Below is a comprehensive discussion of the issues surrounding Non-Payment of Final Pay and 13th Month Pay in Philippine Resignation Cases. This article is based on Philippine labor laws, Department of Labor and Employment (DOLE) regulations, and established jurisprudence. It aims to guide employees and employers on their rights and obligations upon an employee’s resignation.

1. Overview of Final Pay in the Philippines

Final pay (sometimes referred to as “last pay” or “back pay”) is the sum or total of all the wages or monetary benefits due to an employee once the employment relationship ends. Whether the separation is due to resignation, termination, completion of contract, or other causes, the employer is generally required to pay what is rightfully owed to the employee under law and/or any applicable company policies or collective bargaining agreements (CBA).

1.1. Common Components of Final Pay

Unpaid salaries and allowances
- All earned but unpaid wages up to the last day of work.
- Any salary differentials if applicable.
- Any unpaid allowances (if contractually or legally due).
Pro-rated 13th month pay
- Mandated by Presidential Decree No. 851, employees are entitled to 13th month pay equivalent to one-twelfth (1/12) of their basic salary for the calendar year.
- For resigning employees, 13th month pay is usually pro-rated based on actual length of service within the year.
Unused leave conversions
- Under company policy or a CBA, any unused and convertible sick or vacation leaves may be monetized, unless the policy states otherwise.
Cash bond or deposit returns
- If the employee paid a cash deposit or bond (for tools, equipment, etc.), it should be returned if there are no liabilities or grounds for forfeiture.
Other payables
- Commissions, incentives, or bonuses expressly due and demandable under company policy, contract, or practice.
- Separation pay if mandated by law in certain instances (not always applicable to resignations, but applicable if stipulated by contract/CBA, or in specific cases of authorized causes under the Labor Code).

2. Legal Framework for 13th Month Pay

2.1. Presidential Decree No. 851

Presidential Decree No. 851 requires employers to pay their rank-and-file employees a 13th month pay.
Coverage extends to all employers except those specifically exempted by law (e.g., distressed employers with prior approval, certain government employees, household/domestic helpers, etc.).
For employees who did not work the entire calendar year (e.g., resigned before December 31), the 13th month pay is computed in proportion to the length of service within that year.

2.2. Computation of Pro-Rated 13th Month Pay

The formula for pro-rated 13th month pay is generally:

[ \text{Pro-rated 13th Month Pay} = \frac{\text{Total Basic Salary Earned During the Year}}{12} ]

For resigned employees, you consider only the basic salary earned from January 1 (or the start date if hired mid-year) until the date of resignation.

Example: If an employee resigns on June 30 and earned a total of PHP 120,000 in basic salary from January to June, the 13th month pay due would be:

[ \frac{PHP 120,000}{12} = PHP 10,000 ]

3. Timeframe for Release of Final Pay

3.1. DOLE’s Guidelines

Labor Advisory No. 06, Series of 2020 (“Payment of Final Pay and Issuance of Certificate of Employment”)

Although not a strict law, this DOLE advisory provides guidance that final pay should be released within thirty (30) days from the date of separation, unless a different period is stipulated in the company policy, contract, or CBA.
The advisory clarifies what counts as “final pay” and encourages employers to issue the corresponding Certificate of Employment (COE) within the same or a reasonable period.

3.2. Company Policy and Agreements

If a company has its own policy or there is a provision in the CBA that specifies a different period, that agreement may govern as long as it does not violate any law or regulation.
However, DOLE typically recommends 30 days as a reasonable period to process all clearances and compute final pay accurately.

4. Common Reasons for Delay or Non-Payment

Pending clearance or accountability
- Employers often require an employee to undergo clearance procedures (e.g., returning company property, finalizing outstanding tasks, reconciling financial accountabilities).
- If there is a legitimate dispute—such as lost company equipment or unreturned property—part of the final pay may be withheld to cover damages or replacement costs. However, the employer must still release any undisputed portion.
Poor administrative processes
- Sometimes, a backlog in the HR or finance department leads to delays. Employers are strongly encouraged to streamline and expedite final pay processing.
Employer’s financial difficulties
- Financial distress or cash-flow problems of the company do not justify the complete non-payment of final pay. Employers are obliged to pay what is legally due.
Unfounded refusal
- In some cases, an employer unlawfully refuses to pay final wages out of malice or attempts to impose illegal deductions. This is grounds for a labor complaint.

