Final pay

The end of an employment relationship — whether by resignation, termination, or retirement — often leaves both employee and employer asking the same question: when should the final pay be released?

To address this recurring concern, the Department of Labor and Employment (DoLE) issued Labor Advisory 06, Series of 2020. The advisory provides a clear framework on the release of the final pay and the issuance of a certificate of employment (CoE), an area that used to be marked by uncertainty and inconsistent practice.

Final pay refers to the total monetary benefits due an employee upon separation. It includes unpaid salaries, prorated 13th month pay, monetized unused leave credits, separation or retirement pay when applicable, tax refunds and other benefits under company policy or agreement.

Under the advisory, employers are required to release the final pay within 30 days from the date of separation, unless a more favorable company policy applies. This 30-day period is a significant development. In the past, no definite timeline governed the release of final pay, leaving employees uncertain and employers without a clear standard. The advisory now establishes a baseline rule — one that promotes predictability and accountability.

Non-compliance, however, is not without consequence. Delay beyond the prescribed period may expose employers to complaints before the DoLE, with possible administrative repercussions. This underscores the need for companies to review and streamline their internal processes to ensure timely compliance.

That said, the rule is not absolute. Employers may validly withhold the final pay under certain circumstances, particularly when the employee has not completed clearance requirements or has pending accountabilities. These may include unreturned company property, outstanding cash advances, or other obligations arising from the employment relationship.

The Supreme Court in Milan v. NLRC (G.R. 202961, 4 February 2015) recognized that clearance procedures are a legitimate exercise of management prerogative. An employer cannot be compelled to release full benefits while the employee remains accountable for company assets or obligations. In this sense, the clearance process serves as a safeguard for both parties.

Viewed properly, the 30-day period is not a rigid deadline imposed solely on employers. It reflects a shared responsibility. Employees are expected to comply promptly with clearance procedures, while employers must act with reasonable dispatch once those requirements are completed. Delay on either side defeats the very purpose of the rule.

The advisory likewise clarifies the issuance of a certificate of employment. Upon request, the employer must issue the CoE within three days. The document, which states the employee’s period of service and job description, is essential for future employment and cannot be withheld arbitrarily or used as leverage in disputes.

In case of disagreement involving the final pay or the issuance of a CoE, the employee may seek recourse before the appropriate DoLE office. The availability of this administrative remedy reinforces compliance and provides a straightforward avenue for redress.

Ultimately, the advisory promotes fairness, transparency, and order in the often sensitive process of employment separation. For employers, it offers a clear standard that reduces legal risk. For employees, it affirms the right to receive what is due without unnecessary delay.

At the end of the day, separation from employment need not be contentious. With clarity in the rules and good faith on both sides, even endings can be handled with professionalism — and dignity.

For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.