An employee who was illegally dismissed is entitled to full backwages, computed from the time compensation was withheld, at dismissal, up to actual reinstatement. Backwages cover the basic salary plus the regular allowances and benefits the employee was receiving or would have received, such as the 13th-month pay. They are awarded without deducting income the employee earned elsewhere during the dismissal. Where reinstatement is no longer viable, the employee gets separation pay in lieu of reinstatement plus backwages computed up to the finality of the decision.
Winning an illegal-dismissal case is only half the battle; the other half is the money. The centerpiece is backwages — and how they are computed determines whether the award is a few months’ pay or several years’ worth.
The Twin Reliefs for Illegal Dismissal
An employee dismissed without just or authorized cause, or without due process amounting to illegal dismissal, is generally entitled to two things: reinstatement without loss of seniority rights, and full backwages. These are separate and cumulative — reinstatement restores the job going forward; backwages compensate for the earnings lost while wrongly out of work.
What Backwages Cover
Backwages are not just basic salary. They include the basic wage plus the regular allowances and benefits the employee was receiving, or would have received had they not been dismissed — typically the 13th-month pay and other regular monetary benefits. The idea is to restore the employee to the financial position they would have been in without the dismissal.
The Period: From Dismissal to Reinstatement
Backwages are computed from the time compensation was withheld (the date of dismissal) up to actual reinstatement. Where reinstatement is ordered and carried out, the clock runs to that point. Because litigation can take years, this period — and thus the award — can be substantial.
No Deduction for Earnings Elsewhere
A crucial rule: backwages are awarded without deducting the earnings the employee obtained from other employment during the period of the illegal dismissal. The doctrine of “full backwages” deliberately does not reduce the award by what the worker managed to earn to survive. So a dismissed worker who took odd jobs does not see those earnings subtracted.
When Reinstatement Is Not Viable: Separation Pay in Lieu
Sometimes reinstatement is no longer practical — the position is gone, the business closed, or relations are so strained that going back would be untenable (the doctrine of strained relations). In that case the employee receives separation pay in lieu of reinstatement — commonly one month’s pay per year of service — plus backwages. Here backwages are computed from dismissal up to the finality of the decision (since there will be no reinstatement to end the period). The two awards stack: separation pay for the lost job, backwages for the lost earnings.
Interest and Attorney’s Fees
Monetary awards in labor cases generally earn legal interest until fully paid, and where the employee was forced to litigate to recover, attorney’s fees (commonly ten percent of the award) may be granted. These add to the total.
Practical Advice
Because backwages run to reinstatement or finality and are not reduced by interim earnings, an illegal-dismissal award grows with the length of the case — which is why employers often settle. Keep records of your pay and benefits at dismissal, since those set the base. And understand the choice between fighting for reinstatement and accepting separation pay in lieu, both of which come with backwages.
Frequently Asked Questions
What do backwages include? The basic salary plus the regular allowances and benefits you were receiving or would have received, such as the 13th-month pay. The goal is to restore you to the position you would have been in without the dismissal.
Are earnings from other jobs deducted from backwages? No. Under the full-backwages doctrine, income you earned elsewhere during the illegal dismissal is not deducted from the award.
What period do backwages cover? From the date of dismissal (when compensation was withheld) up to actual reinstatement, or, where reinstatement is not viable, up to the finality of the decision, with separation pay in lieu of reinstatement added.
Do I get both reinstatement and backwages? Yes. They are separate and cumulative. Reinstatement restores your job; backwages compensate the earnings lost. If reinstatement is not viable, you get separation pay in lieu plus backwages.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you were illegally dismissed, the backwages owed to you may be substantial, and our firm can help you compute and claim them. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.