One of the benefits of being a government employee is receiving a loyalty pay after a certain number of years of satisfactory and continuous service in the government.
In this post we will discuss the basic guidelines on the grant of loyalty pay to government employees including the following:
• What is loyalty pay;
• Legal basis on the grant of loyalty pay;
• Required number of years of government service to be eligible to the loyalty pay;
• Amount of authorized loyalty pay;
• Conditions to be complied with to be eligible to the loyalty pay; and
• Whether the loyalty pay is taxable or not.
What is loyalty pay?
A loyalty pay is a monetary incentive given to government employees to recognize their satisfactory performance and continuous service in the government for a specific number of years.
What is the legal basis on the grant of loyalty award?
Executive Order No. 292 (Administrative Code of 1987) particularly Section 35, Chapter 5 of Book V, provides that the government shall establish a government-wide suggestions and incentive award system.
EO No. 292 further provides that government employees shall receive incentive awards, including grant of loyalty award based on continuous and satisfactory service.
In 1992, the Civil Service Commission (CSC) resolved by virtue of CSC Memorandum No. 42, to provide guidelines on the grant of loyalty award to government employees.
In 2002, the CSC issued CSC Memorandum No. 6 to provide the Revised Guidelines/Policies on the Grant of Loyalty Award to government employees.
How many years of service should a government employee render to receive loyalty pay?
To receive a loyalty award, a government employee must render ten (10) years of satisfactory and continuous government service.
Additionally, a government employee may also qualify for the 5-year milestone loyalty award after the 10-year period.
Starting January 1, 2002, continuous and satisfactory government service include services in one or more government agencies without any gap.
In computing the required ten (10) years of service, the CSC adopted the rules in computing length of service for the grant of step increment provided for in CSC MC No. 50, series of 1990.
How much is the authorized loyalty pay of government employees?
The loyalty award given to government employees is composed of loyalty memorabilia/souvenir and a cash gift.
In addition to the loyalty memorabilia or souvenir, a cash gift of not less than ₱500.00 but not more than ₱1,000.00 for every year of service is given to qualified government officials or employees.
The loyalty memorabilia or souvenir includes a bronze pin (for 10 and 15 years of service), silver ring (for 20 and 25 years of service) and gold medallion (for 30, 35, and 40 years of service) or other memorabilia/souvenir as provided for under the rewards and recognition system of the agency concerned.
COA Guidelines on the Grant of Loyalty Pay to Government Employees
In 2013, the Commission on Audit (COA) issued COA Circular No. 2013-03A amending COA Circular No. 2013-003 dated January 30, 2013 regarding Reiteration of Audit Disallowance of Payments without Legal Basis of Allowances, Incentives, and Other Benefits of Government Officials and Employees in the NGAs, LGUs, and GOCCs and their Subsidiaries.
In the said Circular, COA provides that the rates for Loyalty Cash Award prescribed in COA Circular No. 2013-003 dated January 30, 2013 are are amended as follows:
10th year — from ₱5,000 to ₱10,000
15th year and every 5 years thereafter — from ₱2,500.00 to ₱5,000
Please note however, as we understood it, considering that the subject Circular is about audit disallowance of payments without legal basis, the rates prescribed about are the maximum rates for loyalty cash award.
DBM Guidelines on the Grant of Loyalty Pay to Government Employees
According to the Department of Budget and Management (DBM), the provision for the cash gift component of the Loyalty Award for qualified officials and employees, in addition to the loyalty memorabilia/souvenir, on the occasion of the incumbent’s milestone year (10th year anniversary and every 5 years thereafter), shall be computed at P500.00 but not more than P1,000.00 for every year of service, in accordance with CSC MC No. 06 (s. 2002). Hence, the Loyalty Award shall be at a maximum of P10,000.00 for the first 10 years of continuous and satisfactory service; and a maximum of P5,000.00 for every 5 years thereafter. [NBM 145, series of 2023]
Is the loyalty pay taxable?
As a general rule, the compensation received by government employees is subject to withholding tax.
In 2018, the Supreme Court ruled that “All income received by an employee from his/her employer are presumptively taxable and subject to withholding”. [PNA]
According to BIR Revenue Regulation No. 11-2018, certain compensation of government employees which include loyalty award are exempt from withholding tax provided that total amount of such compensation does not exceed ₱90,000.00. Total compensation in excess of the ₱90,000.00 is considered taxable compensation.
Grant of Loyalty Cash Award of certain Government Agencies
As provided for under EO 292, the government, through the different departments, agencies, offices, shall establish a government-wide suggestions and incentive award system and government employees shall receive incentive awards, including grant of loyalty award based on continuous and satisfactory service.
In the Department of Education (DepEd), teachers as well as non-teaching employees and their officials receive ₱1,000 for every year of satisfactory and continuous service, pursuant to DepEd Department Order No. 54, s. 2015.
In the Philippine National Police (PNP), non-uniformed personnel (NUP) receive ₱10,000 loyalty incentive for serving 10 years of satisfactory and continuous service pursuant to PNP Memorandum Circular No. 2020-063, s. 2020.
In other agencies, they implement their own respective rewards and recognition system in granting loyalty awards to government employees following the guidelines set by the CSC, COA and DBM.
Do you have any question?
Please feel free to leave us a message if you have any question about the grant of loyalty pay to government employees.
