AFTERNOON OPEN FORUM
QUESTIONS / QUERIES REGARDING LEGAL MATTERS
QUESTION: From Notre Dame of Lagao - Cotabato
Is the Pag-Ibig employer share included in the computation of retirement benefits of the employee?
REPLY:
The answer is YES, this is an expressed provision of law. So when you compute the retirement benefits, first of all, you call and ask the CEAP Retirement Plan how much has the employer contributed to the retirement of this employee, and how much has been earned. That is the first source of payment of the retirement benefit. Then the second is you call up Pag-Ibig and find out how much has the employer contributed for this employee, and how much has it earned. That is the second source of payment of the retirement benefit. And if still there is a balance left, then the school has to pay for that balance. This is not even a debatable issue, it is found in the law. In fact, this is one time where the Department of Labor will readily tell the employee who complains that he has been cheated by the Sister, “Hindi ho, tama po ‘yan. The employer share in Pag-Ibig is applied to discharge the retirement liability of the school.”
QUESTION: From Sacred Heart School of Parañaque
How should supplemental fund contributions in CEAP be treated in our school’s accounting system?
REPLY:
Whether this is a regular contribution or the contribution to the supplemental fund, these are legitimate business expenses of the school and should be booked as such. Is there any rule that says you cannot do that? The answer is no. In fact, the law encourages you to contribute more. Now in this connection, maybe I should share with you some recent trends among congregations.
I don’t know if Mr. Aseneta will be very happy with what I have to share with you here. But it is a known fact that congregations have various schools, not only one or two schools. And more often that not, the situation is a congregation will have one big school and nine or nineteen “beggar” schools, “hand-to-mouth” schools that can hardly pay even the retirement benefits. But whether you are a poor school or a rich school, the retirement law says you must pay one-half month for every year of service as provided in the law. And so the question is, how can the poor school fund this? Many congregations have come up with various solutions. Some congregations set up their own retirement plan and when the trustee reports at the end of the year that the fund has earned so much, it is customary for the retirement board to set aside certain percentage, at the most 5%, for contingency and this is the amount that is used by the retirement board to cover the small schools that are unable to pay retirement contributions. In that way the congregation can say to all its lay partners, “whether you work in my biggest school or my poorest school, you are assured of your retirement pay under the law.”
Other congregations, and this is probably a very good move, they will continue to fund their retirement contributions whether it is in PERAA or in CEAP but knowing that they have a very poor schools, the congregation itself sets up a supplemental fund. It is not the individual school anymore that goes to Mr. Aseneta or Sr. Lioba, it is the treasurer of the congregation who says “I will set up a supplemental fund to cover my poor schools”. That is also another possible solution.
QUESTION: From Marist School in Marikina
Are non-stock, non-profit religious institutions exempted from final tax on interest from investment and savings account?
REPLY:
The answer is YES. In fact there is a Department of Finance regulation that says so. Of course there are conditions that the BIR invokes in order to claim that the interest is not exempt - there must be a Board Resolution as to how that interest will be spent; there must be a certification from the bank; and all of these must be attached to the information return of the school. And so if the school fails to do that, according to some naughty BIR examiners, therefore the exemption is lost. If they tell that to you, you answer, “Ang lupit mo naman.” In the first place, that condition is illegal because the law grants the exemption and it is not the Commissioner who can put conditions. And if he says, “Why do you say that Sister?” You answer, “Because the Commissioner himself said so.” That is the doctrine in the case of St. Paul School of Aparri.
QUESTION: From Notre Dame of Tacurong in Sultan Kudarat
Local and national taxation laws applicable to the school canteen operated and maintained by the administration? Can you provide us with the copy of the ruling?
REPLY:
There is no specific ruling on this point. But what we have is much stronger than a ruling and that is the Department of Finance Order No. 137-87. All schools must always have a copy of this because Section 2.2 of that specifically provides that the constitutional exemption from taxes and duties applies to the income and assets of canteens, cafeterias, bookstores and other auxiliary services of schools. So that is an expressed provision of law.
