When the Department of Education issued Order No. 5 defining the order of preference of the automatic deductions from the teachers’ payroll, there was a general presumption of regularity and that the goals of the twin regulations would be achieved.
But sadly, the desired benefits of DepEd Order No. 5, coupled with Section 48 of the General Appropriations Act of 2018, apparently fell short of the cost to their target beneficiaries.
The complementary regulations set up a ranking of preference in the Automatic Payroll Deduction System in the payment of individual employee contributions or obligations.
The order is as follows: BIR, PhilHealth, GSIS and Home Development Mortgage Fund, non-stock savings and loan associations and mutual benefit associations, provident funds, GFIs, insurance companies and thrift banks and rural banks.
The 2018 GAA also provides that in no case shall the deductions diminish the employee’s monthly net take home pay to less than P5,000.
By the way, this order of preference applies to both old and new debts; that is, retroactively, which effectively which renders nil the earlier formula followed in collection—the First In, First Served System which in the past ensured that older obligations were promptly met.
And herein lies the problem.
New credit from lenders higher up in the rank of preference are settled first before old loans from thrift and rural banks, which are last on the list, resulting in an increase in the risk of default and, as a result, constricts the amount of credit available to teachers.
Previously, when the FI-FS system was operational, there was an efficient mode of granting and paying loans, such that rural and thrift banks were guaranteed prompt payment and, consequently, DepEd employees were less prone to incur interest and other financial charges.
The application of the order of preference and the FI- FS system have always been treated as below the NTHP threshold, ensuring that a particular sum is received by every DepEd employee every month.
If the deductions have reached this NTHP threshold, the outstanding loan amortizations that did not make the cut get displaced and transferred to the Un-Deducted Obligations of the payslip while still retaining their order of priority.
Thus, when the next payslip comes, the Un-Deducted Obligations from the previous payslip is taken away from the payroll first before the other obligations (or amortizations) which have a later effective date.
However, given the conditions set in the GAA 2018 and the DepEd Orders, there is a built-in and unreasonable interference with PLIs’ ability to grant credit to teachers that impede DepEd employees’ access to reasonably regulated credit.
Consequently, teachers would have less access to regulated credit and would have to resort to loan sharks and other financial predators.
The lesson here: you don't knock down the entire barn just to patch up holes on the roof.