Updated · By John Nazarene Dela Pisa · Rates checked against the law and agency circulars
Final pay and separation pay
Your final pay is due within 30 days of your last day (DOLE Labor Advisory 06-2020). It is everything the employer still owes you: unpaid salary, the pro-rated 13th month, unused leave in cash, and separation or retirement pay when the law or your contract grants it. Here is how each part is computed and taxed, with worked examples.
The short answer
- Deadline: 30 days after your last day; Certificate of Employment within 3 days of asking.
- Separation pay: one month per year for redundancy, half a month per year for retrenchment or closure, at least one month. None by law when you resign.
- Tax: separation pay for causes beyond your control is tax-free; the 13th month shares the ₱90,000 exemption.
What’s in your final pay
- Unpaid salary for days worked since the last payday (Labor Code Art. 116). Taxed as usual.
- Pro-rated 13th month: basic salary earned this year ÷ 12 (PD 851). Tax-free within ₱90,000 with your other bonuses.
- Unused leave in cash: at least the 5 days of service incentive leave a year after one year of service (Art. 95), plus any vacation leave your policy converts. Up to 12 days are tax-free (RR 29-2025).
- Separation pay or retirement pay, when due (below).
- Tax refund or tax due, after your employer recomputes the year’s tax.
Separation pay by cause
| Why you left | Separation pay | Tax |
|---|---|---|
| Redundancy, labor-saving devices | 1 month per year of service, at least 1 month | Tax-free |
| Retrenchment, closure not due to serious losses | Half a month per year, at least 1 month | Tax-free |
| Disease (Art. 299) | Half a month per year, at least 1 month | Tax-free |
| Closure due to serious losses | None | Not applicable |
| Resignation, end of contract | None by law; only if your contract or policy gives it | Taxed |
| Dismissal for just cause | None | Not applicable |
Worked example: redundancy after 7 years
Hired 1 March 2019, last day 31 October 2026, ₱30,000 a month on a 5-day week, 10 days not yet paid, 5 unused leave days. Service is 7 years and 8 months, which counts as 8 years. Final pay is due by 30 November 2026.
| Item | Amount | Tax |
|---|---|---|
| Salary for days worked, not yet paid | ₱13,793.10 | Taxed |
| Pro-rated 13th month | ₱25,000.00 | Tax-free |
| Unused leave, in cash | ₱6,896.55 | Tax-free |
| Separation pay | ₱240,000.00 | Tax-free |
| Total before tax | ₱285,689.65 | ₱271,896.55 tax-free |
The same person let go by retrenchment gets half a month per year: ₱15,000 × 8 = ₱120,000 of separation pay, and ₱165,689.65 in all. If they resigned instead, there is no separation pay: ₱45,689.65.
Retirement pay (RA 7641)
Without a company plan that pays more, an employee who retires at 60 to 65 with at least 5 years of service gets 22.5 days of pay per year of service: 15 days, plus 5 days of service incentive leave, plus a twelfth of the 13th month. It is tax-free (RMC 13-2024). A company plan’s retirement pay is tax-free if the plan is BIR-qualified and you are at least 50 with 10 years.
Example: ₱30,000 a month (a daily rate of ₱1,379.31), retiring at 60 after 20 credited years: ₱1,379.31 × 22.5 × 20 = ₱620,689.50, tax-free.
If your final pay is late
Ask HR in writing first. If it still doesn’t come, call the DOLE hotline 1349 or file a Request for Assistance at any DOLE office for SEnA, a 30-day conciliation (RA 10396). Money claims prescribe 3 years after they fall due.
Final pay questions
When should I receive my final pay?
Within 30 days of your last day, under DOLE Labor Advisory 06, series of 2020, unless your contract, company policy or CBA sets a shorter period. Your Certificate of Employment is due within 3 days of asking for it.
How is separation pay computed in the Philippines?
It depends on why you were let go (Labor Code Arts. 298 and 299). Redundancy or labor-saving devices: one month's pay per year of service. Retrenchment, closure not due to serious losses, or disease: half a month per year. Either way, at least one month, and six months or more of a year counts as a full year.
Do I get separation pay if I resign?
Not by law. Separation pay is owed only when you are let go for an authorized cause such as redundancy or retrenchment. If your contract, company policy or CBA gives it to people who resign, it is paid, but it is taxed as compensation.
Is separation pay taxable?
Not when you left for a reason beyond your control: redundancy, retrenchment, closure, labor-saving devices, illness or death (NIRC Sec. 32(B)(6)(b)). Separation pay you receive on resigning is taxed.
How much is retirement pay under RA 7641?
If your company has no better retirement plan: 22.5 days of your latest daily rate for every year of service, for employees aged 60 to 65 with at least 5 years. It is tax-free under RMC 13-2024. Retail, service and farm employers with 10 or fewer workers are exempt.
Sources
- DOLE Labor Advisory 06, series of 2020: payment of final pay and issuance of the Certificate of Employment
- Labor Code of the Philippines (PD 442), Arts. 95, 116, 298, 299 and 302 (formerly 283, 284 and 287)
- Republic Act 7641 (Retirement Pay Law)
- NIRC Sec. 32(B)(6): separation pay for causes beyond the employee's control, and retirement benefits
- BIR Revenue Memorandum Circular 13-2024: tax exemption of retirement pay under RA 7641
- Presidential Decree 851 (13th month pay) and its revised guidelines
- BIR Revenue Regulations 29-2025: de minimis ceilings from 6 January 2026
Every figure on this page is generated from the same rules file the calculator uses, so the two always agree. PinaSweldo is not affiliated with the BIR, SSS, GSIS, PhilHealth, Pag-IBIG or DOLE. It is an estimate for planning: your employer’s payroll and the agencies have the final word. Spotted a change? Write to [email protected].