But what you should watch out for in regard to the canteen is this – Department of Finance Order No. 137-87 that says “the canteen is exempt from all taxes and duties provided it is owned by the school, it is operated by the school and it is located within the school premises.” Remember those three conditions. And that is why two big schools in Metro Manila, one got hit with a P20-M assessment and another with a P30-M assessment, just for canteen income. These schools did not have personnel to run these canteens and so they chose to let it be operated by a concessionaire. In that way the school did not have to employ workers for the canteen, did not have to worry about pilferages, and presumably but wrongly, about taxes; because the concessionaire pays either a fixed rental or a fixed rental plus a certain percentage of sales. Now, that did not meet the second condition of the exemption, which is, that the canteen must be operated by the school.
Elsewhere in other occasions I have already explained to you administrators that if you really must get a concessionaire since you do not have the traditional old or retired sister who will sit there in the canteen reciting the rosary while the canteeneras steal the money left and right, or if you do not have those old sisters anymore and that you must get a concessionaire, at least take the necessary precautions. Do not make them concessionaires but make them only consignors of foodstuffs. In other words, treat them like you would treat the publishing houses during enrolment time. They rush to the school during enrolment time bringing all the textbooks that were prescribed by your school, they even bring the salesladies, and so at the end of the day they say, “for every textbook I have sold for P100, I give the school P20 or P30 commission”. That is a taxable transaction. But when the publisher goes back to his office, his accountant has a very different treatment. He says, “I sold to the school a textbook for P80, the school sold it to the students for P100, and the school paid me P80”, that is an exempt transaction.
QUESTION:From St. James Academy of Pasuquin, Ilocos Norte
How to apply for a Tax Exemption Certificate?
REPLY:
This is a very simplified system now because regional offices in the BIR now have a format, they just insert the name of the school in the template. The usual requirement is to first, submit your Articles of Incorporation and By-Laws to show that you are non-stock, non-profit. Second, you submit the audited financial statement for the last three years, which were anyway attached to your information return. Third, you submit a copy of the government recognition or permit to show that you are recognized by the government. And finally, you execute what they call an Affidavit of Non-Forum Shopping where you just state under oath that this is the first time you apply or you have not previously applied with any other BIR office. With that, they will process your Certificate of Exemption.
Before it was a very complicated affair. We have to thank, specifically the Sister Directress of St. Paul School of Aparri, for bringing it to a head where Commissioner Buñag lectured to the Regional Director in Tuguegarao that all the conditions he was imposing were not applicable to non-stock, non-profit schools.
QUESTION:From La Salle University of Ozamiz City
The CEAP Retirement Board should issue a circular or memo to all CEAP member schools to implement the table of refund, if any faculty or staff resigns after 10 years of membership.
REPLY:
This has to be clarified. Under the CEAP Retirement Plan, an employee who has rendered 10 years or more of service is given a percentage of what has been accumulated to his account by way of contributions from the employer. Under the Labor Code, if an employee resigns even after 50 years of service, she gets nothing. But under the CEAP Plan, he gets 50% of what has been accumulated to his account and it increases by 5% every year until after 20 years, 100% of what has been accumulated is given to the employee who resigns. Resignation, remember, is different from retirement.
Now if he has rendered less than 10 years of service, he does not get any amount from the CEAP Retirement Plan. The entire amount is forfeited in favor of the school. If he has 10 years of service, 50% goes to him, 50% is forfeited in favor of the school. There is no such thing as a refund to the school because the law expressly prohibits that any amount contributed to a retirement plan approved by the BIR should be returned or be refunded to the school. But the school can use that forfeited amount to reduce its subsequent premium contributions to the CEAP Retirement Fund.
