Service Incentive Leave

Employee Wages and Benefits 2010-02-27

Basis
The basis of the grant of Service Incentive Leave to qualified employees is found in Article
95 (Book Three, Title I) of the Labor Code.
Section 2, Rule V, Book III of the Omnibus Rules contains the rules and regulations for the
implementation this right.

Employees entitled to SIL

Every employee (subject to the exceptions below) who has rendered at least one year of
service is entitled to yearly service incentive leave of five days with pay.
At least one year of service Meaning
The term at least one-year service means service for not less than 12 months, whether
continuous or broken.
The 12-month period shall be reckoned from the date the employee started working,
including authorized absences and paid regular holidays.
However, where the operation of the establishment as a matter of practice or policy, or that
provided in the employment contract, is less than 12 months, such period shall be
considered as one year.

Employees not covered

The following employees are excluded from entitlement to SIL under the Labor Code (but
they may be entitled to the same or similar benefits if so provided under other laws, or
collective bargaining agreement or employment contract):
1.

Those of the government and any of its political subdivisions, including governmentowned and controlled corporations;

2.

Domestic helpers and persons in the personal service of another;

3.

Managerial employees as defined in Book Three of the Labor Code;

4.

Field personnel and other employees whose performance is unsupervised by the

employer including those who are engaged on task or contract basis, purely commission
basis, or those who are paid a fixed amount for performing work irrespective of the time
consumed in the performance thereof;

5.

Those who are already enjoying the benefit herein provided;

6.

Those enjoying vacation leave with pay of at least five days; and

7.

Those employed in establishments regularly employing less than ten employees.

(Omnibus Rules)

Manner of availment
The service incentive leave may be used for sick and vacation leave purposes. And, at the
end of the year, the unused SIL may be commuted to cash.

Commutability to cash

Under the Omnibus Rules, the unused service incentive leave is commutable to its money
equivalent at the end of the year. [N.B. Not found in the LC.]

Accumulation of Leave Credits

Instead of using up SIL, the employee may accumulate it and opt for its commutation to
cash upon his resignation or separation from employment.
Computation of SIL
In computing SIL, the basis shall be the salary rate at the date of commutation. The
availment and commutation of this benefit may be on a pro rata basis. (DOLE Handbook)
Illustration
An employee was hired on January 1, 1997, and resigned on March 1, 1998. Assuming he
has not used or commuted any of his SIL credits, he is entitled upon his resignation to the
commutation of his accumulated SIL as follows:
SIL earned as of Dec. 31, 1997 = 5 days
Proportionate SIL for Jan. and Feb. 1998 = (2/12) x 5 days = 0.833 day
Total as of March 1, 1998 = 5.833 days

Part-time Workers
Are part-time workers entitled to the full five days SIL, or should the entitlement be on prorata basis? Part-time workers are entitled to full five days SIL. (BWC Advisory Opinion)
The reason is that the Labor Code speaks of number of months worked in a year, not
number of hours worked in a day, as basis for entitlement.

Vacation and Sick leave

The Labor Code treats vacation leave and sick leave under the same category as Service
Incentive Leave or leave with pay.
Thus, the grant of vacation or sick leave with pay of at least five days may be credited as
compliance with SIL. For example, if a company is giving its employees 15 days vacation
leave, five days of which is with pay, the five-days paid vacation leave may be credited as
SIL.

Case
1.

Petitioner CIT claimed that teachers are not entitled to SIL because they are engaged
by the school on contractual basis. The claim was not sustained. It was held that the phrase
those who are engaged on task or contract basis as mentioned in the Omnibus Rules
should be read in relation to field personnel. Teachers, not being field personnel, are
entitled to SIL. (CIT vs. Ople, 1987.)

2.

Applying Article 291 of the Labor Code in light of this peculiarity of the service
incentive leave, we can conclude that the three (3)-year prescriptive period commences, not
at the end of the year when the employee becomes entitled to the commutation of his
service incentive leave, but from the time when the employer refuses to pay its monetary

equivalent after demand of commutation or upon termination of the employees services, as

the case may be. (Auto Bus Transport, Inc. vs. Bautista, 2005)
3.

Petitioners contention that respondent is not entitled to the grant of service

incentive leave just because he was paid on purely commission basis is misplaced. What
must be ascertained in order to resolve the issue of propriety of the grant of service
incentive leave to respondent is whether or not he is a field personnel. (Auto Bus Transport,
Inc. vs. Bautista, 2005)

4.

Exemptions. To claim exemption from payment of service incentive leave pay, it is

the employers duty to prove that it is covered under the exemption. Thus, where the
employer claims that the employee is not entitled to service incentive leave pay inasmuch
as establishment employing less than ten (10) employees are exempted from paying service
incentive leave pay, it has the duty to prove that there were less than ten employees in the
company. (C. Planas Commercial, et al. vs. NLRC, G.R. No. 144619, November 11, 2005.)
Last Edited: Friday, August 26, 2011
Caveat: Subsequent court and administrative rulings, or changes to, or repeal of, laws,
rules and regulations may have rendered the whole or part of this article inaccurate or