Clarifying Concerns on Final Pay After Resignation

Money owed to an employee whose employment has ended is known as the final pay. In addition to any accrued entitlements like annual leave and, if applicable, annual leave loading, final pay may also include other payments like accumulated long service leaves, payment in lieu of notice, and redundancy compensation.

Most of the rewards mandate that you pay a leaving employee their final salary no later than seven days after their employment ends. Longer time-frames could be offered by some awards and registered agreements. Others call for a shorter period, depending on your previous agreement.

Why the Final Pay Matters Greatly

One thing is clear: job resignation is never a simple process. In addition to the possibility of losing a job, the upcoming uncertainties make it more challenging because everyone needs money to survive, especially if you have people depending on you. Hence, what will be included in an employee’s final salary is a common query. Accounting services in the Philippines point out that many workers on a payroll look forward to receiving this final payment because this money will tide them over until they find their next employment.

The wage for work performed, prorated thirteenth month pay, other bonuses, unused service incentive leaves (SIL), return of the bond (if applicable), and tax refund are all required to be included in the final payment under Philippine labor rules (if excess taxes have been withheld by the company). Moreover, SSS loans and other monies owed by the employee to the company would be deducted from the final pay, along with other deductions.

Some Individuals Are Not Entitled to Separation Pay Upon Resignation

It should be emphasized that a departing employee is not entitled to separation pay. Several people hold the incorrect belief that separation money is always owed. That’s incorrect. According to tax services in Manila, separation compensation is only offered when an employee is let go for legitimate reasons such as the following:

  • Illness
  • Redundancy
  • Retrenchment
  • The installation of labor-saving technology

Separation pay may also be given when an employee who was fired without cause cannot be brought back owing to strained relations. Thus, it is important to reiterate that when an employee resigns, no separation compensation is ever granted and this will not be included in the final pay.

The Department of Labor Makes Its Statement Regarding Final Pay

To avoid confusion for both employees and employers, tax and accounting services in the Philippines pointed out that DOLE published Labor Advice No. 06 series of 2020 last on January 31, 2020. The uncertainty regarding the release of the final pay was ultimately cleared up by this labor advisory.

The DOLE now requires that the final pay be released within thirty (30) days of the date of separation or termination of employment, unless there is a more advantageous company policy, individual or collective agreement, in order to effectively balance the management prerogative of the employer and the right of the employee.

When Final Pay Must Be Released and the Possibility of Disputes

When must final pay be given? Workers who are leaving their jobs are eager to know this answer. For instance, a worker tendered his resignation on August 31, 2020, with effect from September 30, 2020. Thus, the last payment must be made by October 30, 2020, at the latest. Of course, the business has the option to distribute the final payment sooner, especially if the person resigning was a valuable asset with a good relationship with the company.

The nearest DOLE field office with jurisdiction over the workplace should be contacted if there is a dispute over the issuance of the final pay. a word of advice. It’s best to appropriately resolve any issues with your employer. The DOLE should only be used as a final resort after all other options have been explored. Bridges should never be burned, as the adage goes.

If you’re a business owner, it’s imperative to stay on top of this to avoid disputes with former employees. It would be stressful to face charges with DOLE. For the best outcomes, call our accounting services in Pasig. Apart from the usual accounting, bookkeeping, and auditing, we also offer payroll services to help take care of the human assets in your company.