So to repeat, the rule is, if an employee resigns below 10 years in service, all the amounts that have been accumulated from the employer’s contributions are forfeited in favor of the school, which can now be used to reduce its subsequent premium contributions. If it is 10 years or more of service, the employee gets a certain percentage and the difference again is forfeited in favor of the school.
QUESTION: From Little Flower School of Cebu
May we please know if our support staff like the canteenera who is working from 7:30 up to dismissal time, but who is only a high school graduate, also has to be compensated following the wage order rate of a degree holder?
REPLY:
The answer is YES, but there are ways of handling this. For example, you can stagger the hours of the canteenera. There are hours when the students are in the classroom and therefore there is hardly any activity in the canteen. Usually it is just before the start of classes, during recess time, lunch time and dismissal time that you need the staff to run the canteen. But in between, you can either close it or just have one canteenera to handle the sales. But as I said, if you hire them regularly for 8 hours or even more, then you just have to pay the minimum wage law.
QUESTION:
What is the school’s defense regarding discontinuance of benefits if the union employees cite Article 100 of the Labor Code?
REPLY:
I am glad this question was asked. When a school has granted an increase in salary or a benefit and the school wants to withdraw it, you will hear the labor union of the employees screaming, “Sister, hindi pwede yan. A benefit once granted cannot be withdrawn.” Article 100 of the Labor Code says, “No provision of this Labor Code shall be deemed to refill any benefit already existing at the time of the promulgation of this Code which was in May 1, 1974.” So it never said benefits once granted cannot be withdrawn. But there is a principle in Labor Law which says that when a benefit or practice has been in existence with an employer for a very long period of time, even if it is not reduced to writing, it will be considered a term or condition of employment. How did that principle start?
In a car assembly plant in the United States, workers would stop working at 10am and go to the smoking room or the cafeteria and either smoke or drink coffee for 15 minutes and then resume work. A supervisor looked at the collective bargaining agreement and did not find a provision providing for 15-minutes break. And so he told the employees, “From this day forward, no more smoking time for 15 minutes, no more coffee time because it is not found in our CBA.” To make the long story short, the court said, “When a practice has been in existence for a long time, it is deemed to be a term and condition of employment.” That is the origin of the statement“A benefit once granted cannot be withdrawn.”
That is a principle of Labor Law, but there are three recognized exceptions to that rule. The first exception is that a benefit granted can be withdrawn if it was given by mistake. What do you mean by that? Example – many years ago the Department of Labor issued the so-called “Trajano Opinion” that says, “overload pay is part of basic salary and therefore is included in the computation of 13th month pay”. The CEAP repeatedly question that, and finally in Joint Order No. 2 Series of 1996, the Secretary of Labor, the Secretary of the Dep-Ed, the Chairman of CHED and TESDA agreed with CEAP and said, “overload is a temporary arrangement and the compensation is not basic salary but an honorarium.” Therefore, schools that were including that in the computation of 13th month pay naturally started excluding that and the employees said, “benefits once granted cannot be withdrawn”. Even the Department of Labor conceded that yes, in this case it can be withdrawn because it was a mistake cause by our, meaning the Department of Labor’s stupidity. That is the first exception.
A similar exception – for many years there was Policy Instruction No. 54, also known as the “Drilon Law” which says, “Hospitals with a bed capacity of 100 or more cannot make their employees work more than five days a week but must pay them seven days pay for five days work”. San Juan de Dios questioned that and the Supreme Court said that it was illegal. Sister Daughter of Charity, Sor Paz Marfori, was threatened by the union that they were going to strike because she refused to follow the Drilon Law. Sor Paz made that famous stand, “Huwag na n’yo ‘kong takutin dahil takot na takot na ako, pero wala pa rin akong pera kaya idemanda n’yo na lang ako”. So the union sued her and she won all the way up to the Supreme Court that that was an illegal interpretation of the law. Because of that, many hospitals are now saying, “five days work, I pay you five days salary. Do not expect to be paid seven days for five days work”. So the answer to “but benefit once granted cannot be withdrawn”, is, “that was a mistake induced by the Secretary of Labor and the Supreme Court said his policy instruction was illegal, therefore I have the right to correct that”. So that is the first exception, when it is a mistake.
