GSIS v.

Civil Service Commission

June 19, 1995 | Kapunan, J
Rights and Privileges; Right to Compensation

Doctrine: Service in government on a per diem basis, without any other form of compensation or
emolument, is compensation within the contemplation of the term ‘service with compensation.’

Case Summary: Private respondents Matilde L. Belo and Dr. Manuel Baradero wanted to have their
government service credited to avail of retirement benefits. They were paid, however, on a per diem
basis. The SC previously ruled that government service rendered on a per diem basis is not creditable in
computing length of service for retirement purposes. Upon MR, the SC decided that…(See doctrine)

Facts:
 Private respondents Matilde L. Belo and Dr. Manuel Baradero wanted to have their government service
credited to avail of retirement benefits. They were paid, however, on a per diem basis.
 The SC previously ruled that government service rendered on a per diem basis is not creditable in
computing length of service for retirement purposes. In this decision, the SC decides on the motions for
reconsideration filed by both private respondent Belo, and the GSIS, on behalf of both private
respondents.
 Belo was Vice-Governor of Capiz from Jan. 5, 1972 up to Feb. 1, 1988.
1. 01/25/72-12/31/76: held office by virtue of election, paid with fixed salary
2. 12/31/76-02/01/88: holdover capacity
a. a. 12/31/76-12/31/79: paid on per diem basis
b. b. 01/01/1980-02/01/88: paid fixed salary
 CSC: The first holdover period (2.b.) was creditable for purposes of retirement. During the entire
holdover period, Belo served full time as Vice-Gov. and was on call 24 hours a day.
 GSIS, on the other hand, disagreed. It filed a petition for certiorari, arguing that per diems were not
compensation within the meaning of the GSIS Act.1
 The SC first ruled in favor of GSIS. It now reverses its decision in this MR.

Issue: WON regular service in government on a per diem basis, without any other form of compensation or
emolument, is compensation within the contemplation of the term ‘service with compensation’ under the
Government Service Insurance Act of 1987.—Yes.

Ruling:
 What ought to be controlling in the cases at bench therefore, should be the nature of the remuneration
rather than the label attached to it.
 The “per diem” she received was actually paid for in the performance of her duties as Vice-Governor of
Capiz in a holdover capacity not as the per diem referred to by the GSIS Act.
 Since it is generally held that an allowance for expenses incident to the discharge of an office is not a
salary of office, it follows that if the remuneration received by a public official in the performance of his
duties does not constitute a mere “allowance for expenses” but appears to be his actual base pay, then
no amount of categorizing the salary as a “per diem” would take the allowances received by petitioner
from the term service with compensation for the purpose of computing the number of years of service in
government. Furthermore, it would grossly violate the law’s intent to reward the public servant’s years of
dedicated service to government for us to gloss over the circumstances surrounding the payment of the
said remunerations to the petitioner in taking a purely mechanical approach to the problem by accepting
 an attached label at face value. (In short, per diem is just a label but in reality, this is the salary).

What is per diem?

 A daily allowance given for each day an officer or employee of government is away from his home
base. This is its traditional meaning: its usual signification is as a reimbursement for extra expenses
incurred by the public official in the performance of his duties. Under this definition the per diem is
intended to cover the cost of lodging and subsistence of officers and employees when the latter are on
duty outside of their permanent station.
 On the other hand, a per diem could rightfully be considered a compensation or remuneration attached
to an office.
1
Section 1(c) of R.A. 1573 which amended Section 1(c) of C.A. No. 186 (Government Service Insurance Act):
Salary, pay or compensation shall be construed as to exclude all bonuses, per diems, allowances and overtime pay,
or salary, pay or compensation given to the base pay of the position or rank as fixed by law or regulations.
As applied to Belo:
 It was in the nature of compensation or remuneration for her services as Vice-Gov, not reimbursement
for incidental expenses.

As applied to Baradero:
 He was a member of the Sangguniang Bayan from Jan 1976 to Oct 1978. During this period, he
rendered full services to the government, paid on a per diem basis. Thus, the disputed period was
served on a full-time basis regardless of the denomination given to the compensation he received.

On the right to benefits:

 Retirement benefits given to government employees in effect reward them for giving the best years of
their lives to the service of their country.

But they didn’t contribute to GSIS?

 The Court argued that they were not informed of the need to pay the GSIS contributions and assumed
in good faith that they continued to be covered by GSIS insurance benefits.

 In a sense, the contract made between the GSIS and the government employee is done on a take-it-or-
leave-it basis, that is, it is a virtual contract of adhesion which gives the employee no choice but to
involuntarily accede to the deductions made from their oftentimes meager salaries.

 If the GSIS did not deduct, it was by its own choice: contributions were exacted from petitioner before
and after the disputed period. To assert that petitioners would have been entitled to benefits had they
opted for optional deductions at that point misses the principal fact in issue here, which is the question
as to whether or not the disputed periods should be credited as service with compensation for the
purposes of retirement.

 The situation as far as private respondents and the GSIS are concerned could be rectified by
deducting a reasonable amount corresponding to the contributions which should have been
deducted during the period from the amount of retirement benefits accruing to them.

 It would be grossly inequitable—as it would violate the spirit of the government retirement and nsurance
laws—to permanently penalize both respondents Belo and Baradero by ignoring the fact of actual
period of service to government with compensation, and deny them the retirement privileges that they,
for their unselfish service to the government justly deserve.

 Under the peculiar circumstances of the case at bench, the demand for equity prompts us to regard
spirit not letter, and intent, not form, in according substantial justice to both respondents, where the law,
through its inflexible rules might prove inadequate.

Disposition: WHEREFORE, the instant motion is hereby GRANTED, our decision dated October 28, 1994
RECONSIDERED and the questioned resolutions and orders of the CSC requiring GSIS to consider
creditable the services of private respondents on a per diem basis AFFIRMED. SO ORDERED.