DOLE Issues Guidelines on the Payment of Final Pay and Issuance of Certificate of Employment

With so many people being laid off from work, both temporary and permanent, there are thousands of people questioning their rights for their final pay and Certificate of Employment (CoE). For all those that are being terminated, retrenched, or made redundant, knowing the rules on how to get your Final Pay and CoE are important.

Labor Advisory No. 6, Series of 2020, issued on January 31, 2020, gives a definition of the DOLE guidelines on the issuance of Final Pay and CoE for employers and employees alike. The advisory defines the terms and explains what you can get as your Final Pay and the rules around how long your employer has to issue your CoE. It also sets out the specific period prescribed for the release of an employee’s final pay and Certificate of Employment, imposing an obligation on the employer to comply with these newly prescribed periods.

Non-compliance with the provisions of LA 06-20 may expose an employer to a complaint for such violation, which shall be dealt with accordingly by the DOLE.

Final Pay

Also known as “Last Pay” or “Back Pay”, your final pay is the last payment from your former employer. You are entitled to this whether you were terminated for any reason or you decided to resign. Your final pay is made up of a number of things that your employer owes you, and must be paid to you without illegal deductions. Illegal deductions are those that have not been authorized by you, or are not permitted under the Labor Code.

Your final pay can include, but is not limited to:

  • Unpaid earned salary of the employee;
  • Cash conversion of unused Service Incentive Leave (SIL) pursuant to Article 95 of the Labor Code;
  • Cash conversions of remaining unused vacation, sick or other leaves pursuant to a company policy, or individual or collective agreement, if applicable;
  • Pro-rated 13th month pay pursuant to Presidential Decree No. 851 (PD 851);
  • Separation pay pursuant to Articles 298-299 of the Labor Code, as renumbered, company policy, or individual or collective agreement, if applicable;
  • Retirement pay pursuant to Article 302 of the Labor Code, as renumbered, if applicable;
  • Income tax claim for the excess of taxes withheld, if applicable;
  • Other types of compensation stipulated in an individual or collective agreement, if any; and
  • Cash Bond/s or any kind of deposit/s due for return to the employee, if any.

13th Month Pay

The 13th month pay refers to the payment of one-twelfth of your annual salary made in December. If your resignation or termination is before December, then your 13th month pay will be pro-rated based on the number of months you have worked. For example, if you worked for seven months, and earned 20,000 a month, the basic formula for your pro-rated 13th month pay is:

(Monthly Salary x Number of Whole Months Worked) / 12 months or (20,000 x 7)/12 = 11,666.66

For this computation, a part of a month is not counted, so if you worked for seven months and 12 days, you only get seven months as your Number of Months Worked.

It must be noted that, unless your 13th month pay exceeds 90,000 pesos, it is NOT taxable.

Release of Final Pay

According to the Labor Advisory, final pay should be released to the employee within 30 days from the date of their separation or termination of employment, unless the company has a more favorable policy, or any collective or individual agreement.

It should be noted that the 30-day prescriptive period begins when the employee is separated or terminated, NOT when they have completed their clearance from the company. However, there is a legal exception that allows the prescribed period to be extended, in those cases where the clearance is not completed correctly or fully. In the case of Milan v. NLRC (G.R. No. 202961, 04 February 2015), the Supreme Court ruled that an employer could withhold final pay in the event that the employee has not yet returned company property, has pending accountabilities (financial only), or has other outstanding clearance requirements, such as but not limited to: return of company identification or medical card, return of other company property, authorization to deduct pending financial accountabilities, etc.

For an employee that completes all of their clearance requirements prior to the 30th day, that employee must be paid their final pay, without further delays.

Certificate of Employment

Your Certificate of Employment, or CoE, is the certificate that you receive from your employer that specifies the dates of your engagement and termination, and the type of work for which you were engaged. This is usually used to show that you have completed your employment and are eligible to take on a new employment with a different employer, with no liabilities. It should be noted that the CoE should NOT include anything other than the period of engagement and type of work done. It must not include infractions, violations, disciplinary actions, or other irrelevant information not pertaining to your period and type of employment.

According to Labor Advisory No. 06-20, the employer must issue the CoE within three days of the request from the former employee. This is not an extendable period, and must be followed.