The other is when the benefit granted is clearly based on financial considerations, then, if there is a change in the financial situation, the school can withdraw that benefit. Example, this employer in Subic saw his business booming, called his employees and said, “We are very fortunate, business is booming so from now on I will give you not only 13th month pay but I will give you also 14th month pay.” So everybody was happy, and this went on for eight years. Then the Americans left Subic Bay and businesses collapsed. So again this employer called his employees and said, “it is no secret to you that we are facing financial difficulties, therefore, I will just pay you 13th month pay. I cannot pay you anymore 14th month pay”. And the employees said, “benefits once given can not be withdrawn”. That’s when the Supreme Court said, “we have read and reread Article 100, it does not say so. Second, since the benefits was based on financial considerations, the employer had the right to withdraw it based on a change of financial situations.” That is the second exception.
The third exception is, if there is a union in the school and the union agrees. Example, I mentioned earlier the La Consolation College-Daet where the union agreed that for the next five years there will be no increase in salaries and benefits and what is more, that all their non-statutory benefits like moderator’s fee, advisory fee and all other fees and privileges were repel. Since the union agreed to it and the union speaks for all the employees, that is binding on all the employees.
In Sto. Tomas-Batangas, when Archbishop Arguelles finally got sick and tired of the union there he said, “I will now close the school”. The trick they practiced on the foreign sisters who were running the school and who were always afraid when the union said we will strike was, as they said, “basic salary is P19T a month”, which is quite high for a provincial school and even for a Manila school. And then they added, “but this is only for 15 units”. So where will the school get teachers for the remaining units? They said, “you must get additional teachers outside”. But then the union also said, “but we prohibit you from getting teachers from outside. You must give that to us as overload”. So when we negotiated with the union, we said, “this got has to stop. We will not reduce your salary of P19T a month but you will work for 30 hours teaching time instead of 15 hours every week”. The union signed and so Sto. Tomas Academy is still alive.
QUESTION: An employee opted for early retirement but she only worked with the school for 17 years, short of 20 years. She is not yet 60 years old, therefore CEAP contention is that she only gets 80% of the retirement pay and will be taxed. School contention is – over 50 years old, no tax for retirement benefit. Should she be taxed?
REPLY:
The answer is she should not be taxed. This in fact has been clarified by the BIR, and by the CEAP with the BIR. If you want to know the history of that provision, let us go back a little in time.
Under Republic Act 4917 which provided for retirement plans approved by the BIR, “a retirement benefit is exempt from taxes if it is paid by a retirement plan approved by the BIR to an employee who has rendered 10 years of service and is at least 50 years old”. All four conditions must be met. If one condition was not met, it would become taxable. That was the old rule under Republic Act 4917.
Then Congress passed the new retirement law, Republic Act 7641 amending Article 287 of the Labor Code. And it said that an employee may be retired at the age provided in the CBA or any applicable employment contract and is entitled to retirement pay provided he has rendered at least 5 years of service prior to retirement. So under 4917, you must be at least 50 years old and you must have rendered at least 10 years of service. Republic Act 7641, did not say anything about age but only said after 5 years of service, that employee is entitled to retirement pay.
So when this question was post to the BIR, it answered, “there is no contradiction between R.A. 7641 and R.A. 4917. All that R.A.7641 says is that after 5 years of service, he is entitled to retirement benefits. Whether that is taxable or tax exempt, law is silent. So we will be covered by 4917. What is the meaning of that?
