Final Pay & Back Pay Computation Philippines 2026

Whether you resigned, were retrenched, or were terminated, you are legally entitled to receive your Final Pay — commonly called "back pay" — from your employer. This is not a courtesy; it is a right mandated under the Philippine Labor Code and DOLE Labor Advisory No. 06, Series of 2020. This guide explains every component you should receive and how each is computed.

1. What Is Final Pay?

Final pay (or last pay) is the sum of all wages and monetary benefits due to an employee upon separation from employment, regardless of the reason for separation. DOLE requires employers to release final pay within 30 days from the date of separation or upon completion of the clearance process — whichever comes first.

2. Components of Final Pay

The following items must be included in the computation:

A. Unpaid Wages

All basic salary earned up to and including the last day worked but not yet paid. If your payroll cycle ended on the 15th and you resigned on the 25th, the 10 days of salary are included.

B. Pro-Rated 13th Month Pay

Formula: (Total Basic Salary Earned from January 1 to last day worked) ÷ 12

Example: If you resign on June 30 with a ₱30,000 monthly salary, your pro-rated 13th month = (₱30,000 × 6) ÷ 12 = ₱15,000

C. Cash Conversion of Unused Service Incentive Leave (SIL)

Under the Labor Code, employees with at least one year of service are entitled to 5 days Service Incentive Leave per year. Unused SIL must be converted to cash upon separation.

Formula: (Daily Rate × Unused SIL Days)

Note: If your company policy grants more than 5 days VL/SL, check your contract — excess leaves are converted only if your policy allows it.

D. Separation Pay (if applicable)

Separation pay applies in specific situations (authorized causes). Refer to our Separation Pay Guide for full details. It is not automatically included in every final pay — only when legally required.

E. Other Company-Specific Benefits

These depend on your employment contract or CBA:

• Unpaid performance bonuses that have already been earned and declared
• Commission on closed deals prior to separation
• Reimbursable expenses already incurred
• Return of salary loans deducted in advance (if applicable)

3. Sample Final Pay Computation

4. Deductions From Final Pay

Employers may only deduct the following from your final pay — nothing else is legally authorized:

• Remaining balance of salary loans (SSS, Pag-IBIG, company)
• Withholding tax on taxable components
• Any amount owed to the company as documented in a signed agreement

5. What If Your Employer Delays or Refuses?

1. Send a formal written demand letter to your employer.
2. File a Request for Assistance (RFA) at the nearest DOLE office under the SENA program.
3. If unresolved, elevate to the National Labor Relations Commission (NLRC) for a formal money claim.

Claims for unpaid final pay prescribe after 3 years from the date they became due — so act promptly.