How to Compute Final Pay for Resigning Employees
A step-by-step guide to calculating the final pay (back pay) for employees who have resigned or been terminated.
Calculate Unpaid Salary
Sum up the basic salary earned by the employee from the last payroll cut-off up to their final working day. Add any unpaid overtime or night differentials.
Compute Prorated 13th Month Pay
Divide the total basic salary earned during the current year by 12 to get the prorated 13th-month pay.
Convert Unused Service Incentive Leave (SIL)
Convert any remaining unused Service Incentive Leaves (SIL) or company-provided vacation leaves into cash based on the employee's daily rate.
Process Tax Refunds (Annualization)
Perform an annualized tax computation. If the withheld taxes throughout the year exceed the actual tax due based on the shortened employment period, the excess must be refunded to the employee as part of their final pay.
Deduct Outstanding Liabilities
Subtract any outstanding company loans, cash advances, or unreturned company assets from the total amount.