What is included in final pay?
DOLE Labor Advisory No. 06, series of 2020 defines final pay (“last pay”) as everything the employer owes when employment ends, for any reason. It must be released within 30 days from separation unless a more favourable company policy or agreement applies. It includes:
- Unpaid salary for days already worked
- Pro-rated 13th month pay (PD 851): total basic salary earned in the calendar year ÷ 12
- Cash conversion of unused service incentive leave (5 days a year after one year of service, Art. 95) and other convertible leave under company policy
- Separation pay, if the cause of termination requires it
- Tax refund of excess withholding, retirement pay and other benefits, if applicable
Separation pay under the Labor Code
| Cause | Separation pay |
|---|---|
| Redundancy, installation of labor-saving devices (Art. 298) | 1 month pay per year of service, or 1 month pay, whichever is higher |
| Retrenchment to prevent losses; closure not due to serious losses (Art. 298) | ½ month pay per year of service, or 1 month pay, whichever is higher |
| Disease (Art. 299) | ½ month pay per year of service, or 1 month pay, whichever is greater |
| Closure due to serious business losses | None |
| Resignation; dismissal for just cause (Art. 297) | None by law (unless contract, CBA or policy) |
A fraction of at least six months counts as one whole year.
Tax on final pay
The 13th month pay and other benefits are tax-free up to a combined ₱90,000 a year (NIRC Sec. 32(B)(7)(e) as amended by the TRAIN law). Separation pay received because of death, sickness, disability or any cause beyond the employee’s control — such as redundancy, retrenchment or closure — is tax-exempt (Sec. 32(B)(6)(b)). Unpaid salary and leave conversion are taxable compensation.
FAQ
How much separation pay do I get for redundancy?
One month of pay for every year of service, with at least one month. With a ₱25,000 monthly salary and 7 years 5 months of service (June 2019 to 15 November 2026), you are credited 7 years and get ₱175,000. Adding 10 unpaid days, the pro-rated 13th month and 5 days of leave, total final pay in that example is ₱214,090.70.
Do I get separation pay if I resign?
No. The Labor Code gives separation pay only for authorized causes like redundancy, retrenchment, closure or disease. If you resign, you still receive unpaid salary, pro-rated 13th month pay and any convertible leave.
How is the 13th month computed in final pay?
Total basic salary earned from January to your last day, divided by 12. For ₱25,000 a month and a last day of 15 November 2026, that is about ₱262,191.78 ÷ 12 = ₱21,849.32.
When should I receive my final pay?
Within 30 days from the date of separation, under DOLE Labor Advisory No. 06-2020, unless your company policy or contract sets a shorter period.
Sources (checked 5 November 2026): Labor Code of the Philippines, Arts. 95, 297, 298 and 299 (renumbered, DOLE Department Advisory No. 01-2015); PD 851 and its revised guidelines; DOLE Labor Advisory No. 06, series of 2020 (dole.gov.ph); NIRC Sec. 32(B)(6)(b) and 32(B)(7)(e) as amended by RA 10963 (TRAIN), bir.gov.ph.