GUIDE: How to Compute Your Backpay

(SPOT.ph) New year, new work? It’s common for employees to wait until the end of the year before they send in a resignation letter in order to receive those 13th, 14th, or even 15th month bonuses. When they finally leave, it’s common to seek backpay for various reasons: underpayment, unpaid overtime, miscalculated hours, or other payroll errors from when they were still employed with the company.

Don’t allow yourself to start 2024 shortchanged.

Looking to calculate your own backpay? Your company might be doing the work for you, but it’s still crucial to verify what you’re owed. Backpay isn’t the complex payroll calculations you think it is.

Also read: Is There a Right Time to Resign?

What is backpay?

Backpay is the total of all wages and benefits an employee must receive upon termination of employment. This includes a worker's unpaid earned salary, cash conversion of leaves, pro-rated 13th month, retirement pay and/or separation pay if applicable, among others.

Calculating backpay as an employee is largely about ensuring that your employer has paid you correctly according to the labor laws in the Philippines. According to the Department of Labor and Employment’s (DOLE) Labor Advisory No. 06 Series of 2020, the backpay must be released within 30 days of separation, unless the worker fails to clear his or her liabilities with the company.

Filing a claim often initiates a review process, where the employer cross-checks the employee’s case with their records. If the employer acknowledges the oversight, the backpay is typically processed in accordance with the company’s payroll procedures, resulting in a lump-sum payment to the employee. However, in cases where the employer disputes the claim or if the issue remains unresolved, the employee may need to seek legal recourse.

Also read: You Got a Job Offer, Here's How to Negotiate a Higher Salary

How to compute for backpay in the Philippines

Understand your employment contract... and the law

When calculating backpay as an employee, it's crucial to be thorough.

Review your employment contract and any relevant company policies. Pay special attention to the sections about salary, benefits, overtime, holidays, and termination policies. Know the specifics about overtime rates, holiday pay, night differentials, and any other benefits you're entitled to as well. 

Be aware of the deadlines for claiming backpay under Philippine labor law as well. According to the Labor Code of the Philippines, money claims resulting from an employer-employee relationship must be filed within three years from the time the claim arises. This includes claims for backpay. Waiting too long could jeopardize your ability to claim what you're owed.

Review your pay slip and time records

Equally important is having a comprehensive record of your received pay. Gather all your pay slips and time records for the period you believe you are owed backpay. Double check these documents for discrepancies between the hours you worked and the pay you received.

Do the math for your backpay

Calculate the total basic salary, overtime pay, and other benefits like 13th month pay for the period in question. If you worked night shifts, calculate your night differential pay. This is typically an additional 10% of your regular hourly rate for hours worked between 10 p.m. and 6 a.m.

Take note of any standard deductions such as taxes, SSS, PhilHealth, and Pag-IBIG. Have any liabilities or damages that you might have incurred to your company-issued equipment? Deduct that as well to arrive at your total expected backpay.

Compare with received pay

Compare your calculated expected backpay with what you have received. Note any discrepancies. Gather all relevant documentation, including your calculations, in case you need to present them to your employer or a legal advisor.

If there's a discrepancy, approach your HR department or employer. Present your case clearly, with your calculations and supporting documents. You can seek legal advice if necessary. An attorney specializing in labor law can guide you on the next steps.

Keep communication lines open

This makes the employer or HR department easier to contact. Often, discrepancies in pay can be the result of misunderstandings or clerical errors, so a direct conversation can lead to a swift resolution in a best-case scenario.

If direct communication doesn't resolve the issue, knowing when and how to seek legal advice is important. A legal expert in labor law can offer guidance and, if necessary, representation. This step should be taken if you believe your employer is willfully withholding due pay or if the amount in dispute is substantial.

In all this, keep detailed records of communications with your employer regarding pay. This documentation is vital should you need to present evidence to your employer or in a legal setting.

Also read: How Much Should Your Salary Be? This Tool Lets You Check If It's Above or Below the Pack