5. Legal Remedies for Non-Payment or Delay

5.1. Filing a Complaint with the DOLE

If an employee believes their final pay or pro-rated 13th month pay has been unjustly withheld, they may file a complaint with the nearest DOLE Field or Regional Office.
DOLE provides avenues for mandatory conciliation-mediation (SEnA: Single Entry Approach) to help the parties reach an amicable settlement.

5.2. Labor Arbiter Proceedings

Should conciliation fail, the employee can elevate the matter to the National Labor Relations Commission (NLRC), where a Labor Arbiter will hear the case.
Claims for unpaid or underpaid wages, 13th month pay, and other benefits fall under money claims within the Labor Arbiter’s jurisdiction.

5.3. Potential Damages and Attorney’s Fees

If the Labor Arbiter or higher tribunals find the employer to have willfully withheld wages, they may award:
- Full back payments of the withheld amounts.
- Legal interest, if appropriate.
- Attorney’s fees, under Article 2208 of the Civil Code, in instances where the withholding is in bad faith.

6. Frequently Asked Questions

6.1. Can an employer require clearance before releasing final pay?

Yes. Employers generally have the right to institute clearance procedures to ensure that the resigning employee has no outstanding obligations or accountabilities. However, indefinite or unreasonable withholding of final pay beyond the justifiable amount or time frame can be a violation. Employers must act in good faith and promptly release any undisputed amount.

6.2. Is the 30-day release of final pay mandatory?

DOLE’s Labor Advisory No. 06, s. 2020, strongly recommends releasing the final pay within 30 days from separation. While it is an advisory and not a rigid statutory requirement, it reflects the minimum standard for reasonableness. Prolonged delay may expose employers to labor complaints.

6.3. Do resigned employees always get separation pay?

No. Separation pay is typically granted when termination is due to authorized causes under the Labor Code (e.g., retrenchment, closure, redundancy, etc.) or when provided by company policy or a CBA. Voluntary resignation does not automatically entitle the employee to separation pay unless explicitly granted by an agreement or a policy.

6.4. Can 13th month pay be withheld for disciplinary reasons?

No. 13th month pay is a statutory benefit mandated by PD 851. Employers cannot withhold it as a disciplinary sanction. Deductions can only be made if there are lawful and valid reasons recognized by the Labor Code (e.g., debts to the employer, damages caused by the employee, etc.), but the final 13th month pay due cannot be withheld in its entirety as a punitive measure.

6.5. What if the employee disagrees with deductions made by the employer?

The employee can inquire or contest any deductions they deem improper. If the employer insists and the employee still believes it to be unjust or unsubstantiated, the matter can be brought to DOLE or filed as a labor complaint for money claims.

7. Practical Tips for Employers and Employees

For Employers

Establish a clear clearance and final pay policy
- Outline steps, required documents, and timelines in your employee handbook or HR guidelines.
Compute final pay accurately and promptly
- Ensure synergy between HR, finance, and legal teams to avoid errors or unwarranted delays.
Document everything
- Keep clear records of how and when final pay is computed, the basis for any deductions, and communication with the resigning employee.
Follow DOLE advisories
- While some are not strictly penal in nature, they reflect best practices and help avoid legal disputes.

For Employees

Fulfill clearance obligations
- Return all company properties, settle loans, and complete any required exit documents to prevent justifiable withholding of part of your final pay.
Keep a record of your wages and benefits
- Track your monthly salary, 13th month pay accrual, leave conversions, etc. This helps you verify the accuracy of your final pay.
Communicate clearly
- Submit a formal resignation letter stating your last day of work. Request a schedule or breakdown of your final pay and 13th month pay.
Know when to seek help
- If your employer refuses to settle or delays without reason, contact DOLE or file a labor complaint if necessary.

8. Conclusion

In the Philippines, the law treats final pay and 13th month pay as fundamental rights for separated employees, whether they resigned or were terminated for authorized causes. DOLE, through its advisories, sets guidelines to ensure employees receive these entitlements promptly and fairly.

Non-payment or unjust delay in releasing final pay and the pro-rated 13th month pay can lead to labor disputes and possible penalties against employers. Conversely, employees must also complete clearance obligations and adhere to company policies to avoid legitimate withholding.

Ultimately, maintaining transparency and open communication—paired with a thorough understanding of the law—helps both employers and employees navigate resignation cases smoothly, ensuring fair and lawful treatment at the end of the employment relationship.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. For specific concerns or disputes related to non-payment of final pay and 13th month pay, individuals are advised to consult with a qualified labor lawyer or approach the Department of Labor and Employment (DOLE).