If an employee has rendered 5 years of service under Republic Act 7641, he is entitled to retirement pay, and if he receives it, then under the Internal Revenue Code of 1997 that is exempt from income tax. So we ask the BIR again, “which rule will be followed?” Jojo Buñag said, “naguguluhan din ako, isulat mo na lang kung ano ang gusto mo”. That’s why we have the CEAP ruling. So what did we say? We said that if an employee is receiving the one-half month benefit under R.A. 7641 the applicable rule is R.A. 7641 which means he is retired at the age provided for in the CBA or applicable employment contract, i.e., any retirement age agreed upon between him and the school and he has rendered at least 5 years of service. And that retirement pay is exempt from income tax.
But if he is going to receive much more or more than the minimum under R.A. 7641, then we said, in that case R.A. 4917 will apply. And so he must be 50 years of age and must have rendered 10 years of service. That is not found in the law, that is just what Mr. Aseneta and I agreed upon, and which we made the Commissioner sign.
Well Mr. Aseneta said, “how can we reconcile this case with the provision in the retirement plan that the normal retirement age is 60.” But the CEAP Retirement Plan also has a provision on early retirement. And so if he qualifies under early retirement, then he will get this. But he said, “he does not qualify for retirement because he has not reached 20 years of service”. But the answer there is, since we are now applying R.A. 7641, and R.A. 7641 does not carry a 20-years service requirement but only a 5-year service requirement, therefore it will still be exempt from income tax. You must distinguish between whether he is entitled to retirement benefits and the next question is whether that retirement benefit given to him will be exempt from income tax.
As far as I can recall, the CEAP Retirement Plan provides for age 60. But it does not provide that you must have X number of years of service. So in that case, if it is the age requirement, you must be age 60. But I suppose the employer can also waive that and reduce it. Under the CEAP Plan, there is such a thing as an early retirement provision that may very well come into play in that situation.
QUESTION: Is it alright to use the word “rental” in our contract with consignors as regard to school canteen?
REPLY:
Definitely it is not, unless you really want to commit suicide or you want to contribute to Gloria Macapagal-Arroyo’s budget. That is a dirty word, whether you are renting your gymnasium or renting your auditorium or your canteen, the moment you use “rental” you are subject to the following horrible consequences.
As far as the National Internal Revenue Code is concerned, that is subject to 12% value added tax. Whatever the concessionaire pays you, you must in turn remit 12% of that immediately to the BIR as value added tax. Then the remainder is income, which is taxed at 35%. First it will be taxed at 5%, the concessionaire will withhold 5% and then you must file quarterly an income tax return and if that is the rental income, you will pay 35% minus the 5% that was withheld by your tenant or concessionaire. That is on the national level.
Then after that, another mosquito will drop by and that is from the City Treasurer’s Office and he will say, “since you are now a lessor, you get a Mayor’s Permit graduated according to your income as lessor and then you pay a lessor’s tax which is usually P2 for every P1,000 and you pay all the regulatory fees”. So lahat ng kabuwisitan andyan na.
So I say if it is the canteen do not receive rental, do not agree to get a concessionaire because to be exempt, remember the three conditions – the canteen or cafeteria must be owned by the school, it must be operated by the school and it must be located inside the school premises. If any of those conditions is not met, then the income is taxable. That is why also when somebody says, “Sister, can I use the auditorium for a presentation or the gymnasium for an exhibition game”, you would like very much to help especially if it’s for a good cause, so you can either give it free but then you have to be practical also as an administrator. They would be using electricity, water, you will have security guards watching, you will have janitors cleaning this up after the exhibition game, and that cost money. So it is only natural that you will charge them at cost for the use of utilities and other facilities. Now, that is not rental. But if you make the mistake of saying that is rental, then you have nobody except yourself to blame for it.
QUESTION:What is the standard number of school days in a month, 26.7 or 25 days?
REPLY:
Apparently this is being asked in connection with the computation of the daily rate. There is no law that provides for a monthly minimum wage. But there is a law that provides for a daily minimum wage and it varies from region to region. When an employee is paid a salary, in 90% of the cases, he is paid a monthly salary. And so the question arises, what is his daily wage? If you paying your employees P12T a month, you usually don’t pay them P350 plus P12 as per day so just line up in front of the cashier, but you pay them every 15th and end of the month. You know you’re paying this employee P12T, and you’re paying another employee P10T a month. The question is what is his daily wage, and why is this important?
