Tuition Fee Increases and Employee Benefits: The Supreme Court's Ruling on Allocation of Incremental Proceeds

The Supreme Court recently settled a significant question for private educational institutions: can retirement plan contributions be funded from the 70% tuition fee incremental proceeds (TIP) required under Republic Act No. 6728? In Guagua National Colleges v. Guagua National Colleges Faculty Labor Union (G.R. No. 213730, June 23, 2021), the Court ruled that such contributions are valid in Section 5(2) of RA 6728. The law provides that 70% of tuition fee increases shall go to the payment of "salaries, wages, allowances, and other benefits" of teaching and non-teaching personnel. The Court emphasized that the law does not qualify "other benefits" to mean only "wage-related benefits."

The Court found that DECS Order No. 15, series of 1992, which restricted "other benefits" to "wage-related benefits," improperly expanded or restricted the scope of the law. Applying the settled doctrine that the law prevails over administrative regulations implementing it, the Court held that an administrative rule cannot amend the law by abridging its scope.

The Court cited its earlier ruling in Cebu Institute of Medicine v. Cebu Institute of Medicine Employees' Union (G.R. No. 141285, July 5, 2001), which interpreted as provided under the law.

The Court also noted that the Department of Education itself issued DepEd Order No. 11, s. 2011, which amended Section 182 of the 2010 Revised Manual to conform to RA 6728. The amended provision expressly included "other benefits" in the allocation of tuition fee increases, apart from salaries, wages, and allowances.

Practical Takeaways

• Schools have discretion in allocating the 70% TIP. The law does not require that all 70% go to salary increases. Schools may allocate portions to various benefits, including retirement plans, as long as the total goes to salaries, wages, allowances, and other benefits of teaching and non-teaching personnel.

• Administrative regulations cannot override the law. If an implementing rule from the Department of Education or other agencies narrows the scope of RA 6728, the statute prevails. Schools should be aware that agency issuances that conflict with the law may be disregarded.

• Retirement plan contributions are valid "other benefits." Following this ruling, schools may fund retirement plans from the 70% TIP without violating RA 6728.

• Documentation remains important. Schools should maintain separate records of accounts for tuition increases and their disposition, as required by law, to demonstrate compliance during inspections.

• Consultation with unions is still advisable. While the school has discretion in allocation, engaging with employee unions on the distribution scheme remains a good practice to avoid disputes.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.