Last Updated: February 2026
Computing final pay in the Philippines can seem complicated, but it breaks down into a few clear components. This guide walks through each one with formulas and examples.
What's Included in Final Pay?
Final pay typically includes:
- Last salary (unpaid wages for days worked)
- Pro-rated 13th month pay
- Cash conversion of unused Service Incentive Leave (if applicable)
- Separation pay (if entitled)
- Retirement pay (if applicable)
- Other benefits per employment contract or company policy
1. Last Salary (Unpaid Wages)
This is the salary for the days you actually worked in your final pay period that have not yet been paid.
Formula: (Monthly Basic Salary ÷ Total Working Days in Month) × Days Worked
Example: Monthly salary ₱25,000, worked 10 out of 22 working days
= (₱25,000 ÷ 22) × 10 = ₱11,364
2. Pro-Rated 13th Month Pay
All rank-and-file employees are entitled to a pro-rated 13th month pay for the months they worked that year, regardless of how employment ended.
Formula: Total Basic Salary Earned This Calendar Year ÷ 12
Example: Earned ₱150,000 in basic salary from Jan 1 to Oct 15
= ₱150,000 ÷ 12 = ₱12,500
3. Cash Conversion of Unused SIL
If your company allows conversion of unused Service Incentive Leave (SIL) to cash, unused days are paid at your daily rate.
Formula: (Monthly Basic Salary ÷ 26) × Unused SIL Days
Note: Whether unused SIL can be converted to cash depends on your company policy. The Labor Code requires at least 5 days SIL per year for qualifying employees, but cash conversion upon separation is not mandatory unless the company policy allows it.
4. Separation Pay (If Applicable)
Separation pay is only required by law for specific authorized causes. It is NOT required for voluntary resignation.
| Cause of Separation | Amount |
|---|---|
| Redundancy | 1 month pay per year of service |
| Retrenchment / Closure | ½ month pay per year of service |
| Disease | ½ month pay per year of service |
| Resignation | Not required by law |
Formula: Monthly Basic Salary × Years of Service × Multiplier
Note: A fraction of at least 6 months is counted as one full year.
5. Deductions
From the gross final pay, the following deductions may apply:
- SSS, PhilHealth, Pag-IBIG contributions for the last pay period
- Income tax withholding (if applicable)
- Any authorized salary loans or cash advances
- Accountabilities found during clearance (documented and legitimate only)
Tax Considerations
- 13th month pay: tax-exempt up to ₱90,000/year (TRAIN Law)
- Separation pay due to authorized causes: generally tax-exempt (BIR ruling)
- Last salary: subject to regular income tax withholding
When Must Final Pay Be Released?
Under DOLE Labor Advisory No. 06-20, final pay must be released within 30 calendar days from the last day of employment.
Full Example Computation
Employee: Maria, resigned after 5 years | Monthly salary: ₱30,000 | Last month worked 15 of 22 days | Unused SIL: 3 days | Company allows SIL cash conversion
| Component | Amount |
|---|---|
| Last salary: (₱30,000 ÷ 22) × 15 | ₱20,455 |
| Pro-rated 13th month: ₱270,000 ÷ 12 | ₱22,500 |
| Unused SIL: (₱30,000 ÷ 26) × 3 | ₱3,462 |
| Separation pay (resigned) | ₱0 |
| Gross Final Pay | ₱46,417 |
| Less: SSS, PhilHealth, Pag-IBIG | ~₱1,200 |
| Less: Income Tax (estimated) | ~₱1,500 |
| Net Final Pay (estimated) | ~₱43,717 |