Terminal Leave Benefits for Reappointed Government Employees Under Philippine Civil Service Rules

Overview

Terminal leave benefits (TLB) are the cash value of all unused, earned vacation and sick leave credits that a government employee is entitled to upon separation from government service. The benefit is a property right arising from services already rendered and is generally fully commutable (no cap), subject to lawful deductions.

The central question for reappointed employees is whether a subsequent appointment (to the same or another agency) blocks or allows payment of terminal leave. The short answer:

No separation, no terminal leave. If there is no break in service, leave credits are transferred—not paid.
Any break in service (even a single calendar day with no government appointment in force) generally triggers TLB from the separating agency.
Special rules apply for movements to elective office, different leave systems, abolition/reorganization, and expiration of appointments.

This article synthesizes the governing principles from the Administrative Code, the Omnibus Rules on Leave and their amendments, Commission on Audit (COA) issuances on computation and funding, and consistent Civil Service practice.

Legal Bases (high-level)

1987 Administrative Code, Book V (Civil Service)
Omnibus Rules on Leave (as amended by various CSC Memorandum Circulars/Resolutions)
COA rules on terminal leave computation and funding (including prescribed constant factor and documentary requirements)
Related DBM budgetary rules on funding sources and BIR rules on taxation (summarized below)

(Citations above are referenced generically; agencies should rely on their latest official copies.)

Who Is Covered

Covered: Non-teaching, non-uniformed national government employees, LGU personnel, and GOCC/GFI/GIP employees who accrue vacation and sick leave under the Omnibus Leave Rules.

Not covered / special systems:

Public school teachers (Proportional Vacation Pay system);
Uniformed personnel (PNP/AFP/BFP/BJMP, etc., with separate leave laws);
Barangay elective officials (honoraria-based).

Where an employee moves into or out of a special system, see Transfers across different leave systems below.

When Terminal Leave Is Payable (Core Rule)

TLB is payable only when the employee is separated from government service by:

Retirement (optional/compulsory)
Resignation
Death (payable to heirs)
Expiration of term/appointment (including non-renewal of temporary/casual/contractual appointments)
Abolition/reorganization (resulting in actual separation)
Termination for cause (earned credits remain but may be applied to lawful money claims/deductions)

Key test: Was there a real break in service? If yes, pay TLB. If no (continuous government employment), transfer the leave credits and do not pay TLB.

Reappointment Scenarios (With Practical Examples)

1) Reappointment with no break in service (same or different agency)

Effect: No TLB. All earned leave credits must be transferred to the new position/agency; service is continuous.
Examples:
- Separation is effective 11:59 p.m. June 30, and the new appointment takes effect 12:00 a.m. July 1 (no calendar day in between).
- Same-day movement within the same agency (e.g., promotion, reclassification, change in status from temporary to permanent).

2) Reappointment after a break in service (even one day)

Effect: TLB payable by the last employer for all accumulated credits as of the separation date.
Example: Contract ends June 30; new appointment starts July 2. July 1 is a break, so TLB is due from the former agency; the new appointment begins with zero carried credits.

Weekends and holidays count. If you separate on a Friday and your next appointment starts on Monday, the Saturday/Sunday gap is a break. TLB is payable.

3) Back-to-back renewals without a gap

Effect: If the next appointment immediately follows the prior one (no intervening calendar day), treat as continuous; no TLB, credits are carried over.

4) Movement to elective office

Effect: Upon assumption to an elective post, the appointive position is vacated; TLB is payable for accrued credits from the appointive service. Credits do not transfer to the elective post.

5) Transfers across different leave systems

Effect: If moving into a system that does not recognize/accept the same leave credits (e.g., to PVP-based teaching service), the change is treated as separation from your old leave system; TLB is payable by the previous agency.
Conversely, moving from a special system into the standard Omnibus Leave system triggers the rules of that source system (often no transferable credits; no TLB unless their rules allow).

6) Abolition/Reorganization

Effect: If a plantilla item is abolished and the employee is not given an immediate new appointment, the separation triggers TLB. If a seamless placement occurs without a break, credits are transferred, not paid.

7) Dismissal/Separation for cause

Effect: Earned credits are generally retained and commutable to TLB; however, the agency/COA may offset lawful government claims (e.g., cash advances, audit disallowances, restitutions) before releasing net TLB.

Transfer of Leave Credits (No TLB Case)

When there is no break in service, the separating HR unit must:

Certify the employee’s leave ledger/card and service record (inclusive dates, credit balances by type).
Transmit these to the new agency’s HR/Payroll for carry-over entry.
Not process TLB; doing so would cause double benefit (cash + carried credits), which COA will disallow.

What Counts as “Separation” vs “Continuous Service”

Continuous: There is no calendar day when the person is not a government employee. Consecutive effectivity dates (yesterday’s separation, today’s assumption) = continuous.
Separation: Any calendar day with no appointment in force—including weekends/holidays—constitutes a break and triggers TLB.

