Is It Legal to Hold an Employee’s Salary in the Philippines? What Employers Need to Know

Timely payroll dispersal is a fundamental employer responsibility. But suppose one of your team members were under investigation for misconduct, or your payroll system suddenly glitched the night before payday. Situations like these could make you ask: Is it legal to hold an employee’s salary in the Philippines?

While some delays may seem justified, the law clearly states when, how, and if salary withholding is ever allowed. 

This guide explains what the Labor Code says about delayed salaries to be on the right side of the law.

Is It Legal to Hold an Employee’s Salary in the Philippines?

No, it’s not legal to delay or withhold an employee’s salary without lawful cause. Under Article 103 of the Labor Code, employees must receive their wages at least once every two weeks or twice a month. Non-payment of salary by the employer in the Philippines can lead to labor claims and penalties.

Even if an employee is involved in an internal case or dispute, you can’t legally hold that person’s pay unless there’s a court order, authorized deduction, or legal basis under the Labor Code. DOLE takes delayed salary complaints seriously and may conduct inspections or issue penalties to non-compliant employers.

In short, you must pay your employees on time; if you can’t, you need a legally acceptable reason.

What are the 6 Common Causes of Delayed Salary in the Philippines? (What Employers + Employees Can Do in These Situations)

Delays in salary payments happen, but that doesn’t make them legal. Here are the most common situations where you might put a paycheck on hold and DOLE rules on delayed salary you should be aware of.

1. Resignation or final pay

When an employee resigns, you must pay them what’s due, including any unused leave, 13th-month pay, and final salary. 

As a general rule, employers should not withhold an employee’s final pay solely because the company property has not been returned. Items such as uniforms, IDs or badges, and equipment must be accounted for, but any deductions from an employee’s final pay must be legally justified.

DOLE’s delayed salary advisory states that you must release final pay within 30 days of resignation. Company policies must comply with this standard.

2. Ongoing administrative or disciplinary cases

You must follow due process if an employee is under investigation. Under Articles 116 and 117 of the Labor Code, you’re not allowed to withhold an employee’s salary without their written consent or a lawful reason. Involvement in any ongoing internal cases does not justify late salary payment. 

The only time you may delay payment is if there’s a valid legal basis, like a court-ordered garnishment order or authorized deductions permitted under the Labor Code. DOLE treats wage violations seriously and can penalize you for unjustified salary delays or deductions during investigations.

3. Employer-employee disputes

Even if you’re in the middle of a disagreement with your employee—whether over performance, attendance, or other issues—it is unlawful to delay salary. 

If needed, you can file a case with the National Labor Relations Commission (NLRC), but you must still meet payroll obligations while the case is ongoing. Otherwise, you risk violating Articles 113–118 of the Labor Code and being penalized for them.

Some situations where you can approach the NLRC include:

• Unfair labor practices (ULP) – If an employee or a union engages in activities that violate your rights as the employer, such as illegal strikes or refusal to bargain collectively
• Violation of company policies – When an employee breaches company policies or contracts, leading to disputes that you can’t resolve internally
• Other labor disputes – Any other disputes arising from the employer-employee relationship that fall under the jurisdiction of the NLRC
  

4. Permissible deductions

You’re authorized to deduct from an employee’s salary in specific situations, such as:

• Mandatory contributions, like SSS, PhilHealth, Pag-IBIG, and withholding tax
• Court orders or legal garnishments, like child support or debt payments
• Loans, advances, or other deductions with the employee’s written consent, including insurance, union dues, or company loans
• Loss or damage the employee caused, subject to terms and conditions—proven fault or negligence, implementation of due process, and employee acceptance of the amount to be deducted

5. Delays due to payroll system issues

While tech issues or system upgrades are operational challenges, they do not exempt employers from the obligation to pay salaries on time. Failure to do so, even unintentionally, can still result in labor law violations and penalties.

6. Contractual clauses or agreements

Even if your employment contract includes a clause about salary withholding, it can’t override the Labor Code. Any agreement that violates labor law is automatically void. For example, a clause that says “final pay will be held for 90 days” isn’t enforceable unless it aligns with DOLE guidelines.

What Happens If You Delay Salaries?

You may incur the following penalties for late salary payment in the Philippines:

• Administrative penalties – DOLE may conduct inspections, issue compliance orders, and impose fines. Repeated violations can even result in business closure.
• Civil liabilities – Employees can file money claims through the NLRC. Then, the Commission may require you to pay back wages, legal interest, attorney’s fees (usually 10% of the total award), and in some cases, moral or exemplary damages for bad faith or malice.
• Criminal charges – If salary delays are willful and unjustified, company officers may face fines or imprisonment.

Various legislative proposals—including House Bill No. 6537—aim to seek stronger penalties for employers who unjustly delay salary payments and violate employee wage rights.

Handle Salary Issues Legally and Professionally

Salary delays can cause major disruptions and, ultimately, hurt your reputation and employee morale. They can even trigger legal action. Whether you’re facing payroll system glitches or unclear HR policies, you have a legal and ethical duty to pay your staff on time.

Avoid costly legal mistakes regarding employee salaries with the help of employment experts like Manila Recruitment. Our recruitment agency in the Philippines will guide and connect you with trusted legal advisors to ensure your payroll practices fully comply with Philippine laws. 

Contact us today to protect your business and your reputation.

DISCLAIMER: The information in this webpage/blog/article/infographic we have published and the associated commentary are presented as general information and are not a substitute for obtaining legal advice in this area. Manila Recruitment does not accept liability for any action taken based on the information presented or for any loss suffered as a result of reliance on the information provided.