Deciding to move on from your current company will happen at some point. Whether you’re leaving with fond farewells or under a dark cloud, you’re entitled to receiving the remuneration you’ve worked hard for.
As you look forward to moving on to greener pastures, you’ve probably asked yourself about what final pay is and how to get the right final pay computation.
The truth is, computing for final pay in the Philippines isn’t always as straightforward as it seems. After all, each member on your team has different basic pay amounts. Moreover, your office mates are entitled to different 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 the hours you put in until the end.
What is Final Pay?
Final pay (or last pay) is the amount of money that a company owes you after you leave. This means that it will be the last salary your employer gives you, regardless of your reason for leaving the company.
Other than salary already earned, prorated 13th month pay, and amounts stated in a relevant company policy, collective bargaining agreement, or employment contract, an employer is not legally obligated to pay any additional amounts to an employee who is about to end their employment voluntarily.
Here’s a list of what your final pay should include:
- Unpaid earned salary. Your prorated last salary is the amount of your salary proportional to the number of days you’ve worked in the previous cutoff.
- Leave conversions. If your employer observes only the minimum five (5) days Service Incentive Leave (SIL) requirement, your unused SILs are convertible to cash. But if your company offers vacation and sick leaves, that means your employer has already complied with the SIL requirement. As a result, your company policy on leave conversions applies, whether or not those other leaves are convertible to cash.
- Prorated 13th month pay. After leaving a company, you're entitled to 13th month pay. The amount will depend on the number of months you worked for the company before the year ends.
- Tax refunds. If you resign before the 12th month of the year, you’ll receive a refund on your tax payments if your tax dues are less than the sum of your withheld taxes.
Take note that your final pay will be subjected to the usual deductions from your SSS and PhilHealth contributions. It’s also possible for your employer to deduct certain expenses and loan amortizations, if you have provided prior consent, from your final paycheck. This happens 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 up to your last day at work. Talk to your immediate supervisor or your HR about your final pay as well as the other documents you’ll need for your next job.
What else are you entitled to?
Your final pay isn’t the only thing your employer should issue when you decide to leave your company. We’ve listed some of the other documents you should ask for below.
- BIR Form 2316 - Your BIR form 2316 is a certificate that includes your income and the corresponding taxes that your employer withheld from you during the year. The document serves as proof that you’ve earned income and indicates the taxes withheld for your income.
- Certificate of Employment - An employee certificate is a document that contains your personal information and verifies your employment history with your company.
- Release Waiver & Quitclaim - Typically, an employer will require you to sign and execute a Release, Waiver, and Quitclaim upon release of your final pay, Certificate of Employment, and BIR 2316.
On top of obtaining all necessary documents, don’t forget to visit HR and your IT department to hand over any company possessions, like computers or general office supplies. Make sure you wipe your personal info clean from your company-issued electronic devices for security purposes.
When Can You Claim Your Final Pay?
Labor Advisory 6-2020 requires employers to give workers their final pay within 30 days after the end of the engagement contract, unless there is a shorter time provided by company policy. If you experience any delays or inconveniences, get in touch with HR to expedite the release of your final pay.
How is Final Pay Different from Separation Pay?
Final pay and separation pay are loosely defined technical terms that describe the benefits you’ll receive upon resignation. Since they tend to be misused and used interchangeably, let’s take a closer look at what separation pay is.
Separation pay is given to employees who end their employment because of any of the following reasons:
- Closure of all or a part of the business establishment not due to serious business losses
- Termination due to disease
- Installation of labor-saving devices (such as robotic installers and other gadgets that eliminate human participation in a manual process)
Keep in mind, however, that business closure due to serious business losses exempts employers from giving separation pay.
On the flip side, you are not entitled to receive separation pay because of:
- Serious misconduct
- Willful disobedience
- Fraud or breach of trust
- Gross & habitual neglect of duties
- Commission of crime against the employer or other personnel
- Other analogous causes such as terminable violations of the company code of conduct
That said, employees who resign from their jobs are not entitled to separation pay except if a more favorable company policy provides. For example, your company policy could state that employees can receive a separation benefit. So if you’re qualified to receive separation pay, it’ll be included in your final pay computation.
How Do You Compute for Final Pay?
There’s a chance that your last day won’t fall on the last day of the month, and this means you’ll have to do some math to figure out how much your employer owes you. We’re here to help you compute your gross final pay or the amount without any taxes or deductions.
Take note that the amount could differ depending on your current pay structure.
You’re a monthly-rate employee if you’re paid every day of the month, including regular holidays, special days, and unworked rest days.
- Start by computing for your annual pay by following this formula: Annual pay = Monthly pay x 12 (number of months in the year)
- Get your daily pay by following this formula: Annual Salary / Number of working days per year (can be 261, 313, or 365)
If you’re a daily rate employee, you’re paid based on the actual number of days that you work as well as unworked regular holidays.
- Start by computing for your weekly pay by following this formula: Weekly pay = annual salary / 52 (or the number of weeks in the year)
- Get your daily pay by following this formula: Weekly pay / 5 (or the number of days in a working week)
If you’re a semi-monthly rate employee, it means that your company issues your paycheck twice every month.
- Start by computing for your annual pay by following this formula: Annual Pay = Semi-monthly Rate x 24 (number of payroll periods per year)
- Get your daily pay by following this formula: Daily Rate = Annual Pay / Number of working days per year (can be 261, 313, or 365, but in most cases, you’ll follow 261 working days if you have 2 rest days per week)
Once you’ve computed your daily rate, multiply the amount by the number of days you worked during that pay period to get your estimated gross final pay. Just keep in mind that when following these formulas, you’re just getting the gross amount. This means it’ll still be subject to other deductions.
Want to learn more about employment and other work hacks? Feel free to explore the Sprout blog.
If you’re an HR Administrator, in charge of Payroll, or from Finance, use Sprout's Payroll system to make final pay computation much easier for your employees. Get in touch with us to find out how.
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