How to compute an employee's final pay
Final pay covers the unpaid salary to the last day worked, prorated 13th month pay, cash conversion of unused leave, any separation pay due, and a tax refund or payable from year-end annualization. DOLE Labor Advisory No. 06 of 2020 requires release within 30 days.
What final pay includes
| Component | How it is computed |
|---|---|
| Unpaid salary | Daily rate × days worked from the last pay period end to the last day |
| Prorated 13th month pay | Sum of basic salary earned from January 1 to separation date ÷ 12 |
| Unused leave conversion | Convertible unused leave credits × daily rate |
| Separation pay | Required by law or company policy based on the reason for separation |
| Tax refund or payable | From year-end annualization to the separation date |
Process final pay in OneHRIS
- Start or confirm the employee's offboarding record. Open HR, then Employees, find the employee and open Offboarding. See offboarding and clearance for a departing employee.
- Open Final Pay from the offboarding screen.
- OneHRIS calculates the unpaid salary, prorated 13th month, and convertible leave automatically from the last day worked.
- Review each line. Add any one-off items such as separation pay or unreturned equipment accountabilities using Add Adjustment.
- Confirm the deductions: outstanding loans are pulled in automatically. Remove any that were already settled.
- Select Generate Final Pay to create a payroll run for the final pay amounts.
- Approve and disburse through the normal payroll approval flow.
Tax annualization on separation
When the final pay run is generated, OneHRIS annualizes taxable income from January 1 to the separation date. It projects the year-to-date earnings to an annual equivalent, applies the tax table to the projected annual income, then computes how much tax is due for the period actually worked.
- Over-withheld: monthly tax tables withheld too much compared to the annualized amount. The difference appears as a negative tax line and adds to net final pay.
- Under-withheld: tax due is higher than what was withheld. The difference is an additional deduction in the final payslip.
The result is shown on the BIR Form 2316 issued at separation. See BIR Form 2316: complete employer's guide.
Outstanding loan acceleration
If the employee has an active company loan, the remaining balance is accelerated and added to the final pay deductions. If the net final pay is not enough to cover the full balance, OneHRIS flags the shortfall and does not create a negative disbursement. The unpaid balance is tracked as a receivable. See record employee loans and cash advances.
Certificate of employment
DOLE's advisory requires issuing a Certificate of Employment within three days from the employee's request. Employees can generate one from the Employee Portal. See get a certificate of employment.
Questions people ask
How many days does the employer have to release final pay?
Within 30 calendar days from the date of separation, unless the employment contract, company policy, or a collective bargaining agreement provides a shorter period.
Is 13th month pay included in final pay?
Yes. The prorated amount is computed as total basic salary earned from January 1 (or the hire date) to the last day worked, divided by 12.
What happens if the employee has an outstanding loan?
The remaining loan balance is deducted from final pay, subject to the employee's written authorization. If final pay is not enough to cover the full balance, the employer can only deduct what is available and must follow the agreed repayment process for the remainder.
What if unused leave cannot cover all outstanding deductions?
Final pay cannot go below zero. The employer may only deduct what the law and a signed agreement allow. Any shortfall is handled as a separate receivable, not withheld from a negative-pay situation.
Does the employee get a tax refund in their final pay?
Possibly. The final pay run performs tax annualization from January 1 to the separation date. If more tax was withheld during the year than the annualized amount due, the difference is refunded in the final payslip.
Sources
- DOLE Labor Advisory No. 06, Series of 2020, guidelines on final pay and employment certificate
- Presidential Decree No. 851, 13th month pay
- Labor Code of the Philippines, Article 95, service incentive leave