An HR Professional’s Guide to the Resigned Employee Benefits in the Philippines

Categories: Advice for Doing Business in the Philippines

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The Philippine government strives to ensure that every Filipino employee receives fair treatment and protection, even beyond their tenure with a company. Yes, you read that right—there’s a safety net in place even for those who bid farewell to their desks and move on.

Saying goodbye to a valued team member can be bittersweet. However, amid the sendoffs and fond memories, employers must still fulfill their obligations. If you fail to meet them, you might receive a not-so-friendly call from the Department of Labor and Employment (DOLE).

This guide is a crash course in resigned employee benefits in the Philippines and the labor laws surrounding offboarding. Here’s everything you need to know.

What Benefits Are Entitled to Resigned Employees?

After sending off an employee on their last day, you’ll have to arrange the benefits they are entitled to receive. These include the following.

Final pay

When bidding adieu to an employee, there’s the matter of final pay. It’s the prorated sum of their last salary, calculated based on the total number of days they’ve worked until the most recent pay period. 

The final pay needs to find its way into the hands of the departing employee within a tidy timeframe. According to DOLE, it should be processed within thirty days of separation or termination of employment. Of course, if your company has a more generous policy or an agreement, that timeline could be speedier. 

Service incentive leave conversion

Employees accrue these precious days off over time, but what happens if they haven’t had the chance to use them all up by the end of the year? There’s actually an option to convert those unused leave credits into cash. If an employee decides not to use their service incentive leave upon filing their resignation, they can have the company convert it into monetary compensation. 

Prorated 13th-month pay

Employees who leave before the release of the 13th-month pay are still entitled to a prorated portion of it based on the time they’ve worked during the year, from January until their departure date. According to labor regulations, if an employee resigns or the company terminates before the scheduled payout, they’re still entitled to a portion of this festive bonus.

What Happens If Employers Don’t Comply With These Regulations?

If employers fail to comply with the stipulated regulations regarding final pay, service incentive leave conversion, or prorated 13th-month pay, they may find themselves in hot water with the Department of Labor and Employment. 

DOLE isn’t shy about conducting investigations and inspections to ensure employers follow the rules. Note that the law tends to favor labor. Article 4 of the Labor Code of the Philippines states that any doubts in implementing and interpreting labor laws result in a resolution in the employees’ favor. 

Similarly, Article 1702 emphasizes that in cases of doubt, the law should construe labor legislation to ensure workers’ safety and decent living standards. So, it’s best not to take any chances when it comes to compliance.


How do you compute a resigned employee’s final pay?

To compute a resigned employee’s final pay, calculate their prorated last salary based on the total number of days worked until the most recent cut-off. Make sure to release this final pay within thirty days from the separation date or termination of employment unless a more favorable company policy or agreement is in place.

An easy way to remember how the calculation works is:

Final pay = Unpaid earned salary + (total number of unused leaves x cash equivalent) + severance pay + 13th-month pay

How do you compute a resigned employee’s prorated 13th-month pay?

To compute a resigned employee’s prorated 13th-month pay, determine the length of time the employee has worked during the year, from January until their resignation or termination date. Then, calculate the 13th-month pay based on their total basic salary earned during that period. 

For instance, if the employee worked from January to September (9 months) with a basic monthly salary of ₱30,000, the prorated 13th-month pay should equal one-twelfth of their total basic salary during that period. This is computed as such:

  • ₱30,000 x 9 months = ₱270,000 (Total Basic Salary)
  • ₱270,000 / 12 months = ₱22,500 (Prorated 13th-month Pay)

Are resigned employees entitled to separation pay?

Unfortunately, employees do not receive separation pay as they voluntarily leave work. A worker only receives separation pay if the company terminates their employment due to causes such as retrenchment, redundancy, and similar situations.

Guaranteeing Compliance and Care

Offboarding processes are crucial in maintaining legal compliance and employee satisfaction. By understanding and fulfilling the entitlements of resigned employees in the Philippines, you can get through this phase with confidence and integrity.

If you need assistance with outsourcing and offshore staff recruitment, Manila Recruitment is here to help. We’re a recruitment agency in the Philippines dedicated to finding you the best talent for your company.

Contact us today for more information on how we can support your offshore needs.

DISCLAIMER: The information in this webpage / blog / article / infographic we have published and the associated commentary are presented as general information and is 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.