When an employee leaves, whether they resign, are separated, or reach the end of a contract, the employer owes them a final pay that settles everything still due. Getting the computation right, and releasing it on time, is both a legal obligation and a matter of goodwill. Here is what final pay includes and how to work it out.
What final pay covers
Final pay (sometimes called "last pay" or "back pay") is the sum of every amount owed to a departing employee, less any lawful deductions. The usual components are:
- Unpaid salary for days worked up to the last day, including any earned but unpaid premiums.
- Prorated 13th month pay for the portion of the year worked. See how to compute 13th month pay.
- Cash conversion of unused leave that is convertible under law or company policy (for example, unused Service Incentive Leave).
- Separation pay, where the ground for separation requires it (authorized-cause terminations).
- Other amounts due under company policy or agreement, such as unreleased allowances or a pro-rated bonus, if promised.
What can be deducted
From that total, an employer may deduct only lawful items: outstanding government or company loans, unreturned company property with the employee's written authorization, tax adjustments, and other deductions permitted by law or authorized in writing. Silent or arbitrary deductions are not allowed.
A simple worked example
Suppose an employee earning ₱24,000/month resigns effective the 15th of the month, has ₱24,000 in basic salary earned so far for those days, five days of convertible unused leave, and ₱132,000 in basic salary earned for the year to date. Their final pay would combine the unpaid salary for the days worked, five days' worth of leave conversion, and prorated 13th month pay of ₱132,000 ÷ 12 = ₱11,000, less any loan balances or authorized deductions. The exact figures depend on your cutoff and records, which is why clean payroll data matters.
When it must be released
DOLE guidance directs employers to release final pay within a reasonable period, commonly 30 days from the date of separation, unless a more favorable company policy, contract, or agreement provides an earlier timeline. A Certificate of Employment should also be issued on request within a short period. Confirm the current rules with DOLE.
Make separations clean, not chaotic
Final pay is only as easy as your records are complete. When salary, leave balances, 13th month accruals, and loan deductions all live in one system, computing an accurate final pay is a matter of minutes rather than a manual reconstruction. BeavHR keeps that data together so every exit is settled correctly and on time. If you would like to see a clean final-pay run, book a demo and we will walk you through it.
Related reading
- Final Pay and the Certificate of Employment
- How to Compute 13th Month Pay in the Philippines
- A Practical Guide to Employee Leave in the Philippines
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.