Service incentive leave is a leave benefit covered in Article 95 of the Labor Code of the Philippines. However, most people know it as Vacation Leave.

This article will explain about the service incentive leave and vacation leave in the Philippines:

  • What is Service Incentive Leave (SIL)
  • What is Vacation Leave
  • Are part-time employees entitled to service incentive leave?
  • Common question: are probationary employees entitled to vacation leave?
  • Common question: can my employer deny my vacation request?
  • Is service incentive leave convertible to cash?
  • Is vacation leave convertible to cash?
  • How to compute Service Incentive Leave

Service Incentive Leave (SIL)

Service incentive leave is a leave entitlement regulated through Article 95 of the Labor Code of the Philippines. An employee who has rendered at least 1 year of service shall be entitled to 5 days of paid service incentive leave (SIL) per year. However, in practice, most employers do not provide service incentive leave to their employees. Instead, the employers grant vacation leave benefit to their employees. Employers who grant at least 5 days of vacation leave per year is deemed to be in compliance with this provision.

Vacation Leave Philippines

Vacation leave benefit is not covered in the Labor Code of the Philippines.

There is no provision in the Labor Code that requires an employer to grant vacation leave. However, a company that provides vacation leave with pay of at least 5 days per year is deemed to be in compliance with the service incentive leave provision. Therefore, most employers have a vacation leave policy instead of a service incentive leave policy.

In granting the vacation leave, the employer has the right to impose certain conditions such as the scheduling of the leave. An employee is thereby required to seek official approval from the employer to avail the vacation leave benefit.

Are Part-Time Employees entitled to Service Incentive Leave (SIL)?

Part-time employees are also entitled to 5 days of service incentive leave with pay after rendering 1 year of service. The availment and commutation of the SIL will be proportionate to the daily work rendered and the regular daily salary, respectively.

Illustration

Full-time Part-time
Regular Daily Wage P70/ hr × 8 hours = P560 P70/ hr × 4 hours = P280
Conversion of 5 days of SIL P560 × 5 = P2,800 P280 × 5 = P1,400

Can my employer deny my vacation request?

The grant of vacation leave benefit is a management prerogative. Therefore, the employer may impose certain conditions on it such as the scheduling of the leave. In the case of Rene Soriano vs PNCC Skyway Corporation, the court has explained that the employer may approve or deny any vacation leave request, or to compel its employees to exhaust all their vacation leave credits.

Service Incentive Leave Convertible to Cash?

The 5-day unused SIL is commutable to its money equivalent at the end of the year or upon separation from the company.

Is Vacation Leave Convertible to Cash?

Employers must allow employees to use, convert to its money equivalent or carry forward a total of at least 5 days of vacation leave per year to be in compliance with the service incentive leave provision.

However, the employer may impose other conditions such as limiting the maximum number of vacation leave credits to be converted to its money equivalent or to be carried forward to the following year.

Service Incentive Leave Computation

Upon completion of the first 12 months of service, an employee shall be entitled to 5 days of SIL. Beyond the first 12 months of service, the use and conversion of the leave may be on a pro rata basis. This is without prejudice to any existing arrangement more favorable to the employee.

Illustration

An employee was hired on 1 January 2015 and effectively resigned on 1 March 2016. Assuming that the employee has not used any SIL, the employee shall be entitled to the following as of 1 March 2016:

SIL earned as of 31 December 2015   5 days
Proportionate SIL for January and February 2016 (2/12) x 5 days = 0.833 day
Total accrued SIL as of 1 March 2016   5.833 days

For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.