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At some point, you’re bound to move on from your current company. Whether you’re leaving with fond farewells or under a dark cloud, you’re entitled to the remuneration you’ve worked hard for.
As you seek greener pastures, you may ask what final pay is and how to compute it properly.
The truth is, computing final pay in the Philippines isn’t as straightforward as it seems. After all, each member of your team receives different basic pay amounts. Moreover, your colleagues are entitled to benefits like redundancy pay, bonuses, and other financial incentive schemes your company offers.
We’ve put together a simple guide to help you understand final pay better and get paid for your work until the end.
Final pay, also known as back pay, refers to how much a company owes you after leaving it. It’s the last salary your employer gives you, regardless of why you’re leaving the company.
Besides an employee’s earned salary, pro-rated 13th-month pay, and amounts stated in a relevant company policy, collective bargaining agreement, or employment contract, the law doesn’t require an employer to pay any additional amounts to a resigning employee.
Here’s a list of what your final pay should include:
Additionally, your final pay should cover other types of compensation specified in an individual or collective agreement and cash bonds or deposits you’ve made.
For one, your final pay excludes your SSS and PhilHealth contributions. Employers can also deduct certain expenses and loan amortizations from your last paycheck if you’ve agreed to it. These deductions happen because of company liabilities like lost or damaged office equipment or if you still have pending loans or cash bonds to pay.
As an outgoing employee, you have the right to receive your final pay as payment for the work you’ve done until your last day with your company. Talk to your immediate supervisor or HR department about your final pay and the documents your next job needs.
Along with your final pay, you should ask your employer to issue these documents.
On top of obtaining all necessary documents, visit HR and your IT department to surrender computers, office supplies, or other equipment. Remove your personal information from your company-issued devices beforehand to protect your privacy.
DOLE (the Department of Labor and Employment)’s final pay guidelines, or Labor Advisory No. 06-20, requires employers to give workers their last pay within 30 days after their separation or termination date.
However, companies can remit a resigned employee’s final pay before or beyond the mentioned period. Their current policies or individual or collective agreements determine when you’ll receive your back pay.
If you’re still waiting for your final pay, contact your HR department to expedite its release.
The terms final pay and separation pay describe the benefits you’ll receive upon resigning. Yet, some misuse and use these terms interchangeably.
To avoid confusion, let’s discuss separation pay and how it’s different from final pay.
Employers give separation pay to employees who resign for any of these reasons:
Remember, though, that employers can’t give separation pay if they close their businesses after gaining serious losses.
Conversely, you’re not entitled to receive separation pay because of:
That said, resigning employees are only entitled to separation pay if company policy allows it. For example, the policy states that employees can receive a separation benefit. If you’re qualified for the benefit, your employer will include it in your final pay computation.
Your last day may fall before the last day of the month, meaning you’ll have to calculate how much your employer owes you.
For your back pay computation, let’s say you earned a monthly basic salary of ₱25,000 over six months. Get your daily rate with this formula:
Monthly basic salary x 12 months ÷ 261 working days (if you get two rest days per week) = daily rate
Here’s how we calculated the daily rate:
₱25,000 x 12 ÷ 261 = ₱1,149.43
Next, get your total earnings with your unpaid salary, pro-rated 13th-month pay, leave conversions, and tax refund (if applicable). Your computation should look like this:
Unpaid salary (Daily rate x 15 working days) | ₱1,149.43 x 15 = ₱17,241.45 |
Pro-rated 13th month pay (Basic monthly salary x number of months worked in the year ÷ 12 months) | ₱25,000 x 6 ÷ 12 = ₱12,500 |
Leave conversions (Daily rate x number of days with unused leaves) | ₱1,149.43 x 5 = ₱5,745 |
Tax refund (Monthly salary x 12 months = Annual projected gross income) Note: We’ll use ₱0 here to simplify our calculation. | ₱0 |
Total earnings | ₱35,486.45 |
After computing your total earnings, add your total deductibles. Here’s a sample breakdown:
Tardiness | ₱0 |
Absences | ₱0 |
Withholding tax | ₱366.30 |
Pag-IBIG contribution | ₱100 |
SSS contribution (Monthly salary credit x contribution rate) | ₱25,000 x 0.045 (4.5% employee contribution rate) = ₱1,125 |
PhilHealth contribution (Monthly basic salary x premium rate ÷ 2 = Employee’s share) | ₱25,000 x 0.04 ÷ 2 = ₱500 |
Total deductions | ₱2,091.30 |
Note: We used the formulas below to compute our sample withholding tax.
Here’s how we calculated the withholding tax.
Finally, compute your final pay with this formula:
Total earnings – total deductions = net final pay
With our sample total earnings and total deductibles, we get:
₱35,486.45 – ₱2,091.30 = ₱33,394.70
Calculating final pay in the Philippines is complicated, with risks of human error. Incorrect computations cause delayed payments that frustrate outgoing employees. Hence, knowing how to calculate final pay properly is crucial to accurate, prompt payments and graceful exits.
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Established in 2015, Sprout Solutions is the largest and most trusted homegrown B2B SaaS company in the Philippines. Inspired by our North Star "To impact the life of every Filipino by improving business in the Philippines", we help companies and their employees succeed through AI-enhanced HR and Business solutions.
Rockwell Business Center Building North Tower 9th Floor Sheridan St, corner United St, Mandaluyong, 1550 Metro Manila
Already a sprout user? Email [email protected] or contact your CSM for inquiries.
Established in 2015, Sprout Solutions is the largest and most trusted homegrown B2B SaaS company in the Philippines. Inspired by our North Star "To impact the life of every Filipino by improving business in the Philippines", we help companies and their employees succeed through AI-enhanced HR and Business solutions.
Rockwell Business Center Building North Tower 9th Floor Sheridan St, corner United St, Mandaluyong, 1550 Metro Manila
Already a sprout user? Email [email protected] or contact your CSM for inquiries.
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