Supreme Court rules COLA integration into state workers' salary legal

MANILA, Philippines - The integration of the Cost of Living Allowance (COLA) and other allowances of government workers into their standardized salary rates is legal, the Supreme Court (SC) ruled.

The SC has affirmed the legality of the National Compensation Circular 59 (NCC) issued by the Department of Budget and Management (DBM) on May 3, 2004, which directed the integration of COLA and other allowances into the standardized salary rates for offices in the national government, state universities and colleges, and local government units.

The SC ruled that NCC 59 is consistent with Section 12 of Republic Act 6758 (Compensation and Position Classification Act of 1989), which allows the consolidation of all allowances except for representation allowances; clothing and laundry allowances; subsistence allowances of marine officers and crew on board government vessels; subsistence allowances of hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and other additional compensation as may be determined by the DBM.

The Court noted that while the said provision cited certain exclusions, it stressed that the DBM has the authority to identify other additional compensation that may be granted over and above the standardized salary rates.

Instead of identifying other allowances to be excluded from integration into the basic pay of government employees, the DBM issued NCC 59, which specified the allowances and benefits deemed integrated into the standardized salary rates.

The list specifically includes COLA, inflation connected allowance, living allowance emergency allowance, additional compensation of public health nurses assigned to public health nursing, additional compensation of rural health physicians, additional compensation of nurses in the Malacañang clinic, nurses’ allowance in the Air Transportation Office, assignment allowance of school superintendents, and the allowance of postal service office employees.

Other allowances covered by NCC 59 are the subsistence allowance of employees except uniformed personnel of the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP); laundry allowance of employees except those hospital or sanitaria personnel who attend directly to patients and required to wear uniforms, prison guards and AFP and PNP personnel.

The High Court noted that the fringe benefits clearly mentioned in Section 12 of RA 6758 belong to the category of privilege called allowances that are usually granted to officials and employees of the government to reimburse the expenses incurred in the performance of their official functions.

If these allowances are consolidated with the standardized salary rates, then the government official or employee will be compelled to spend his personal funds in performing his duties, the SC explained.

On the other hand, the SC said the cost of living refers to “the level of prices relating to a range of everyday items or the cost of purchasing those goods and services which are included in an accepted standard level of consumption.”

“Clearly, COLA is not in the nature of an allowance intended to reimburse expenses incurred by officials and employees of the government in the performance of their official functions… Based on this premise, COLA is a benefit intended to cover increases in the cost of living. Thus, it is and should be integrated into the standardized salary rates,” the SC noted.