It is important because number 1, when you compute for retirement, you will have to ascertain the daily wage. When you deduct for absences or tardiness, it will have to be based on daily wage. If you require them to work for overtime, you will have to compute on the basis of daily wage. So the next question is, what is the daily wage of an employee who is paid P12T a month?
The answer is it depends. If the practice of the employer is to pay the employee for seven days a week, even if he works only for five days a week, then the daily wage is simply the P12T divided by 30 days. So if you want to be very exact you say, P12T times 12 months equals P144T divided by 365 days. If the employee works five days a week but the employer agrees to pay him for six days a week then that employee, even if he receives also P12T like the first employee, has a different daily wage. If you want to shortcut it, you just say P12T a month divided by 26 days which means 30 days in the a month minus the four Sundays. Now if you want to be very accurate, you say, P12T times 12 equals P144T a year, divided by 314 working days, including holidays. If that employee works only five days a week and is paid five days a week, then even though he receives P12T a month, his daily wage is obviously much higher than the employee who is being paid for 30 days at a monthly salary of P12T. So the answer there is it depends on what is the practice of the school.
QUESTION: Please explain more clearly regarding benefits or discounts of tuition fees of children of employees. Are they taxable?
REPLY:
The withholding tax regulations which is Revenue Regulations No. 2-98 and 3-98 expressly provides that among benefits of employees, a scholarship granted to an employee represents income to him, unless it is granted for the benefit of the employer and that is shown by the fact that he is made to agree to teach, let us say, for so many years in exchange for the scholarship. Otherwise it is additional income subject to withholding.
When it comes to scholarships or discounts given to children of employees, the withholding tax regulation says, “the amount of the discount or the scholarship is income to the employee and therefore added to the regular salary and the total amount is then subjected to withholding”. In other words, it is no difference when the school says to the three children of the employee, “as the first child you are exempt from the P30T tuition”, and if the school had given the employee P30T and the employee used the amount to pay for the tuition of his first child. The same is true on the 50% or the 25% discount.
The exception is if the scholarship was given for academic reasons or academic excellence. Then it is being given not because she is the child of an employee but because of his superior academic performance. No difference than if you give scholarships to valedictorians and salutatorians transferring from other schools to your school.
Can the school, out of mercy and pity for the employee, not include it in the withholding? The school can do so but the school will have to pay for what it forgot or refused to withhold and it will be paid with surcharges and penalties. So the school has no choice except to include the value of the tuition fees, scholarships or discount of the employee.
Other congregations after considering the plight of their employees, their lay co-workers, have tried to look for solutions. One possible solution I said was that the schools could contribute to a scholarship fund of the congregation and then this scholarship fund is used by the congregation to pay for the tuition of the children of the employees. Then that would be exempt because the economic benefit of the employee resulting from the scholarship of his child is being given not by his employer but by the congregation, or by a third party. That is one possible solution.
QUESTION: Do you include probationary period in counting one year of service in giving service incentive leave?
REPLY:
The answer is yes.
QUESTION: Is CEAP contribution deductible from taxable income just like SSS?
REPLY:
If you mean if it is an expense under the profit and loss, yes, it is definitely deductible. But since you are a non-stock, non-profit school the question of taxable income does not even come into play because you are tax exempt in the first place.
QUESTION: Can a college faculty who is not a master’s degree holder become a permanent teacher after three consecutive years of service?
REPLY:
The answer is no because Joint Order No. 1 series of 1996 of the Department of Labor, the CHED, the DepEd and TESDA specifically provides that an employee who does not possess the minimum academic qualifications can never become permanent and in fact, and this is my addition to that law, may be replaced when a qualified employee becomes available. Since the Manual of Regulations for private schools in the Tertiary Level requires that a professor must have at least a Master’s Degree in his major field. And if this professor does not, then he cannot become a permanent teacher.