How Terminal Leave Is Computed

Coverage: The total of vacation + sick leave credits (in days) earned but unused as of the separation date.
Rate base: The highest monthly salary actually received at any time during the employee’s government service (not limited to the last salary), as recognized by COA rules.
Formula: COA prescribes a constant factor (CF) that converts monthly salary to the cash value per leave day. Agencies apply:

[ \textbf{TLB} = \big(\text{Highest Monthly Salary}\big) \times \big(\text{Total Leave Credits in Days}\big) \times \text{CF} ]

Your HR/Accounting will use the then-current COA-prescribed CF. Do not substitute daily-rate shortcuts; use the official factor.
Deductions: Lawful deductions (e.g., unpaid obligations, audit disallowances, tax if applicable) are taken before release.

Funding and Processing

Funding source: The separating agency charges TLB to its personal services (PS) or other lawful funding source in accordance with DBM/COA rules. In LGUs, observe the Personal Services cap and local budget ordinances.

Standard documentary requirements (typical):

Service Record (complete and updated)
Certified Leave Card/Ledger (showing balances to date)
Computation Sheet (HR/Accounting with CF and salary base indicated)
Clearance (property, financial, legal)
Vouchers/OBR with approvals
Proof of separation (appointment expiration, acceptance of resignation, retirement authority, assumption to elective office, etc.)
For death claims: Heirship documents (e.g., SPA, Affidavit of Heirship, or court papers) and Death Certificate

Timelines: There’s no single statutory number of days, but expeditious processing is required under civil service norms of prompt, courteous, and adequate service. Unreasonable delay may constitute administrative liability.

Tax Treatment (Practical Guide)

General rule in practice: Terminal leave pay of government personnel, when paid by reason of separation/retirement, has been treated as non-taxable under prevailing BIR rules/issuances applicable to government leave commutation.
Caveat: Tax treatment depends on current BIR regulations and specific facts (e.g., monetization vs terminal leave upon separation). HR/Accounting should apply the latest BIR guidance and withhold only if required. When in doubt, seek a written ruling or your RO’s/LGU’s RDO confirmation.

Frequently Encountered Edge Cases

Expiration of Temporary/Casual Appointment → Immediate Reappointment Next Day

No break, no TLB, credits carry over.

Expiration on Friday → New Appointment on Monday

Break exists over weekend, TLB payable by the old agency.

Separation then Reappointment after two months

Old agency must pay TLB at separation; new agency cannot accept carry-over credits.

Change in Status (Temporary → Permanent) within same agency

No separation, no TLB; credits remain.

Movement to Elected Post (e.g., elected as Mayor)

TLB payable from appointive service; credits do not carry to elected post.

Employee with Pending Audits/Property Accountability

Agency may withhold TLB only to the extent of lawful claims; must release the net balance once liabilities are settled/offset or absent.

Death of Employee with Subsequent Posthumous Appointment Issue

Death fixes the separation date; TLB accrues to heirs, unaffected by later HR paper corrections.

Practical Compliance Checklist (HR/Accounting)

Confirm separation vs continuous service (check effectivity dates precisely).
If continuous, prepare carry-over documents; do not process TLB.
If separated, compute TLB using highest monthly salary and COA CF.
Secure clearance and check for lawful offsets; compute net TLB.
Ensure funding availability and proper charging (PS or other lawful source).
Process vouchers and release promptly.
For inter-agency moves, promptly transmit leave and service records.

Do’s and Don’ts for Reappointed Employees

Do:

Track your effectivity dates to know if a break will occur.
Keep a personal copy of your leave ledger and service record.
Clear accountabilities before separation to avoid delays/offsets.

Don’t:

Assume you can choose between TLB and carry-over; the rule depends on break vs continuity.
Request both carry-over and TLB—COA will disallow double recovery.
Delay claiming death benefits—coordinate early with HR/Accounting for heirs’ documentation.

Model HR Language (for Notices)

“Upon your separation effective [date], your earned vacation and sick leave credits totaling [XX.XX] days shall be commuted to cash as terminal leave benefits pursuant to civil service and COA rules, less lawful deductions. If you are reappointed without break in service, your leave credits shall be transferred to your new appointment and no terminal leave shall be paid.”

Key Takeaways

Separation triggers TLB; continuous service blocks it.
One calendar day without an appointment counts as a break.
No double benefits: either carry-over (no break) or TLB (with break).
Use the COA formula with the official constant factor and the highest monthly salary.
Expect lawful offsets, ensure proper funding, and process promptly.

This article is a practical, doctrinal summary for HR officers, accountants, and employees navigating terminal leave in the context of reappointments. For unusual fact patterns (e.g., mixed service, partial disallowances, or conflicting dates), coordinate with your HRMO, Accounting, and COA cluster for case-specific guidance.