In the Philippine legal landscape, the compensation of local government officials and employees is governed by a delicate balance between local autonomy and national standardization. The question of whether a Local Legislative Body (Sanggunian) can pass an ordinance granting salary increases effective retroactively is a recurring issue in administrative law and public fiscal management.

1. The General Rule: Prospectivity of Ordinances

As a fundamental principle of law, statutes and ordinances are intended to operate prospectively. This is rooted in the concept of due process and the need for fiscal certainty.

In the context of local government finance, the Local Government Code of 1991 (Republic Act No. 7160) and the rules set by the Department of Budget and Management (DBM) generally require that salary adjustments be supported by an appropriation and take effect only upon the fulfillment of legal requirements, such as the posting or publication of the ordinance.

2. The Role of the Salary Standardization Law (SSL)

The primary authority for salary increases is the Salary Standardization Law. While LGUs enjoy "local autonomy," this power is not absolute. Under Section 81 of R.A. 7160, the compensation of local officials and employees shall be determined by the Sanggunian, provided that:

It does not exceed the maximum salary rates established by law.
It complies with the budgetary limitations on personal services (PS) (45% for 1st-3rd class LGUs; 55% for 4th-6th class).

When the President issues an Executive Order (EO) mandating a national salary adjustment (e.g., the various tranches of the SSL), the EO usually contains a specific provision authorizing LGUs to implement the same, subject to the availability of local funds.

3. Conditions for Retroactivity

Retroactive salary increases are generally viewed with disfavor unless specifically authorized by a national mandate. However, they may be considered valid under the following circumstances:

National Mandate: If a National Law or Executive Order specifically provides for a retroactive effectivity date for salary adjustments and expressly includes LGUs in that scope, the local ordinance may mirror that retroactivity.
Correction of Error: If the retroactivity is intended to correct a previous clerical error or a clear miscalculation of a legally entitled rate, it may be upheld.
The "Vested Right" Theory: If the law providing for the increase was already in effect at an earlier date, but the LGU delayed the passage of the enabling ordinance, the Sanggunian may, in certain jurisdictions, provide for retroactivity to the date the national law allowed it, provided the funds were already appropriated or available.

4. Jurisprudential and Administrative Constraints

The Commission on Audit (COA) frequently disallows retroactive pay increases that lack a specific legal basis. The following are the most common grounds for disallowance:

The Rule Against Additional Compensation: Article IX-B, Section VIII of the 1987 Constitution prohibits elective or appointive public officers from receiving additional or double compensation unless specifically authorized by law. Retroactive pay is often scrutinized as a form of "gift" or "bonus" for past services already rendered and paid for.

Key Limitations:

Budgetary Realities: An LGU cannot retroactively increase salaries if the prior year's budget did not have the corresponding appropriation. An ordinance cannot create a "debt" for the LGU for services already fully compensated under the then-existing budget.
Public Notice: Under Section 59 of R.A. 7160, an ordinance must be posted or published. Retroacting an ordinance to a date prior to its enactment often clashes with the requirement that the public and the affected employees must be notified of the law before it governs them.

5. The DBM Guidelines

The DBM issues Local Budget Circulars (LBC) following any national salary adjustment. These circulars serve as the definitive guide for LGUs. Typically, these circulars state that:

The salary adjustment shall take effect on a date specified by the Sanggunian, but not earlier than the date of the national mandate.
The LGU must first pass a Supplemental Budget to cover the increase if the Annual Budget is insufficient.

6. Conclusion

While a Local Government Unit has the power to increase salaries, the validity of a retroactive increase depends entirely on the existence of a national law authorizing such retroactivity and the strict adherence to the Personal Services (PS) limitation. Without an express grant from Congress or the President, a Sanggunian ordinance providing for retroactive pay is highly susceptible to being declared ultra vires (beyond its power) and subsequently disallowed by the Commission on Audit.