A Simple Client Guide
When an employee leaves your company, you must give them their final pay. This is also called "back pay." Philippine law requires this for both resignations and terminations.
As a client of Montani International Inc., this guide helps you understand the rules and your duties.
What Is Final Pay?
Final pay is the money an employee earned but has not yet received. You must release this money within 30 days of their last day.
What is Included?
Final pay usually sums up these four parts:
- Unpaid Salary: Money for days worked since the last payday.
- 13th Month Pay: This is "pro-rated." To find the amount, use this simple math:
(Total basic pay earned this year ÷ 12) = 13th Month Pay - Leave Credits: At Montani, we do things a bit differently.
- We do not pay cash for unused vacation days.
- Instead, employees use their remaining days as terminal leave.
- They stay on the payroll while they take those final days off.
- Separation Pay: You only pay this for business reasons like downsizing or closing. You do not pay this if the employee quits or is fired for bad behavior.
Legal Deductions
You can only take money out of the final pay for:
- Unpaid government loans (SSS, PhilHealth, or Pag-IBIG).
- Company tools or laptops not returned.
- Cash advances the employee signed for.
Ending Employment: The Rules
There are two ways to fire someone under Philippine law:
1. Just Cause (Employee’s Fault) You do not pay separation pay for these.
- Doing a bad job on purpose.
- Stealing or fraud.
- Breaking major company rules.
2. Authorized Cause (Business Reasons) You must pay separation pay for these.
- The role is no longer needed (Redundancy).
- The business is closing.
- The employee is too sick to work.
How to Avoid Legal Trouble
To stay safe, you must follow "due process." This means giving the employee a fair chance to speak.
- For bad behavior: Give a first notice, let them explain, and then give a final decision notice.
- For business reasons: Give a written notice to the employee and the Department of Labor (DOLE) at least 30 days before the last day.
Timelines to Remember
| Item |
Legal Timeframe |
| DOLE notice (authorized cause) |
30 days before termination |
| Final pay release |
Within 30 days after last day |
| 13th month pay (if resigned early) |
Included in final pay |
Client Role vs Montani Role
| Category |
Client |
Montani |
| Termination Initiation |
Initiates termination request |
Reviews for labor compliance |
| Documentation |
Provides incident records |
Drafts notices & documentation |
| Final Pay Processing |
Confirms final pay approval |
Computes payroll & benefits |
| Separation Pay |
Approves separation pay |
Processes final disbursement |
| Exit Clearance |
Returns company assets |
Ensures legal timelines |
Why Accuracy Matters
If final pay is wrong or late, you may face:
- Legal complaints with DOLE.
- Large fines.
- Damage to your brand.
Montani is here to help you get it right. We make sure you follow the law and protect your business.
