation, end of contract, or termination. When it does, two obligations kick in that employers often underestimate: releasing the employee’s final pay and issuing a Certificate of Employment (COE). DOLE Labor Advisory No. 06, series of 2020, sets clear expectations for both.
Getting this right protects you from money claims and keeps your offboarding professional. Here is what belongs in a final-pay computation and the timelines you need to hit.
What counts as final pay
Final pay (often called last pay or back pay) is the sum of everything still owed to a departing employee. Depending on the situation, that can include:
- Unpaid earned salary up to the last day worked.
- Pro-rated 13th month pay for the portion of the year already served.
- Cash conversion of unused Service Incentive Leave and any other convertible leave your policy allows.
- Separation pay, where it is required by law or company practice.
- Other amounts such as pro-rated allowances, earned commissions, or a tax refund from annualization.
From this you may deduct legitimate, documented items, outstanding cash advances, company loans, or unreturned assets, as long as they are lawful and the employee is aware of them.
The 30-day rule
Labor Advisory 06-20 says final pay should be released within 30 days from the date of separation, unless a more favorable company policy, contract, or CBA provides for an earlier release. The clock runs regardless of the reason for separation, so build clearance and computation into a process you can finish inside that window.
The Certificate of Employment within 3 days
A COE is not the same as final pay, and it is not optional. Upon request, the employer must issue a COE within three (3) days. It simply states the dates of employment and the position(s) held, a record of fact, not a recommendation, and it should not be withheld to pressure a departing employee.
Where employers slip up
- Treating the COE as leverage. Withholding it until clearance is finished is a common and avoidable complaint.
- Forgetting pro-rated 13th month pay. It is earned throughout the year, so a mid-year leaver is still owed their share.
- Missing the tax refund. Year-to-date annualization often means money flows back to the employee.
- No paper trail. Deductions without documentation are the fastest route to a money claim.
Make offboarding repeatable
Because final pay draws on attendance, leave balances, loans, and year-to-date payroll, it is far easier when all of that already lives in one system. BeavHR keeps leave conversions, 13th month accrual, and payroll history in sync, so a final-pay computation is a few clicks rather than a spreadsheet excavation. Book a demo and we will walk you through a clean separation run end to end.
Frequently asked questions
How soon must final pay be released?
DOLE guidance directs employers to release final pay within a set period, commonly 30 days from separation, unless a more favorable company policy or agreement applies. Confirm the current rule with DOLE.
What is included in final pay?
Final pay usually includes unpaid salary, prorated 13th month pay, the cash value of unused convertible leave where applicable, and any other amounts due, less lawful deductions.
How quickly must a Certificate of Employment be issued?
A Certificate of Employment must be issued on request within a short period (commonly a few days). It states employment dates and position. It is not a clearance or a reference letter. Confirm the current timeline with DOLE.
Related reading
- The Complete Guide to Philippine Payroll Compliance
- A Practical Guide to Employee Leave in the Philippines
- The Twin-Notice Rule
Disclaimer: This article is general information, not legal or tax advice, and Philippine rules and rates change over time. Always confirm the current requirements with the relevant government agencies, DOLE, BIR, SSS, PhilHealth, Pag-IBIG, and the National Privacy Commission, or your legal counsel before acting. Last reviewed: July 2026.