Claiming Back Pay After Resignation

Disclaimer: The information provided here is for general educational purposes and should not be taken as formal legal advice. Labor laws and regulations may change, and individual circumstances can vary. For specific concerns, consult the Department of Labor and Employment (DOLE) or a qualified Philippine labor lawyer.

Introduction

When an employee in the Philippines resigns, they are typically entitled to receive certain payments referred to colloquially as “back pay” (often called “final pay”). Back pay encompasses any sums owed to the employee by their employer at the time of separation from the company. Understanding your rights, what is included in back pay, and how to claim it ensures a smoother transition upon resignation.

1. What Is Back Pay (Final Pay)?

In the Philippine context, “back pay” generally refers to the total amount of money owed to an employee upon their separation from the company. It is also frequently called “final pay.” This amount may include:

  1. Unpaid salaries or wages

    • All earned but unpaid salaries/wages up to the last day of employment.

  2. Pro-rated 13th Month Pay

    • The 13th month pay is a statutory benefit. An employee who resigns before the year ends is generally entitled to a pro-rated 13th month pay (i.e., computed based on the number of months worked within the calendar year).

  3. Unused Service Incentive Leave (SIL) or Vacation Leave Credits

    • Under the Labor Code, employees who have rendered at least one (1) year of service are entitled to at least five (5) days of service incentive leave per year, unless a more favorable policy or company practice exists. Any unused SIL (or its commutable equivalent) must be paid upon separation.

  4. Separation pay (if applicable)

    • Generally, resignation does not warrant separation pay unless provided for by company policy, the employment contract, or a collective bargaining agreement (CBA). Separation pay is also statutorily required in cases of authorized causes (e.g., redundancy, retrenchment) but typically not for voluntary resignation. Check your company policies or CBA to confirm if a separation pay benefit exists for resignations.

  5. Other benefits and entitlements

    • Pro-rated allowances, incentives, commissions, or bonuses, if such are contractually provided or covered by company policy or CBA.

  6. Tax refunds (if any)

    • If the employee overpaid income tax via withholding tax during the year, the difference should be returned as a tax refund in the final pay.

2. Legal Framework

2.1 Labor Code of the Philippines

While the Labor Code of the Philippines does not always specify an exact timetable for the release of final pay, Article 103 of the Labor Code requires that wages be paid promptly. This is often used as a basis to claim that final wages should be released within a reasonable time.

2.2 DOLE Labor Advisory No. 06, Series of 2020

The Department of Labor and Employment (DOLE) issued Labor Advisory No. 06, Series of 2020, which provides guidelines on the payment of final pay and issuance of Certificates of Employment. It stipulates:

  • Final pay should be released within thirty (30) days from the date of separation, unless a more favorable company policy, individual agreement, or CBA exists.
  • Employers are encouraged to issue a Certificate of Employment (COE) within three (3) days from the request.

This advisory does allow flexibility in certain circumstances, but typically companies strive to release back pay within the 30-day guideline.

3. Steps to Claim Back Pay

  1. Submit a Formal Resignation Letter

    • Provide a resignation letter stating the last day of employment in accordance with your notice period. Typical notice periods are 30 days unless a shorter or longer period is specified by contract or company policy.

  2. Coordinate with the Human Resources (HR) Department

    • Discuss your entitlements and final pay computation.
    • Ensure you return company property (e.g., ID, laptop, phone) and complete any clearance process.

  3. Sign Clearance Forms and Other Exit Documents

    • Companies typically require the resigning employee to accomplish clearance forms, settling accountabilities.
    • The clearance procedure is often the main prerequisite before payroll or finance departments can process final pay.

  4. Request a Computation of Your Final Pay

    • Ask your HR or payroll department for a breakdown of each item in your final pay, including wages, pro-rated 13th month, unused leave credits, and potential tax refunds.
    • Verify that the amounts match your expectations or statutory requirements.

  5. Monitor the Release Date

    • The default practice is to release final pay within 30 days after the employee’s last day or clearance completion.
    • Keep in regular contact with HR if any delay arises or if you need clarifications.

4. Possible Issues and How to Address Them

  1. Delays Beyond 30 Days

    • If your employer fails to release your final pay within 30 days, clarify the reason and ask for a specific payment date.
    • Some companies hold final pay until all clearances are settled or until the next regular payroll cycle. Delays may be justified if, for instance, you still have unreturned equipment or financial obligations to the company.

  2. Underpayment or Disputes in Computation

    • Check your payslips and documents to ensure the employer calculates your final pay correctly.
    • If you suspect underpayment, communicate with HR or payroll, and if unresolved, consider seeking mediation through DOLE.

  3. Non-Payment or Refusal to Pay

    • If the employer refuses to release final pay or withholds it without valid reason, you may file a complaint with the nearest DOLE Regional Office. DOLE offers dispute resolution mechanisms such as the Single Entry Approach (SEnA), which aims to mediate and settle labor disputes quickly.

5. Tips to Ensure Smooth Processing

  1. Keep Proper Documentation

    • Retain copies of your employment contract, payslips, leave records, and any correspondence regarding salary or benefits.
    • These documents will help you verify the final pay and will be critical if disputes arise.

  2. Follow the Proper Resignation Procedure

    • Respecting the agreed notice period and completing clearance procedures typically ensures fewer delays and smoother release of back pay.

  3. Ask for an Acknowledgment

    • Once you submit your resignation letter, ask for a receiving copy or acknowledgment from HR.
    • This ensures you have proof of the date of your resignation notice.

  4. Communicate Professionally

    • If there are complications or misunderstandings about pay, keep communication polite and professional. Written correspondence (e-mail) is recommended to keep a verifiable record.

6. Relevant Deadlines and Considerations

  • 30-Day Release Rule: Under DOLE Labor Advisory No. 06 (2020), final pay is generally recommended to be released within 30 days from separation.
  • Company Policies: Some employers have specific guidelines or processes that might affect the timing of the release.
  • Tax Year Implications: If you resign mid-year, ensure correct computation of withholding tax for the year and potential refunds.

7. Remedies if Back Pay Is Not Released

  1. Internal Remedies

    • Escalate within the company: HR, then management or legal/finance departments if needed.

  2. Filing a Complaint with DOLE

    • If internal dialogue fails, file a complaint with the DOLE Regional Office.
    • The Single Entry Approach (SEnA) helps facilitate speedy settlements without resorting immediately to litigation.

  3. Civil or Labor Case

    • If DOLE interventions do not resolve the matter, you may pursue a formal case before the National Labor Relations Commission (NLRC). This can be more time-consuming and costly, so it is best to exhaust simpler remedies first.

Conclusion

Back pay (often called “final pay”) after resignation in the Philippines comprises all the monetary benefits owed to an employee up to their last day of work—this may include unpaid wages, pro-rated 13th month pay, unused leave credits, and any other applicable entitlements based on company policy or law. While the standard release timeframe is within 30 days from the last day of employment as per DOLE guidelines, actual timing can vary depending on company policy and clearance procedures.

If you face issues such as delayed or incomplete payment, keep your communication with HR professional and documented. You have the right to seek assistance from the Department of Labor and Employment for resolution. Always consult official resources or a legal professional for specific questions or concerns regarding your back pay, as individual circumstances and company policies can differ.

This article is intended for general informational purposes only and does not constitute legal advice. For in-depth guidance on your particular situation, please consult a qualified labor lawyer or the Department of Labor and Employment (DOLE).

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

Privacy Policy

Terms of Use

Lawyer Login

 
 
Privacy Policy         Terms of Use         Lawyer Login