Enforcement of Violations

The DOLE has its own enforcement mechanism for violations of the Labor Advisory. The advisory states that any issue, claim, complaint, or dispute arising out of r relating to the payment of final pay or the issuance of a valid and correct Certificate of Employment should be filed before the regional, provincial, of field office of the NLRC (DOLE), and which has jurisdiction over the region of the place of work.

Conclusion

In light of this recently-issued Labor Advisory, any employer that withholds the final pay without valid reason after the 30-day period, or refuses to issue the CoE within the three-day prescribed period, will be held liable and accountable to the DOLE. The decision and penalties for such infractions shall be made at the discretion of the Labor Arbiter, the Commission, the Court of Appeals, or the Supreme Court, pending the initiation of the correct appeals process. The standard conciliation and arbitration process shall be used and the any and all issues, complaints, and claims are subject to the DOLE’s existing enforcement mechanism.

In view of this, it behooves the employers to understand and follow this newly-issued rule, and make sure that they follow the correct procedure and prescribed periods in order to minimize the possibility of litigation. No longer can an employer force you to wait for 60-90 days for your final pay.

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10 thoughts on “DOLE Issues Guidelines on the Payment of Final Pay and Issuance of Certificate of Employment

  1. Israel Y Mescallado

    Good evening,

    I was told by my employer that they are unable to issue a breakdown of my final pay -like a payslip. If this is not true, please let me know how to address this matter with them. Thank you in advance.

    Like

    1. Your employer is lying to you. While there is no law surrounding the issuance of payslips, with the exception of the Kasambahay law, they are obliged to provide you with a breakdown of your pay, so that you know the details and have a basis from which to dispute it if your pay is wrong.

      Final Pay is just like any other pay, it is just the last one you will get. But it is still pay, and must conform to the rules on such, including the rules for Payroll from the Omnibus Rules Implementing the Labor Code and settled jurisprudence from the Supreme Court.

      Under Labor Law, no one directly mandates the employer to give a payslip to its employees, but several times the Supreme Court has announced in its decisions that a payslip MUST be given to an employee as a Right.

      However, the following section is provided for in the Omnibus Rules Implementing the Labor Code, which states under RULE X, SECTION 6:

      SECTION 6. Payrolls. — (a) Every employer shall pay his employees by means of a payroll wherein the following information and data shall be individually shown:
      (1) Length of time to be paid;
      (2) The rate of pay per month, week, day or hour piece, etc.;
      (3) The amount due for regular work;
      (4) The amount due for overtime work;
      (5) Deductions made from the wages of the employees; and
      (6) Amount actually paid.

      This has been repeatedly reiterated by the Supreme Court and the DOLE advising employers that they ARE obliged to provide and issue a pay slip for every payment made to the worker. And their failure to do so is a violation for which a complaint can be made.

      Explain all this to your employer, advising him you have already sought legal advice, and if he still does not want t provide you with a payslip, file a complaint in the DOLE.

      Like

    2. Justin Buatis

      Hello, I requested COE from my previous employer since I am planning to apply a PR. Unfortunately, 2weeks have passed and still they haven’t issue my COE. Last reply on my email is that they already issue my COE before and my request now is for approval. I told them that I can’t use the COE they issued to me before because it is lacking information of my last drawn salary. I sent them the COE they gave to me last time and my salary so they don’t need to dive in deeper to look for my records. I am worried that they trying hold it for long.

      Like

      1. Even if you send them all the information they need to include, they will, and should, still get it from their own records. But that should not take a long time. As per the law, mainly Labor Advisory No. 6 Series of 2020, the employer MUST issue the COE within THREE (3) DAYS after written request. Failure to do so is a violation, and the mandatory dispute action, as per said Advisory, is to file a complaint with the DOLE.

        I would suggest that you write to them once more, requesting they release your requested COE within three days, or you will file a complaint in the DOLE for this violation. We have templates you can use for this:

        “[Your Name]
        [Address]
        [Date]

        [Company]
        [Address]

        Re: Certificate of Employment

        Good Morning,

        In light of the fact that I have been cleared from my employment with you for [insert period] now, and have had no adequate response regarding when you will be processing my Certificate of Employment, I am now forced to take more drastic measures.

        Under Labor Advisory No. 6, Series of 2020, an employer has three (3) days to provide an employee with their Certificate of Employment, whether clearance is completed or not. This is not just a guideline; it is now a legal requirement. As such, you are obliged to follow this legal requirement, and provide an employee with their Certificate of Employment within the aforementioned time of three (3) days.