QUESTION: Is there a demotion in rank when a principal is transferred from a school with a bigger population to a school with a smaller population? Could an employee be sued for constructive dismissal by transferring an employee from one school to another?
REPLY:
As to the first question, let me clarify. The tenure or permanent status of a member of the academic staff of a school relates to his being a teacher. If aside from being a teacher he is being given administrative work like coordinator, adviser, moderator, assistant principal or principal, he does not acquire a second tenure to that administrative position. In fact only two days ago, we receive a decision of the Supreme Court in the case of Aklan College where this person was not only a professor in the college department but also acting dean and acting personnel manager. He went on leave for one year and when he came back he told the school, “I want to resume my position as Dean and Personnel Manager”. The president, Msgr. Depra said, “I am sorry, we have reviewed your files and since you do not have the master’s degree, you cannot be Dean anymore. And as regards to being Personnel Manager, you were acting personnel manager in the meantime, but during your leave we already got a permanent personnel manager”. Incidentally, Msgr. Depra also told him, “but please resume your teaching position”. So he sued for illegal dismissal and the long and short of it is, according to the Supreme Court his tenure or permanent status related to his being a professor. He did not acquire tenure in an administrative position therefore the school was free to replace him once his term as acting dean or acting personnel manager come to an end. And since these were acting positions in fact, according to the court, these can be terminated at will by the end.
Is there a deduction in rank? In a school system, like the La Salette System or the school system of the Diocese of San Pablo, when there is one integrated system and a principal of one school is transferred to another school, there is no demotion and therefore there is no constructive dismissal provided there is no loss, as they say, in rank pay or privilege. But is rank dependent upon the population of the school? Obviously not because, if the pay is not reduced whether you’re teaching in Liceo de San Pablo which has 5,000 students and you’re transferred to Liceo de Luisiana which has only 500 students, if there is no reduction in your pay and privileges then obviously there is no constructive dismissal or demotion. But if the transfer involves extra hardship, for example, if he is a teacher who just commutes or walks to school from his house and suddenly he is transferred as principal of a school which is two hours away by jeepney or from his house, then obviously there is a substantial change and if he does not agree, he cannot be forced to accept the transfer. And if he is forced, he can sue for constructive dismissal.
QUESTION: Our personnel and administrative manual provides that the retirement age of the employee is 60. But we still have one teacher who is 61 but continues to teach because she is made as a consultant through an agreement made by the BOT when she reached 60. What do you think is the role of a consultant in the school? Is the teacher still entitled to a merit increase this year for her performance last school year? One retired employee is rehired after six months of retirement to train a replacement in the registrar’s office and a contract was made for this purpose. Please give your advice.
REPLY:
When an employee reaches retirement age, he should be retired. Although as I said, the school has every right if it wants to, to extend the retirement age on a case-to-case basis. But I have always advised against that because it tends to be very expensive. Because at age 60, you retire the employee and you pay the retirement benefits. If you still need the employee, you can rehire her on a case-to-case basis, on a year-to-year basis. In that way, the subsequent years are no longer subject to retirement pay. Unless she’s age 60 and she completes another 5 years, in which case you have to pay additional retirement pay. Now, why do schools hire retired people as consultants?
The culprit there is probably the person here in front of you because very often the school needs some teachers with PhD, who have proven skills in teaching or administration and who are still in the process of teaching other teachers. When the school needs her services, there is no law that prohibits the school from rehiring a retired teacher. But at that point, the school has to make two choices depending on its agreement with the retiree. If the school simply retires this retiree, and he is rehired immediately after retirement, then according to some of the rulings of the Department of Labor, which I consider as usual wrong, it is as though he never retired. So that when he retires at age 65 finally, the DOLE says compute his retirement from day one to age 65 and deduct what you paid at age 60. So the five years are subject to retirement pay and that becomes very expensive. That is one situation. That is why I always suggest that there be at least a one-year or six-month gap to avoid the rulings of the Department of Labor on this point.
