Last Updated: March 2026
One of the most searched questions on Philippine labor law is: 'How exactly is final pay computed?' This guide provides five detailed sample computations covering the most common separation scenarios — with actual peso amounts, formulas, and breakdowns.
Quick Note on Key Variables
- Daily Rate = Monthly Basic Salary ÷ 22 (for 5-day/week employees) or ÷ 26 (for 6-day/week employees)
- 13th Month = Total Basic Salary Earned This Calendar Year ÷ 12
- SIL Conversion = (Monthly Basic Salary ÷ 26) × Unused SIL Days (if company policy allows)
- Separation Pay = Monthly Basic Salary × Years of Service × Multiplier (only for authorized causes)
- A fraction of at least 6 months counts as 1 full year for separation pay
Sample 1: Resigned Employee (5-Day Workweek, No Separation Pay)
| Component | Computation | Amount |
|---|---|---|
| Last Salary | ₱28,000 ÷ 22 × 12 | ₱15,273 |
| Pro-rated 13th Month Pay | ₱224,000 ÷ 12 | ₱18,667 |
| Unused SIL (4 days) | ₱28,000 ÷ 26 × 4 | ₱4,308 |
| Separation Pay | Not applicable (voluntary resignation) | ₱0 |
| Gross Final Pay | ₱38,248 | |
| Less: Gov't Contributions | SSS, PhilHealth, Pag-IBIG (est.) | −₱1,100 |
| Less: Withholding Tax | Based on tax bracket (est.) | −₱2,200 |
| Net Final Pay (est.) | ~₱34,948 |
Voluntary resignation does not entitle Ana to separation pay. However, she is entitled to all earned wages, pro-rated 13th month pay, and unused SIL if her company policy allows conversion.
Sample 2: Retrenched Employee (6-Day Workweek)
| Component | Computation | Amount |
|---|---|---|
| Last Salary (full month) | ₱22,000 (full) | ₱22,000 |
| Pro-rated 13th Month Pay | ₱198,000 ÷ 12 | ₱16,500 |
| Unused SIL | None | ₱0 |
| Separation Pay (½ month/year) | ₱22,000 × ½ × 10 yrs* | ₱110,000 |
| Gross Final Pay | ₱148,500 | |
| Less: Gov't Contributions | Est. | −₱900 |
| Less: Withholding Tax | Separation pay is tax-exempt (authorized cause) | −₱0 |
| Net Final Pay (est.) | ~₱147,600 |
* 9 years + 8 months rounds up to 10 years because 8 months ≥ 6 months. Retrenchment is an authorized cause, so separation pay is tax-exempt.
Sample 3: End-of-Contract (Project-Based Employee)
| Component | Computation | Amount |
|---|---|---|
| Last Salary (full month) | ₱18,000 (full) | ₱18,000 |
| Pro-rated 13th Month Pay | ₱198,000 ÷ 12 | ₱16,500 |
| SIL | Check company policy | ₱0–₱2,077 |
| Separation Pay | Not required for end-of-contract (unless stipulated) | ₱0 |
| Gross Final Pay (est.) | ~₱34,500 |
Project-based employees are generally not entitled to separation pay upon contract expiration. However, they are still entitled to pro-rated 13th month pay if they worked at least one month.
Sample 4: Redundancy (Managerial Employee, 12 Years)
| Component | Computation | Amount |
|---|---|---|
| Last Salary | ₱65,000 ÷ 22 × 18 | ₱53,182 |
| Pro-rated 13th Month Pay | ₱585,000 ÷ 12 | ₱48,750 |
| Unused SIL (5 days, if applicable) | ₱65,000 ÷ 26 × 5 | ₱12,500 |
| Separation Pay (1 month/year) | ₱65,000 × 1 × 12 yrs* | ₱780,000 |
| Gross Final Pay | ₱894,432 | |
| Less: Withholding Tax | Separation pay tax-exempt; 13th month exempt up to ₱90,000 | −₱0 |
| Net Final Pay (est.) | ~₱894,432 |
* 12 years + 3 months. Since 3 months < 6 months, it is NOT rounded up. Years of service = 12. Redundancy is an authorized cause, so separation pay is fully tax-exempt.
Sample 5: Retirement (65 Years Old, 20 Years of Service)
| Component | Computation | Amount |
|---|---|---|
| Last Salary (full month) | ₱40,000 (full) | ₱40,000 |
| Pro-rated 13th Month Pay | ₱360,000 ÷ 12 | ₱30,000 |
| Unused SIL (5 days) | ₱40,000 ÷ 26 × 5 | ₱7,692 |
| Retirement Pay (RA 7641) | ₱40,000 × ½ × 22.5 days/mo × 20 yrs | ₱480,000 |
| Gross Final Pay | ₱557,692 |
Retirement pay under RA 7641 is: ½ month salary per year of service, where ½ month = 15 days + 5 days SIL + 1/12 of 13th month. The exact formula yields approximately 22.5 days per year. Tax exemption applies to retirement pay under BIR rules.
Final Pay Checklist for Employers
- Calculate all unpaid working days up to the last day
- Add pro-rated 13th month pay (based on actual days/months worked this year)
- Include unused SIL cash conversion if company policy allows
- Compute separation or retirement pay if applicable
- Deduct authorized amounts (loans, contributions, accountabilities)
- Release within 30 calendar days from separation date (DOLE LA 06-20)
- Issue BIR Form 2316 and Certificate of Employment simultaneously
Use our free Final Pay Calculator to compute your own numbers, or read more about Separation Pay, 13th Month Pay, and Service Incentive Leave.