Claim Unpaid Terminal Leave Benefits from Local Government Philippines

Claiming Unpaid Terminal Leave Benefits from Local Government Units (LGUs) in the Philippines (A comprehensive legal guide as of July 2025)

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1 | What Are Terminal Leave Benefits?

Terminal Leave Benefits (TLB) are the cash value of all unused vacation and sick leave credits an official or employee has earned up to the date of separation from government service—whether by retirement, resignation, expiration of term, separation for cause, or death.

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2 | Controlling Legal Framework

Instrument	Key Points
1987 Administrative Code (Book V, Title I-A, §40)	Recognizes commutation of accumulated leave to cash upon separation.
Executive Order 1077 (1985)	Standardized the formula for computing the money value of leave credits and expressly covers LGU personnel.
Civil Service Commission (CSC) Rules • CSC MC No. 41-98 (Omnibus Rules on Leave, as amended) • CSC Resolution No. 1600568 (2016)	Defines leave accrual, constant factor, documentary requirements, and procedural timelines.
Local Government Code of 1991 (RA 7160)	Mandates LGUs to appropriate funds for personnel benefits, including TLB, in their annual budget (Sec. 325[a]).
Department of Budget & Management (DBM) Circulars • Local Budget Circular (LBC) 199-2016 & 128-2021	Provide budgeting and recording guidelines, and allow installment payment when funds are insufficient.
Commission on Audit (COA) Rules of Procedure (1997)	Gives COA primary jurisdiction over money claims against LGUs, subject to a 6-year prescriptive period from accrual.
National Internal Revenue Code, Sec. 32 (B)(6)(a) & (7)(e)	Exempts TLB paid due to retirement, death, sickness, or disability from income tax.
Supreme Court Jurisprudence • Mendoza v. COA, G.R. No. 195395 (April 21 2015) • Mantala v. COA, G.R. No. 205045 (June 16 2015) • Re: Molina, A.M. No. P-05-1927 (Oct 13 2009)	Affirms employees’ vested right to TLB, allows legal interest (6 % p.a.) on delayed payment, and upholds the EO 1077 formula.

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3 | Who May Claim

Entitled	Not Entitled
• Permanent, temporary, provisional, and casual LGU employees with approved appointments • Contractual personnel with appointment papers expressly granting leave privileges • Elective officials who have opted to earn leave credits (rare; requires LGU ordinance) • Right may be passed to heirs upon death	• Job Order/Contract of Service workers (not government employees) • Barangay officials (they receive honoraria, not salary) • Elective officials without leave credit entitlement

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4 | Accrual and Computation

1. Constant Factor

   0.0478087 – converts monthly salary to daily rate based on 365-day year (derived from EO 1077 and CSC rules).

2. Formula

   TLB = Monthly Basic Salary × 0.0478087 × Total Earned Leave Credits

3. Example

   • Monthly basic pay: ₱35,000
   • Unused leave: 120 days
   • TLB = 35,000 × 0.0478087 × 120 ≈ ₱200,590.32

4. Latest Salary Used – Salary as of separation date (or date of effectivity of dismissal/retirement).

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5 | Documentary Requirements

Core Requirement	Form/Proof
Application for payment	CSC Form 6 (Terminal Leave Application)
Record of leave credits	Updated Leave Card & HR certification
Certification of last salary	Issued by Accounting/HR
Clearance	Property & money accountability (General Services, Accounting, Cashier)
Service Record	For COA audit & GSIS purposes
Proof of separation	Appointment expiration, Office Order, Retirement Order, or Death Certificate
Heirs’ claim	Extrajudicial settlement/Affidavit of heirship & SPA (if representative)
Budget authority	Appropriation Ordinance or Supplemental Budget (if funds newly allocated)

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6 | Step-by-Step Procedure inside an LGU

#	Office & Action	Statutory/ARTA Time Limit*
1	Employee/Heir files CSC Form 6 & attachments with HRMO.	–
2	HRMO verifies leave credits, prepares computation sheet.	3–5 wd
3	Budget Office certifies availability of funds (CAF).	1–3 wd
4	Accounting prepares Disbursement Voucher (DV) & Obligation Request (ObR); computes taxes if taxable.	5 wd
5	Local Chief Executive (Mayor/Governor) or authorized signatory approves DV & signs check/ADA.	3 wd
6	Treasurer/Cashier releases payment; COA conducts post-audit.	2 wd

*ARTA 11032 (Ease of Doing Business) treats payment of benefits as a complex transaction; agencies must publish specific service standards but cannot exceed 20 working days in total.

