Can a State University Withhold Salary Pending Clearance? (Philippines)

Executive summary

As a rule, no government agency—including state universities and colleges (SUCs)—may withhold a salary that has already been earned, except in situations expressly allowed by law or regulation (e.g., valid suspension, court/COA-ordered set-off for accountable shortages, lawful deductions). “Clearance” is a legitimate exit/separation control (e.g., when resigning, retiring, or transferring). It is not a blanket license to delay the regular, ongoing pay of someone who is actively reporting for work and not under a lawful pay-affecting order. When a clearance check is required for the release of terminal pay (last salary differential, leave monetization, loyalty/retirement benefits), temporary withholding is generally permissible until accountability is settled, but the delay must be reasonable, necessary, and proportionate, with due process observed.

Legal framework and key principles

1) Right to compensation for services rendered

Government compensation is set by law and appropriation. Once services are rendered under a valid appointment and there is no legal cause to withhold, salary becomes a demandable obligation.
Deductions from salary must have a legal basis (e.g., taxes; GSIS/PhilHealth/Pag-IBIG; court-, COA-, or lawful agency-authorized deductions; written employee authorizations allowed by policy).

2) Clearance as an internal control

“Clearance” verifies that an employee leaving, transferring, or going on long leave has no outstanding money/property accountability (e.g., unreturned equipment, books, records; unliquidated cash advances; payroll overpayments).
SUCs may require clearance for separation-related releases—last pay, terminal leave, bonuses, loyalty/retirement benefits, and similar—but clearance should not be used to stall regular, current salaries of employees who are still reporting for duty.

3) When withholding may be lawful

The following are the typical, legally recognized bases for delaying or setting off compensation. Each requires documentation and due process:

Valid suspension
- Preventive suspension or penalty suspension issued under civil service/administrative discipline rules lawfully stops pay for the covered period. If later exonerated, back salaries/benefits may be restored per applicable rules.
Unliquidated cash advances / accountable shortages
- Employees who received a cash advance (travel, petty cash, special disbursing functions) or are accountable officers (cashier, property custodian) may have compensation or benefits temporarily withheld or set off to enforce liquidation/settlement, consistent with COA rules.
Established payroll overpayment
- If an agency determines an overpayment (e.g., step increment error), it may recoup via payroll adjustments or offset, subject to notice and a reasonable repayment scheme.
Final/terminal pay pending clearance
- For resignations, retirements, transfers, or dropping from the rolls, SUCs may hold the release of terminal pay and benefits until money/property accountabilities are cleared.
Court/COA directives, writs, or lawful liens
- Salaries/benefits may be affected only to the extent ordered by a competent authority (e.g., COA disallowance with personal liability; lawful garnishment for allowances that are not exempt by statute).

4) When withholding is not justified

“No clearance, no salary” as a blanket rule for active, reporting employees with no pay-affecting order.
Pending administrative investigation alone (without a valid suspension order).
Speculative claims (e.g., “we think you might owe” without audit/verification).
Indefinite delays in processing separation benefits when the employee has no outstanding accountability.

5) Due process and reasonableness

Any withholding must satisfy:

Notice of the factual/legal basis (e.g., unliquidated advance, inventory shortage).
Opportunity to be heard and to liquidate/return within a reasonable time.
Proportionality (withhold only what is necessary; avoid blanket stoppage of unrelated pay).
Timeliness (prompt audit/clearance; avoid undue delay).
Documentation (clear memos, audit findings, receipts, inventory reports).

SUCs in particular: governance and boundaries

SUCs operate under their charters and Board of Regents (BOR) policies, but they remain subject to national rules on civil service, budgeting, and audit.
A BOR resolution cannot override the Constitution, statutes, civil service regulations, COA rules, or DBM issuances.
SUC-specific clearance forms/policies are valid only insofar as they align with national law (e.g., scope limited to terminal pay, not routine salary).

