Legality of Withholding Salary for “Clearance” in State Universities and Colleges (SUCs) in the Philippines

This is general information, not a substitute for advice from your counsel or your university’s legal office.

Executive summary (key takeaways)

General rule: Salary already earned by a government employee may not be withheld merely for failure to secure “clearance,” especially while the employee remains in active service.
Permissible holds/deductions are those grounded in lawful authority (statute, the General Appropriations Act, COA rules, CSC/DBM issuances, or a court/COA order), e.g., taxes, GSIS/PhilHealth/HDMF, authorized loan deductions, and set-off for liquidated money accountabilities to the Government (e.g., unliquidated cash advances, audit disallowances)—with due process.
Clearance is primarily an exit control (upon separation/transfer) to ensure return of government property and settlement of obligations. It can justify holding final/terminal pay pending verification of liabilities, but it does not license a blanket “no clearance, no salary” policy for regular monthly pay.
Unlawful practices include: indefinite holds with no legal basis; using salary to collect private debts (e.g., cooperative/library/faculty club) without written consent or legal authority; and holding pay to compel return of property without affording due process.
Remedies: Employees may invoke agency grievance processes, seek administrative relief before the CSC, pursue money claims with COA for amounts due from government, or file appropriate actions if constitutional or statutory rights are infringed.

Who is covered (SUC context)

Plantilla personnel (faculty and administrative staff) of SUCs are civil service employees governed by the 1987 Constitution, Administrative Code of 1987 (EO 292, Book V), RA 6758 (Salary Standardization Law), RA 8292 (Higher Education Modernization Act), the annual GAA, and COA/CSC/DBM rules.
Job Order (JO)/Contract of Service (COS) workers in SUCs are not civil service employees; they are paid from MOOE through disbursement vouchers and governed by COA/DBM guidelines and their contracts. Their pay can’t be withheld without legal basis either, but some civil service remedies do not apply to them.

“Salary,” “benefits,” and “clearance”: working definitions

Salary/compensation: Periodic pay for services actually rendered, plus standard allowances (e.g., PERA), subject to no-work-no-pay and mandatory deductions.
Terminal pay/benefits: Last salary, terminal leave benefits, proportionate 13th month/year-end bonus, loyalty/retirement benefits, refunds, etc., computed at or after separation.
Clearance: A documentation process—typically required on exit or transfer—to confirm no outstanding money or property accountabilities (e.g., library books, equipment, unliquidated cash advances, dorm fees) and no pending administrative/court orders affecting pay.

The legal framework in plain language

1) Constitutional and civil service bedrock

Government pay is standardized and protected by law. Employees enjoy security of tenure and are entitled to compensation for work done. Absent a lawful basis, agencies cannot refuse to pay earned salary.

2) COA’s money-accountability regime (auditing law)

SUCs and their personnel are subject to COA rules. Where an employee has a liquidated, demandable money accountability to the Government (e.g., unliquidated cash advance that has become due, audit disallowance/refund, cash/property shortage), the Government may offset from amounts due to that employee—after notice and opportunity to be heard, and based on proper findings.
The right of set-off is a limited, law-based exception to the general rule against withholding salary.

3) The General Appropriations Act & authorized deductions

The GAA and implementing rules routinely allow only specific mandatory deductions (BIR withholding tax, GSIS, PhilHealth, HDMF/Pag-IBIG) and other deductions authorized by law/MOAs (e.g., authorized cooperative or union dues) with the employee’s written consent.
Private debts (e.g., to a campus cooperative, faculty association, bookstore) cannot be collected by unilateral salary hold unless covered by law, writ, or a signed payroll deduction authority.

4) CSC rules on attendance, suspensions, and due process

No work, no pay and preventive suspensions (when allowed by law) mean salary is simply not earned for those periods—this is not “withholding.”
For administrative liabilities affecting pay (e.g., forfeiture), due process and a lawful order are required before deductions or non-payment.

5) RA 8292 and SUC corporate powers

SUCs, through their Boards of Regents/Trustees, may adopt clearance policies to protect government property/funds. These policies cannot override constitutional/statutory rights or COA/CSC directives regarding payment of earned salaries and scope of allowable deductions.

What SUCs may—and may not—do

A. Generally permissible

Require exit clearance before releasing final/terminal pay and employment records, to verify liabilities.
Withhold/offset amounts equal to a liquidated and demandable government claim (e.g., unliquidated cash advances past due, audit disallowances) after due process.
Apply mandatory deductions (tax, GSIS, PhilHealth, HDMF) and employee-authorized deductions (e.g., cooperative loans with signed payroll authority).
Stop pay for unworked days (no-work-no-pay), for a valid suspension, or if the employee has separated (no further services rendered).

B. Generally impermissible

A blanket “No clearance, no salary” policy for ongoing monthly salaries of active employees.
Indefinite holds or “administrative liens” on salary in the absence of specific legal authority or COA-recognized liability.
Using salary to collect private or contractual obligations (e.g., library fines, dorm arrears, cooperative dues) without written authorization or a lawful order.
Punitive withholding of pay to coerce return of property or submission of documents without due process.
Over-withholding beyond the actual, liquidated claim or without clear computation and notice.

How a legally sound clearance works in practice

Trigger: Separation/retirement/transfer (or, for JOs/COS, contract end).
Inventory & certification: Units (Accounting, Supply/Property, Library, ICT, Cashier, Research/Grants, Student Affairs for dorm charges, etc.) certify no accountability or identify specific liabilities (money/property).
Notice and due process: For money/property findings, the employee is notified and allowed to explain/contest and cure (return property, liquidate, or pay).
Computation: Agency computes net terminal pay = gross entitlements minus lawful deductions minus law-based set-offs (if any), with breakdown furnished to the employee.
Partial release: If only part of the amount is disputed, SUC releases the undisputed portion and holds only the amount corresponding to a liquidated claim.
Escalation to COA: Disputes on liability or set-off may be referred to COA; absent a clear basis, SUC should release and pursue collection under regular audit/collection procedures.

