Managing Last Pay in HRIS: Best Practices for Payroll Compliance

When an employee resigns, is terminated, or retires, the company is required to release their last pay (final pay). In the Philippines, the Department of Labor and Employment (DOLE) mandates that last pay must be released within 30 days of separation, unless otherwise agreed upon.

For HR and payroll teams, managing last pay is one of the most sensitive and error-prone processes. This is where an HRIS (Human Resource Information System) becomes essential. An HRIS helps automate, track, and properly compute last pay while ensuring compliance with labor laws.

In this article, we’ll explain what last pay is, how HRIS helps manage it, and best practices for payroll compliance.

What Is Last Pay?

Last pay (also known as final pay) is the total compensation an employee receives upon separation from a company.

It may include:

• Unpaid salary (for days worked)
• Pro-rated 13th month pay
• Cash conversion of unused leave credits
• Separation pay (if applicable, e.g., retrenchment, redundancy)
• Other benefits due (allowances, incentives, commissions, etc.)
• Deductions (loans, cash advances, company property not returned, etc.)

📌 In short: Last pay ensures employees receive everything they are legally entitled to while allowing employers to settle obligations transparently.

Challenges in Managing Last Pay

Many companies face difficulties in releasing last pay on time due to:

• Manual computations prone to human error
• Lack of proper documentation for benefits and deductions
• Delays in clearance due to asset or loan reconciliation
• Compliance risks if DOLE timelines are not met

This is why HRIS solutions are increasingly used to simplify last pay management.

How HRIS Helps Manage Last Pay

Automated Computation

HRIS automatically calculates:

• Pro-rated salary and benefits
• Remaining leave balances
• Government contributions (SSS, Pag-IBIG, PhilHealth)

This reduces errors compared to manual calculations.

Clear Record Keeping

With HRIS, employee records—including loans, advances, leave credits, and benefits—are centralized. This ensures accurate final pay computation.

Faster Clearance Process

HRIS integrates with asset and loan management modules, allowing HR to quickly check pending balances or unreturned items before processing last pay.

Compliance with DOLE Rules

By automating workflows, HRIS ensures last pay is processed within the mandated 30-day period, minimizing labor disputes.

Transparency for Employees

Employees can view breakdowns of their last pay through the system, fostering trust and preventing disputes.

Best Practices for Payroll Compliance in Last Pay

✔ Follow DOLE Guidelines
Always release last pay within 30 days from separation, unless otherwise agreed.

✔ Use HRIS for Automation
Invest in an HRIS that automates last pay computations, ensuring accuracy and compliance.

✔ Maintain Accurate Records
Regularly update employee profiles, leave credits, loans, and benefits to avoid discrepancies during last pay processing.

✔ Establish Clear Clearance Policies
Communicate return-of-property and loan settlement policies to employees before their last day.

✔ Provide Payslip Breakdown
Always issue a final payslip showing computation details to avoid misunderstandings.

✔ Conduct Regular Payroll Audits
Audit your payroll system periodically to ensure deductions, benefits, and tax compliance are correctly applied.

Example: Last Pay Computation Scenario

Anna resigns effective October 15. Her HRIS computes the following:

₱20,000 monthly salary → ₱10,000 unpaid salary (15 days)
₱5,000 pro-rated 13th month pay
₱3,000 leave conversion (5 unused VLs @ ₱600/day)
₱2,000 loan balance deduction

📌 Total Last Pay = ₱16,000

Thanks to HRIS automation, the computation is quick, accurate, and transparent.

Conclusion

Managing last pay in HRIS ensures a smooth and compliant payroll process when employees separate from the company. By automating computations, streamlining clearance, and following DOLE guidelines, employers can reduce disputes, build employee trust, and stay compliant.

For HR and payroll teams, leveraging HRIS is not just about efficiency—it’s about ensuring fairness, transparency, and compliance in every last pay release.