WHEREAS, the officers and employees in the foreign service of the Philippines work and reside under economic environments different from that of the Philippines and are thus subject to foreign exchange, international price level and other developments unique to the foreign service;

WHEREAS, position classification and compensation plans have been developed for government employees in the Philippines, specifically for the career executive service and the civil service proper;

WHEREAS, the problems facing government personnel assigned abroad call for a compensation plan that is suitable for their situation;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution do hereby order and decree:

SECTION 1. Title. This Decree shall be known as the "Foreign Service Compensation Decree of 1978."

SEC. 2. Declaration of Policy. A system of compensation standards and policy is hereby established for personnel of the Philippine government who are stationed abroad, taking into account fluctuations in value among the various currencies of the world, differing rates of price level change in the various countries of assignments, while being consistent with the national compensation and position classification system of the Philippines.

SEC. 3. Definition of Terms. When used in this Decree, the term —

1. "Government" means the government of the Philippines and its component agencies;
2. "Foreign Service" covers officials and personnel of the Department ox Foreign Affairs, Department of Trade, Department of Finance, and ox other agencies, who are stationed abroad;
3. "Abroad" mean all areas outside the territory of the Philippines;
4. "Chief of Mission" means the principal officer appointed by the President of the Philippines, to be in charge of an embassy or legation or other diplomatic mission of the Philippines, or any other person assigned to be minister resident, charge d' affaires, commissioner, or diplomatic agent;
5. "Principal Officer" means the officer in charge, of a consulate general, consulate, or vice consulate of the Philippines;
6. "Prevailing Central Bank rate" refers to the floating rate as established by the Central Bank of the Philippine for the sale of US Dollar or other applicable currencies.

SEC. 4. Position Classification and Compensation. The President shall establish the position classification plan and basic salary levels of foreign service personnel upon the recommendation of the Secretary of Foreign Affairs and the Commissioner of the Budget: Provided, That the initial classification and salary rated of Chiefs of Missions, Foreign Service Officers, and foreign service staff officers and employees shall be as established under Presidential Decree No. 905 until otherwise modified under the provisions of this Decree; Provided, Further, That rules and regulations governing the salaries of foreign affairs officers and of staff officers and employees at the time of appointment, the salaries of alien clerks and employees, the administrative establishment of salary differentials, the compensation of officers primarily in charge, and the classification of positions in the foreign service shall be approved by the President upon recommendation of the Secretary of Foreign Affairs and the Commissioner of the Budget: Provided, Finally, That, The President shall determine, upon recommendation of the Secretary of Foreign Affairs and the Commissioner of the Budget, the equivalence to foreign service positions, of the position classification of personnel stationed abroad, of agencies other than the Department of Foreign Affairs, for purposes of computing the applicable allowances.

SEC. 5. Allowances. The President shall establish a system of allowances for foreign services personnel which shall include the following:

1. Oveseas allowance — to adjust take-home pay of foreign service personnel for any changes in cost of living abroad which arise from changes in foreign currency conversion rates, differentials in cost of living between the Philippines and foreign posts, and extraordinary and necessary expenses not otherwise compensated doe m which are incurred by officers or employees in the foreign service;
2. Living quarters allowance — to enable personnel to whom those are grander, to live in a manner befitting their representative capacity but not for purposes of augmenting basic salary;
3. Clothing allowance — to compensate for increased cost of clothing incurred by foreign service personnel assigned to posts whose climates are different from that of the Philippines or where unusual circumstances exist;
4. Post allowance — to defray unusual expenses incident to the operation and maintenance of an official residence suitable for the chief diplomatic or consular representative of the Philippines at his post;
5. Representation allowance — to enable Chiefs of Missions, special envoys, ministers, permanent delegates or representatives to international bodies, principal office and foreign service officers and ranking staff officers to uphold the prestige of the Republic of the Philippines and otherwise to represent the country with distinction and dignity;
6. Education allowance — to compensate for additional educational cost incurred by officers and employees assigned abroad for legal dependent children not exceeding three in number, who are enrolled in the primary and elementary grades, where free public education and/or English as a medium of instruction is absent;
7. Medical allowance — intended to cover the cost of medical insurance in countries were medical care is unusually expensive, including cost of hospitalization and medical treatment for foreign service personnel and legal dependents living with the officer and employee at the posts as may be approved by the President;
8. Family allowance — to assist foreign service personnel living with their families at the post of assignment, in meeting the incremental expenses arising from foreign assignment, computed for the dependent spouse and for unmarried legal minor dependent children not exceeding three in number.

