Dear Attorney,

I recently resigned from my job and have not yet received my back pay. Could you explain the legal process for claiming back pay and what I can do if there is a delay in receiving it?

Sincerely,
A Concerned Employee

Insights

In the Philippines, back pay refers to the total amount of compensation owed to an employee upon the cessation of employment. Whether due to resignation, termination, or completion of a contract, employees are entitled to receive unpaid wages, accrued benefits, and other monetary compensation. The legal concept related to this matter touches on labor laws, specifically regarding employee rights under the Labor Code of the Philippines and other regulations governing employer-employee relationships.

What is Back Pay?

Back pay typically includes the following:

Unpaid salaries – any salary that has not yet been paid for work completed up to the last day of employment.
Pro-rated 13th-month pay – this is mandatory and calculated based on the number of months the employee worked during the calendar year.
Unused leave credits – under Philippine law, employees are entitled to receive payment for unused service incentive leave (SIL) credits.
Separation pay (if applicable) – depending on the circumstances of the employee’s separation from the company, they may be entitled to separation pay, such as in cases of retrenchment or redundancy, or in situations specified under the law.

Legal Framework on Back Pay in the Philippines

Labor Code of the Philippines (Presidential Decree No. 442)

The Labor Code sets forth the rights of employees to receive compensation owed to them upon separation from employment. While the term “back pay” is not directly defined in the Code, the right to unpaid wages, benefits, and other accrued amounts is implied within the following provisions:

Article 291 (Art. 113) – Protects workers from withholding of wages except in certain circumstances authorized by law, such as tax deductions or employee loans.
Article 95 – Entitles employees to service incentive leave credits, which are typically included in back pay.
Article 283 – Governs the conditions under which separation pay may be due in cases of retrenchment, closure, or redundancy.

Company Policy and Contracts

Employees may also have rights to additional benefits stipulated in their employment contracts or company policies, such as bonuses or allowances. These must be included in the computation of back pay.

Timeframe for Receiving Back Pay

The law does not explicitly prescribe the exact timeframe for the release of back pay. However, it is considered best practice, under the principle of fair labor standards, to release back pay within 30 days of the employee’s last day of work. This timeline allows for the clearance of company property, final computation of wages, and settlement of any employee liabilities.

Delays beyond this reasonable period without just cause may be grounds for filing a complaint with the Department of Labor and Employment (DOLE) or the National Labor Relations Commission (NLRC).

Steps to Take When Back Pay is Delayed

Follow-Up with the Employer
The first step is always to reach out to your employer’s human resources or payroll department to inquire about the status of your back pay. In many cases, delays can be attributed to processing issues that can be resolved through communication.
Demand Letter
If the employer fails to release your back pay within a reasonable period, you can issue a formal demand letter. This letter should be addressed to the employer, stating your entitlement to back pay, itemizing the amounts owed, and requesting a prompt settlement.
File a Complaint with DOLE or NLRC
If the employer continues to withhold your back pay without justification, you may file a complaint with DOLE or the NLRC for unfair labor practices or non-payment of wages. This can lead to an administrative investigation, mediation, or legal proceedings to recover the unpaid amounts.

Legal Remedies

Filing a Labor Complaint

If an employer refuses to settle or delays the release of back pay, the affected employee may file a complaint with the appropriate labor agency.

Department of Labor and Employment (DOLE)
DOLE handles complaints regarding non-payment of wages, including back pay, through its Single Entry Approach (SEnA) program. This program allows for mediation between the employer and employee before escalating to formal litigation.
National Labor Relations Commission (NLRC)
The NLRC handles cases involving illegal dismissal, claims for back pay, and other wage-related disputes. If mediation fails or the matter is more complex, the case may be brought before the NLRC for formal adjudication.

Legal Basis for Compensation

Employees are entitled to recover not only their back pay but also:

Legal interest – The Supreme Court of the Philippines has ruled that unpaid wages and other benefits may accrue legal interest from the date of demand until fully paid.
Attorney’s fees – In some instances, if the employee had to resort to legal action to recover their back pay, they may be entitled to claim attorney’s fees as part of the damages.

Considerations on Separation Pay

Separation pay is not always automatically part of back pay. It is typically owed to employees whose termination was due to authorized causes under the Labor Code, such as:

Retrenchment (Article 283)
Redundancy (Article 283)
Closure or cessation of operations (Article 283)
Disease (Article 284)

Employees terminated for just causes, such as serious misconduct or gross neglect of duty, are generally not entitled to separation pay.

Special Cases

Employees Resigning Voluntarily

Employees who resign voluntarily are not entitled to separation pay unless explicitly provided in their employment contract. However, they are entitled to receive their unpaid wages, prorated 13th-month pay, and any other benefits due to them up to the date of resignation.

Employees Terminated Due to Authorized Causes

In cases of retrenchment, redundancy, or closure, employees are entitled to separation pay of at least one month’s salary or one-half month’s salary for every year of service, whichever is higher, as mandated by law.

Employees Under Project-Based or Contractual Employment

For employees under project-based or contractual employment, back pay is calculated based on the agreed terms of employment, which may limit certain benefits such as leave credits or separation pay.

Conclusion

The concept of back pay is enshrined in Philippine labor laws to ensure that employees receive what they are owed upon the termination of their employment. While the law provides protection and recourse for employees facing delays in receiving their back pay, it is always advisable to seek the advice of a legal professional when disputes arise, ensuring proper procedure is followed and that the employee’s rights are upheld.

Employees facing back pay disputes should exhaust all remedies provided by law, from formal communication with the employer to filing a complaint with labor authorities, to recover the compensation owed to them.