Special situations

1) Unliquidated cash advances

Agencies may disallow further cash advances and offset matured, unliquidated amounts against money due the employee (including terminal pay) after notice. If the amount exceeds what’s due, the employee remains personally liable for the balance.

2) Audit disallowances/refunds

If an employee received a benefit later disallowed, the refund may be collected or offset from amounts due after finality of the disallowance and with due process—subject to good-faith doctrines recognized in audit/jurisprudence.

3) Pending administrative/criminal cases

Mere pendency of a case does not automatically justify salary withholding. Only a lawful suspension or a final order affecting pay changes the picture.

4) Library books/equipment not returned

These are property liabilities. The agency should demand return or charge the assessed value (with due process). Salary of an active employee should not be frozen wholesale; any set-off must follow legal requisites and be proportionate.

5) JO/COS personnel

Pay is based on deliverables and contracts (no “salary” under SSL). Agencies should pay for accepted work and may withhold only under contract terms or lawful set-off for government claims; private debts still require consent or order.

Practical compliance checklist for SUC HR, Accounting, and Supply

Policy: Adopt a Board-approved Clearance & Exit Pay policy expressly stating:
- No “no-clearance, no-salary” for current payroll.
- Exit clearance is required for final/terminal pay.
- Only lawful deductions and COA-recognized set-offs are allowed.
Forms & timelines: Standardize clearance forms; give deadlines (e.g., 5–10 working days/unit).
Due process: Serve written notices of findings; allow reply/appeal; document computations.
Partial release: Release the undisputed portion of terminal pay; hold only what is justified.
Documentation: Keep DTRs, property cards, accountability ledgers, and debt authorizations on file.
Coordination: HR (status), Accounting (money claims), Supply/Library/ICT (property), Legal (due process), COA Resident Auditor (complex offsets/disallowances).
Training: Orient supervisors and cashiers on allowable deductions and prohibited holds.

Quick reference: what can be taken from pay?

Item	Current monthly salary (active employee)	Terminal/last pay
Taxes, GSIS, PhilHealth, HDMF	Yes (mandatory)	Yes
Employee-authorized deductions (e.g., cooperative loan with payroll authority)	Yes	Yes
Government money accountabilities (e.g., matured cash advance, final disallowance)**	Only with due process and clear basis; hold limited amount	Yes, with due process; may offset against terminal pay
Private debts without authorization	No	No
General “clearance hold” with no specific liability	No	Not by itself; clearance may delay while verifying, but only until liabilities are determined

Note: “With due process” means written notice, opportunity to answer, and a reasoned determination; for COA-type liabilities, comply with audit procedures.

Common pitfalls (and how to avoid them)

Indefinite holds because a unit has not responded: Set response deadlines; release when units fail to certify without cause.
Over-withholding “just to be safe”: Hold only the computed, supported amount; release the rest.
Using salary to enforce returns of books/equipment: Charge assessed value after due process; do not freeze entire pay.
Skipping consent for private deductions: Always secure written payroll deduction authorities (and allow revocation where applicable).
Failing to distinguish current pay vs. terminal pay: Clearance delays the latter, not the former.

Employee remedies and venues

Agency grievance / SUC HR: First line for disputing a hold and seeking computation/release.
Civil Service Commission (CSC): For acts violating civil service rights (e.g., unlawful withholding related to status/tenure or disciplinary processes).
Commission on Audit (COA): Money claims against the Government or disputes over audit-based offsets/disallowances.
Ombudsman/Courts: For cases of malfeasance, graft, or to review final COA decisions under the proper rules.
Union/Collective negotiation (where applicable): Clarify payroll/clearance rules in CBAs consistent with law.

Model policy language (you can adapt)

Payment of Earned Salaries. The University shall not withhold the regular salaries of active employees on account of general clearance requirements. Payroll shall reflect only deductions authorized by law, written employee consent, or lawful orders.

Exit Clearance & Terminal Pay. Clearance is required for the processing of terminal pay upon separation/transfer. Verified government money or property accountabilities may be offset against terminal pay, after written notice, opportunity to be heard, and a reasoned computation. Undisputed portions of terminal pay shall be released without delay.

Private Obligations. Deductions for private obligations shall be made only upon the employee’s written authorization or by virtue of lawful orders. The University shall not impose punitive holds on salary to compel performance or return of property.

Frequently asked practical questions

Can HR refuse to include an active faculty member in payroll for lack of “clearance” from the Library? Generally no. Require the return/payment via the proper property/accounting process; do not freeze current salary.
Can the SUC hold my last pay because I have an unliquidated cash advance? Yes, to the extent of the liquidated, due amount, after notice and computation; any excess must be released.
What if units won’t sign my clearance? The policy should set deadlines and treat non-responses as no accountability, absent evidence to the contrary.
I owe the cooperative but never signed a payroll deduction authority—can payroll still deduct? No, not without your written consent or a lawful order.

Bottom line

In Philippine SUCs, salary is not a leverage tool for routine clearance. It is earned compensation that can only be reduced or delayed under clear legal authority. Clearance properly operates as an exit mechanism to reconcile liabilities, not as a blanket precondition for paying people who have already rendered work. SUCs should codify compliant procedures, and employees should insist on due process, transparency of computations, and timely release of what is indisputably due.