Secondly, if you rehire an employee and he is still below age 65, the SSS law comes into play and it says, “one who is retired below age 65 and is rehired will again resume contributions to the SSS like any other employee, which means also his employer, and on top of that, his monthly pension is suspended.” So kawawa naman. So if this teacher who was receiving P15T was retired and received his retirement pay and starts receiving on the very month of retirement, let us say, a monthly pension check of P10T, if you rehire her at P15T which was her salary at the time of retirement, that is fine, she gets P15T but she will lose also the P10T SSS check. That is why to go around that, do not hire her as an employee, hire her as a retainer or a consultant. In that way she is not your employee but she can perform much of the work she used to perform before her retirement, and she can even teach an understudy. In that way, she continues to receive her P10T monthly pension check plus the P15T you agreed to pay her, only this time it will not be called a salary but an honorarium or retainer fee.
QUESTION: The National Statistic Office has been asking from our school a copy of our financial statements every quarter. Do they have the right to ask one from us? Or are we obliged to submit to them? This started in April 2007 and from then on, they always remind us to submit the documents.
REPLY:
Frankly, this is the first time I hear about this and I doubt very much whether the NSO has a right to require this. The monthly financial statement is required only by the BIR because there is a law or a regulation to that effect. Even the SEC requirement, the CEAP is now questioning.
QUESTION: Can the CEAP employee’s contribution be excluded in the computation of the tax?
REPLY:
The answer is no because that is your personal contribution. The employer’s contribution, which benefits you, is excluded in the computation, but not your contribution.
QUESTIONS / QUERIES REGARDING FAMI
QUESTION: From a Notre Dame school in Mandanao
In Mindanao, First Metro Asset Management Inc. is not there. Where can we secure an application for an initial investment?”
REPLY:
Application Form can be downloaded from our website: www.fami.com.ph, While we are finalizing arrangement with Metrobank so that application form can be distributed through all Metrobank branches all over the Philippines. Once you have downloaded your application form, you can accomplish this and go to any Metrobank branch and deposit your placement in our specified account, which you will see in the application form. Another way is for you to directly send your application form to our office in Makati, the complete address is indicated also in the application form, via pouch service. While you are having merienda, our people from FAMI who are present here, Mr. Hector De Leon, COO of FAMI and then Mr. Valeroso, Vice-President of FAMI, will go around and distribute their calling cards and marketing materials so you will know more about FAMI and the mechanics of investing in the mutual funds being managed by FAMI.
QUESTION: Aside from using mutual funds as part of the CEAP Retirement Fund portfolio, for what other purpose can a school use mutual funds?
REPLY:
I don’t know if I understand fully well the question, but let me answer by saying that all schools that are members of CEAP are technically investors to FAMI through the CEAP entity. But this does not prevent all the member-schools of CEAP from bilaterally investing in any of the funds managed by FAMI, either Save and Learn Equity Fund, Save and Learn Fixed Income Fund and Save and Learn Balanced Fund. The other half of the question asked “for what other purpose can a school use mutual funds” – well they can use mutual funds as their primary investment outlet to deploy their excess resources and then earnings from these investments can be used for general purposes like for example renovation of the school or pursuing other programs that are consistent with your mandate and business objective.
Mr. Aseneta: Thank you very much for the questions that were presented. It is unfortunate that some of the written questions cannot be addressed at this time because of the limitation of time, but I will forward these questions to Atty. Padilla and probably if he would have an extra time later on, maybe you could refer to him directly the questions that you submitted for his clarification.
Atty Padilla:As is the practice in previous years, my flight is at 8 in the evening so between now and 8, they say, “Atty. Padilla will hear confessions”. So if you are too embarrassed to stand on the floor and ask questions, when we adjourn I will be outside and I’ll be ready to answer questions that you may have.
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