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7 | Common Obstacles & Solutions

Issue	Practical Remedies
Insufficient funds / expired allotment	• Request inclusion in next Annual/Supplemental Budget. • Accept installment payment (DBM allows staggered up to 2–3 years). • File money claim with COA—attach denied/indorsed request, documents, and statement of accounts.
Undue delay / inaction	• Write a demand letter citing ARTA timelines. • File complaint for neglect of duty with CSC or Ombudsman. • Petition for mandamus in RTC to compel payment plus 6 % interest (per Nacar v. Gallery Frames, G.R. No. 189871).
Disallowed leave credits	• Appeal HR’s leave audit to CSC Regional Office within 15 days. • Include overtime/CTO conversion proof if applicable.
Tax withholding errors	• Reference BIR RR 3-98 & RMC 86-2019 (TLB on retirement/death is non-taxable). • Request refund from LGU/BIR if taxes were wrongly withheld.

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8 | Claims before the Commission on Audit

1. Jurisdiction – COA decides money claims involving any government entity, including LGUs. (1987 Constitution, Art. IX-D; COA Rules of Procedure).
2. Prescription – 6 years from date TLB became due (accrued), tolled while claim is pending with agency.
3. Filing Essentials – Verified petition, supporting documents, and proof of prior resort to the agency.
4. Interest – COA may award 6 % p.a. legal interest on the amount due for delayed payment (per Mendoza and Mantala cases).

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9 | Tax Treatment & Other Deductions

Scenario	Income Tax	Other Offsets
Retirement, death, permanent disability	Exempt under Sec. 32 (B)(6)(a)/(7)(e) NIRC	Outstanding cash advances, COA disallowances, GSIS loan balances may be deducted.
Voluntary resignation, dismissal for cause	Taxable as compensation income; LGU withholds per BIR table	Same offsets apply.

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10 | Frequently Asked Questions

Q	A
Do job-order workers have terminal leave?	No. They do not accrue leave credits under CSC rules.
Can leave credits be transferred to another agency?	Yes, if the employee transfers without gap and remains under CSC-covered service; otherwise they are monetized via TLB.
Are elected officials covered?	Only if an enabling ordinance allows them to earn leave credits (rare). Otherwise, they receive none.
Is there a time limit to file my claim?	Internally, none; the right vests upon separation. But to preserve remedies before COA, file within 6 years.
Can heirs split the benefit?	Yes—submit an extrajudicial settlement or SPA designating a single payee.

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11 | Practical Tips for Employees & Heirs

1. Update your leave card annually; reconcile with HR.
2. Secure original documents (service record, certifications) before leaving service.
3. Track ARTA timelines; follow up in writing to create a paper trail.
4. Keep copies of all correspondence; COA will require proof of agency inaction or denial.
5. Consider interest—if payment is unreasonably delayed, explicitly demand 6 % p.a. in your letters or COA petition.

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12 | Conclusion

Unpaid Terminal Leave Benefits are a vested right of every qualifying LGU employee or their heirs. While the governing rules are clear, delays often arise from budget constraints and administrative lapses. Understanding the legal bases, required documents, and enforcement mechanisms—especially the Commission on Audit’s money-claim process—empowers claimants to obtain what is justly due, with interest where warranted. Proactive documentation, adherence to ARTA timelines, and awareness of tax exemptions will streamline the process and safeguard the value of one’s hard-earned leave credits.

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This guide synthesizes Philippine laws, rules, and jurisprudence in force as of July 3, 2025. It is for general information and not a substitute for formal legal advice.