Back Pay Computation in the Philippines

Back Pay in the Philippines is referred to as the remaining amount to be released by an employer after the separation of employment by an employee.

However, the actual promulgated terms and actual usage may be confusing unless clarified.

Defining Back Pay

The term "Back Pay" may be refer to either following definitions: 1.) Final Pay and 2.) Back Wage

What is Back Pay?

Back Pay refers to the amount earned by the employee that has not been released in addition to other benefits he is entitled upon severance of employment.

Despite the term "Back Pay" being prevalent, the term does not appear in Presidential Decree No. 442, also known as the Labor Code of the Philippines. However, such term is already recognized by the Department of Labor and Employment (DOLE) in Labor Advisory No. 6, series of 2020 as being synonymous with Final Pay and Last Pay.

What is Final Pay?

"Final Pay" is defined by the Labor Advisory of the Department of Labor and Employment (DOLE) as the “sum or totality of all the wages or monetary benefits due to the employee regardless of the cause of the termination of employment”. The advisory has also mentioned that “Last Pay” or “Back Pay” is analogous or equivalent to that of Final Pay.

However, I expect the term "Back Pay" to be used by employees and Human Resource (HR) Officers rather than promulgated term of "Final pay" by the Department of Labor and Employment (DOLE), unless they have been previous oriented with the term.

What is Back Wages?

Back wages is defined as the payment to workers for the earnings they have lost due to their illegal dismissal reckoned from the date of withholdment. Such earning should have been earned should the employee had not been illegally dismissed from their employment.

The entitlement of Back wages due to illegal dismissal is inherent in the rights of employee to Security of Tenure as stated in Article 279 of the renumbered Labor Code of the Philippines:

Security of tenure. — In case of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time of his reinstatement.

Should an employee be entitled to Back Wages, the payment shall form as part of the Final Pay to be received by the employee should they not reinstated.

What is the origin of the term “Back Pay”?

Although I have no reference to the following statement, I hypothesize that the term "Back Pay" emanated from the term "Back wages" which is the official term recognized by the Labor Code of the Philippines and simply has been carried through the years.

Entitlement to Back Pay

Is Back Pay mandatory in the Philippines?

Regardless of how you define "Back Pay" or the emanating provision under the Labor Code of the Philippines, whether is it as Final Pay or Back wage, Back Pay is mandatory in the Philippines.

Who is entitled to Back Pay?

All employees are entitled to Back Pay, regardless of the means of Termination of Employment.

Should the termination of employment be related to illegal dismissal, the employee is entitled to their Back wage.

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