Practical scenarios

A. Still reporting for work; HR asks for “clearance” to release the monthly salary

General rule: Not proper. Clearance is an exit control, not a monthly payroll prerequisite.
Exception: If there is a specific, documented basis (e.g., cash advance liquidation already overdue) and the agency chooses to offset or withhold a portion consistent with audit rules and due process. Even then, the agency should limit withholding to what is necessary and process the remainder of the pay.

B. Resigning faculty member with an unreturned SUC laptop and an unsettled travel cash advance

The SUC may withhold terminal pay/benefits until the property is returned and the cash advance is liquidated/refunded.
The employee may request partial release (e.g., net of established accountabilities) if the figures are final and documented.

C. Employee under administrative investigation, no suspension order issued

Salary continues. Investigation alone is not ground to withhold pay. The appointing authority must issue a lawful suspension (preventive or penalty) for pay to stop.

D. Dropped from the rolls (e.g., prolonged AWOL), with pending lab equipment under accountability

No work, no pay applies going forward. For terminal pay, the SUC may require clearance and withhold until accountability is settled.

What SUCs and HR/Accounting should implement

Clear, written policy distinguishing:
- Monthly payroll (not conditioned on “clearance” for active employees), versus
- Terminal/benefit releases (subject to clearance for accountabilities).
Accountability tracking
- Maintain updated property and cash advance ledgers; issue timely demand letters; provide reasonable liquidation windows.
Due-process templates
- Standard notice for unliquidated cash advances/shortages; reply periods; options for repayment plans; partial releases when appropriate.
Cut-off calendars
- Align payroll and clearance timelines so employees can comply before separation dates; avoid bottlenecks.
Escalation and documentation
- If withholding is necessary, issue a formal memo citing the specific rule and amount involved, and keep a paper trail for COA/CSC review.

What employees can do if pay is withheld

Ask for the legal basis in writing
- Request the specific rule, amount, and documents relied on (e.g., audit memo, inventory record).
Cure the accountability
- Liquidate cash advances promptly; return property; propose a reasonable repayment schedule if needed.
Use the internal grievance system
- File through the SUC’s Grievance Machinery to question the withholding or seek partial release.
Civil service and audit remedies
- CSC: personnel action issues (e.g., alleged illegal suspension affecting pay).
- COA: money claim for salaries/benefits wrongfully withheld or disputes involving liquidation/disallowance.
Document everything
- Keep copies of receipts, return slips, liquidation reports, and correspondence.

Frequently asked questions

Q: Can an SUC adopt a policy that “no clearance, no salary” every month? A: For active employees, no—that practice is generally improper. Clearance is for separation/terminal releases or specific, documented accountabilities (handled with due process), not for routine payroll.

Q: We discovered an overpayment last year. May we recover by netting against current pay? A: Yes, subject to notice, computation transparency, and a reasonable recovery plan. Employees should be allowed to contest the computation.

Q: What about preventive suspension? A: A validly issued preventive suspension halts pay during the period. If the employee is fully exonerated, back salaries may be due under the pertinent rules.

Q: If I’m resigning and all accountabilities are cleared, can my SUC still hold my terminal pay “pending clearance”? A: No. Once the SUC certifies clearance, it should promptly release terminal pay/benefits per processing timelines.

Q: Can the SUC withhold my entire salary because I owe part of a cash advance? A: Withholding should be limited to what is necessary and supported by documents. Agencies should avoid blanket stoppage when a partial set-off or repayment plan suffices.

Bottom line

Routine pay for active service should not be tied to “clearance.”
Terminal pay/benefits may be conditioned on clearance to settle property/money accountabilities.
Any withholding must have clear legal basis, due process, proportionality, and documentation.
Disputes go through grievance, CSC, and/or COA channels depending on the nature of the issue.

(This article provides a structured overview for general guidance in the Philippine public sector context. For specific cases, review the agency’s issuances and the latest CSC/COA/DBM rules and jurisprudence.)