        As you have not replied to my requests asking for a release of my CoE, I hereby give you three (3) days from the date of this letter to provide my Certificate of Employment.

        Your failure to do so WILL result in legal action being taken against you under the aforementioned Labor Advisory, using the Enforcement Mechanism there given.

        I look forward to a speedy resolution of this unfortunate yet illegal action that you have undertaken.

        Yours,

        [insert name]”

        https://www.dole.gov.ph/news/labor-advisory-no-06-20-guidelines-on-the-payment-of-final-pay-and-issuance-of-certificate-of-emplo/

        The link here is so you can put it into the email so they have easy reference to LA 06-20.

        Like

  2. Pingback: HR Talk: Top 11 Questions About the Certificate of Employment (COE) - Tina in Manila

  3. Anonymous

    I left the company last February 2021, and has submitted all of required documents, and also left instruction to my succesor on how to follow up on pending transactions that requires approval from our finace team, now the company will not process my clearance, they are telling me that they cannot process my clearance as the finance team has not approve the previous transactions, is it still my responsibility are they able to hold off my clearance/ back pay because of this?

    Like

    1. Requiring clearance before the release of Final Pay is a normal practice here in the Philippines, and failing to complete clearance can result in a withholding of final pay past the 30-day deadline given in Labor Advisory No. 6, Series of 2020.

      However, maliciously refusing to allow the completion of clearance due to factors not under the control of the employee is tantamount to illegally withholding pay under Article 116 of the Labor Code.

      Since you already perfected the handover to your successor, you have effectively handed over the responsibility for the pending transactions that require approval. And even if you allow that those pending transactions are part of your accountabilities, despite having passed them on to your successor last February, for the finance team to have still not approved them after a period of FOUR MONTHS is grossly negligent on their part.

      I would suggest that you write a formal Letter Before Action to your employer, giving him 14 days to permit the completion of your clearance and the release of your final pay before you file a complaint with the DOLE for Illegally Withholding your Salary.

      This is one of our Template Letters, which can help you to get the formal letter correct more easily. Just edit the details and dates and forward it to your employer by registered mail or courier. If they do not respond or refuse to comply, file the complaint and come and talk to our legal consultants for FREE legal advice on how to handle your complaint without engaging a lawyer.

      https://www.facebook.com/ELPPhilippines/

      [Your Name]
      [Address]
      [Date]

      [Company]

      [Address]

      Re: Illegally Withholding Final Pay

      Good Morning,

      In light of the fact that I have been unable to complete clearance from my employment with you for [X months/weeks/days] now, and have had little to no response regarding when you will be processing my clearance and Final Pay, I am now forced to take more drastic measures.

      Under Labor Advisory No. 6, Series of 2020, an employer has 30 days to provide an employee with their final pay, pending completion of their clearance. This is not just a guideline, it is now a law. As such, you are obliged to follow this legal requirement, and provide a terminated employee that has completed clearance with their final pay within the aforementioned time of 30 days.

      However, the onus is on the employer to enable the employee to complete their clearance at the earliest opportunity. Your failure to do so may now result in legal action being taken against you.

      Your actions to prohibit the facilitation of my clearance from the company are now considered to be tantamount to illegally withholding wages and illegal retention of documents.

      I hereby give you fourteen (14) days from the date of this letter to facilitate completion of my clearance and provide my Final Pay.

      Your failure to do so WILL result in legal action being taken against you for Illegally Withholding Wages, under Article 116 of the Labor Code (renumbered), which practice is subject to the standard DOLE Enforcement Mechanism.

      If the Clearance and Final Pay are not completed and received by [insert date], I will be forced to file a complaint and money claim with the NLRC, to include nominal, moral, and exemplary damages and legal fees.

      I look forward to a speedy resolution of this unfortunate yet illegal action that you have undertaken.

      Yours,

      [insert name]

      Like

  4. Good eve to ask KO lang to pwede to back along mag apply s sss unemployment benefits nag resign to all s work KO dhil to as buntis ako di ako pwede pumasok kaya ngdecide nalang po ako magresign at umuwi nalang s probinsya namin ng asawa KO ask KO rin paano po kumuha s dole ng coe?salamat pk

    Like

    1. Unfortunately, the SSS unemployment benefits are not available to employees that resigned from their employment. It is only available for those that are terminated due to retrenchment, redundancy, etc. Since you resigned, you would not be eligible.

      Like

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