Final pay is what you have already earned: unpaid salary, pro-rated 13th month and unused leave. Everyone receives it. Separation pay is extra, and only an authorised cause triggers it. Resign, and there is none.
On ₱60,000 a month with five and a half years of service, that distinction is worth ₱360,000. A redundancy pays about ₱431,379 in total. The same person resigning receives ₱71,379. And because separation pay for an authorised cause is exempt from income tax, almost all of that difference survives to the bank account.
Redundancy total
₱431,379
separation pay plus final pay
Resignation total
₱71,379
final pay only
Tax on separation pay
None
for authorised causes
Work out your own separation and final pay.
Open the separation pay calculatorThe cause decides the rate
| Cause of termination | Separation rate | Separation pay | Total received |
|---|---|---|---|
| Redundancy or labour-saving device | One month per year | ₱360,000 | ₱431,379 |
| Retrenchment or disease | Half month per year | ₱180,000 | ₱251,379 |
| Closure due to serious losses | None | ₱0 | ₱71,379 |
| Just cause dismissal | None | ₱0 | ₱71,379 |
| Resignation | None | ₱0 | ₱71,379 |
PayMetric's own modelled figures, ₱60,000 a month, five completed years plus six months (counted as six years), ten unpaid worked days and five unused leave days. Final pay of ₱71,379 is common to every row.
What final pay is made of
Unpaid salary for days already worked, ₱27,586 for ten days at this salary on a five-day workweek.
Pro-rated 13th-month pay, ₱30,000 for half a year, which falls inside the ₱90,000 exemption so carries no tax.
Unused leave converted to cash, ₱13,793 for five days. The statutory service incentive leave is convertible; anything above it follows company policy.
The half-year fraction is what turns five years of service into six for the separation calculation. Six months or more counts as a full year, so leaving in month seven rather than month five is worth a whole extra month of separation pay in a redundancy.
Resigning when you are being made redundant costs ₱360,000
An employee who resigns receives no separation pay, so being encouraged to resign ahead of a restructuring is expensive in exactly the amount the employer would otherwise owe. A genuine authorised-cause termination also requires written notice to the employee and to DOLE at least 30 days before the effective date. If you are asked to resign, to sign a quitclaim quickly, or to accept a figure with no itemised breakdown, take advice first.
Check what you should receive
Enter salary, workweek, completed years, months into the current year, unpaid days and unused leave, then pick the cause of termination to see separation pay and final pay separately.
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Frequently asked questions
What is the difference between separation pay and final pay?
Final pay is everything you have already earned: unpaid salary, pro-rated 13th-month pay and the cash value of unused leave. Everyone gets it, however the employment ends. Separation pay is an additional statutory amount owed only when the termination is for an authorised cause such as redundancy or retrenchment. Resigning or being dismissed for just cause means final pay only.
How much separation pay applies to redundancy?
One month of salary for every year of service, with a fraction of at least six months counted as a whole year. On ₱60,000 a month with five years and six months, that is six years, so ₱360,000. Add the final pay of ₱71,379 and the total is about ₱431,379.
Why is retrenchment only half the rate?
The Labor Code separates authorised causes into two tiers. Redundancy and the installation of labour-saving devices carry one month per year. Retrenchment to prevent losses, closure not due to serious losses, and termination because of disease carry one half month per year, subject to a one month minimum. On the same salary and tenure that is ₱180,000 rather than ₱360,000.
Is separation pay taxable?
No, when it is paid for an authorised cause beyond the employee's control, such as redundancy, retrenchment or illness, it is exempt from income tax. That is why the redundancy example nets almost the whole ₱431,379: the tax in it relates to the final pay components rather than the ₱360,000. This is one of the most valuable features of a properly documented authorised-cause termination.
When must final pay be released?
DOLE guidance sets the standard at within 30 days of separation, unless a more favourable company policy or collective agreement applies. The certificate of employment should be issued within three days of a request. Delays are common in practice, and a written follow-up referencing the 30-day guidance usually moves things along.
Does 13th-month pay still apply if I leave in June?
Yes, pro-rated. Thirteenth-month pay is earned as you work, so leaving mid-year entitles you to the portion accrued up to your last day, and it is paid as part of final pay rather than waiting until December. In the example here that is ₱30,000, within the ₱90,000 exemption so no tax arises on it.
Is unused leave always converted to cash?
The statutory service incentive leave of five days a year is convertible to cash if unused. Anything above that depends on company policy: many employers in technology offer more generous leave but only convert a capped number of days. Check the handbook, because the difference on a senior salary can be significant.
What if I think the redundancy was not genuine?
An authorised-cause termination has procedural requirements, including written notice to both the employee and DOLE at least 30 days before the effective date, and a genuine business justification. If those are missing, the dismissal may be found illegal, and the remedies are different and larger: reinstatement or, more commonly, backwages and separation pay in lieu. Take advice before signing a quitclaim.
General information only, not legal advice. Figures come from PayMetric's Philippines separation and final pay engine at 2026 rates. Entitlements depend on the cause of termination, your contract and company policy. Take professional advice before signing a quitclaim or release.