SEC. 6. Overseas allowance. The overseas allowance established under this Decree shall be adjusted periodically, upward or downward, for each foreign service post, on the basis of official price indices and/or currency fluctuations in the foreign posts. For this purpose, the Secretary of Foreign Affairs with the assistance of the Governor of the Central Bank of the Philippines shall compile and evaluate on continuing basic, international price indices including those approved by the United Nations for its own personnel, as basis for recommending periodic adjustment of overseas allowance. The Secretary of Foreign Affairs, the Commissioner of the Budget and the Governor of the Central Bank shall jointly recommend to the President, such periodic adjustments in overseas allowance as they may find necessary but not oftener than once a year.

SEC. 7. Currency conversion. The basic salary of foreign service personnel shall be paid in Philippine pesos or equivalent in foreign currency at the Central Bank foreign exchange conversions rate prevailing at time of remittance. Fluctuations in exchange rate shall be compensated for through the overseas allowance established under this Decree. Retirement benefits, accumulated leaves and other similar privileges shall be paid to foreign service personnel in pesos or equivalent in foreign currency using the prevailing Central Bank foreign exchange rate and subject to applicable Central Bank rules and regulations in cases where foreign service personnel retire abroad.

SEC. 8. Payment of allowances. Allowances of foreign service personnel stationed abroad may be denominated in US Dollars or the currency of the post at which a foreign service staff member is assigned.

SEC. 9. Income taxes. The basic salary and allowances of foreign service personnel shall be subject to income tax under applicable internal revenue laws: Provided, That overseas allowance shall be considered as being paid to and received by the personnel concerned in furtherance of the interests of the Republic of the Philippines, for purposes of determining the tax status of said overseas allowance.

SEC. 10. Accumulated leaves. Upon retirement, death, resignation or separation from the service of any officer or employee in the foreign service, unenjoyed vacation or sick leave credits shall be computed on the basis of actual salary and shall be paid in Philippine pesos and otherwise shall be on the same basis as home office personnel who retire in the Philippines: Provided, That any accumulated leaves earned as of the effectivity of this Decree may be paid to officers and employees leaving the service on the basis of applicable rules and regulations existing prior to this Decree.

SEC. 11. Rules and Regulations. The rules and regulations necessary to implement this Decree, including position classification, rated of basic salary and allowances, currency denomination of allowances, shall be issued by the President upon recommendation of the Secretary of Foreign Affairs and the Commissioner of the Budget: Provided, That the Commissioner of the Budget shall promulgate, with the approval of the President, the transitional measures needed to be adopted with respect to compensation, allowances and other fringe benefits of foreign service personnel other those in the Department of Foreign Affairs, subject to the availability of funds within the agency concerned.

SEC. 12. Repeal Clause. All acts, Executive Orders, Decrees, rules and regulations or parts thereof which are inconsistent with the provisions of this Decree are hereby repealed or amended accordingly, including Title II, Parts C, D and E, and Title VI, Part A of R.A. No. 708 (as amended) and P.D. No. 905.

SEC. 13. Effectivity. This Decree shall take effect immediately.

Done in the City of Manila, this 13th day of January, in the year of Our Lord, nineteen hundred and seventy-eight.

			(Sgd.) FERDINAND E. MARCOS President of the Philippines
	By the President:
	(Sgd.) JACOBO C. CLAVE
		Presidential Executive Assistant