Service Incentive Leave (SIL) in the Philippines

PUBLISHED ON: May 6, 2019
LAST UPDATED ON: May 1, 2021

The Service Incentive Leave (SIL) is a leave benefit that provides five (5) days of leave with pay for employees who have rendered at least one (1) year of service.

The employee should have been in service for twelve (12) months, whether continuous or broken, reckoned from the date the employee started working. The entitlement of the benefit includes authorized absences and paid regular holidays into the computation of the year of service.

Defining Service Incentive Leave (SIL)

What is the Service Incentive Leave (SIL)?

Service Incentive Leave (SIL) is the general leave benefit required to be given to all employees, as indicated in Article 95 of Presidential Decree No. 442, also known as the Labor Code of the Philippines.

(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with pay of at least five days and those employed in establishments regularly employing less than ten employees or in establishments exempted from granting this benefit by the Secretary of Labor and Employment after considering the viability or financial condition of such establishment.

(c) The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any court or administrative action.

Philippine Labor law mandates different types of leave benefits such as maternity leave and paternity leave. However, you may be surprised if I tell you that the law does not mandate VLs and SLs. Take note that not all of the leave benefits would be immediately available as you should be able to attain a certain criteria to avail such.

Entitlement to Service Incentive Leave (SIL)

Who can avail the Service Incentive Leave (SIL)?

The benefit is available to all rank-and-file employees except for the following:

  1. Government Employees;
  2. Persons in the personal service of another;
  3. Managerial employees;
  4. Officers or members of a managerial staff;
  5. Field personnel and those whose time and performance in unsupervised by the employer;
  6. Those already enjoying this benefit;
  7. Those enjoying vacation leave more than the minimum of five (5) days; and
  8. Those employed in establishments regularly employing less than ten (10) employees.

When should you start earning Service Incentive Leave (SIL)?

An employee is entitled of the the 5 Service Incentive Leave when they have rendered one (1) year of service with the company. The reckoning period of the one (1) year of service is at the start of the employment of the employee.

Computation of Service Incentive Leave (SIL)

Is the initial year of service not included in the computation for the entitlement of Service Incentive Leave (SIL)?

The initial or first year of service is included in the computation of Service Incentive Leave (SIL). The Implementing Rules and Regulations of the Labor Code of the Philippines explicitly states that the start of the one year of service is reckoned from the date the employee started working.

As stated in Section 3, Rule V, Book 3 of the Implementing Rules and Regulations of the Labor Code of the Philippines

"The term "at least one-year service" shall mean service for not less than 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contract is less than 12 months, in which case said period shall be considered as one year."

Is prorated computation of Service Incentive Leave (SIL) allowed?

Yes, a prorated computation of Service Incentive Leave (SIL) is allowed and is, in fact, more favorable to the employee.

The company policy provided by your HR would determine how many SIL you would have already accumulated at a certain time or period.

What is important is that the computation period for the year would add up to at least 5 SIL, should you reach that date of employment with the company.

Is an employee still entitled to Service Incentive Leave (SIL) even if he was on Floating Status?

This is in regards to the Service Incentive Leave (SIL) Entitlement Period: There may be times that the employment period is broken due to a number of reasons; Such as, absences, holidays, and maternity leave. If you are reading this during the COVID-19 pandemic, then you may have experience being temporary laid-off or on Floating Status (Also read: Retrenchment Process in the Philippines) as your company has closed due to the Enhanced Community Quarantine (ECQ) or other hindrances during this once-in-a-century event. Regardless of the reason, are you entitled to your Service Incentive Leave (SIL) reckoned from your employment date?

According to the the Worker's Statutory Monetary Benefits Handbook 2020 published by the Bureau of Working Conditions (BWC) which is an attached agency of the Department of Labor and Employment (DOLE):

The phrase “one year of service” of the employee means service within twelve (12) months, whether continuous or broken, reckoned from the date the employee started working. The period includes authorized absences, unworked weekly rest days, and paid regular holidays. If through individual or collective agreement, company practice or policy, the period of the working days is less than twelve (12) months, said period shall be considered as one year for the purpose of determining the entitlement to the service incentive leave.

Meaning of “one year of service"

With the above, we can see that the definition of "one year of service" is defined as 12 months, whether continuous or broken, reckoned from the date the employee has started working. (emphasis supplied) This definition does not discriminate whether there was actual service rendered. Therefore, an employee who has unworked days, regardless of the reason given, would be entitled to the Service Incentive Leave (SIL) of five (5) days.

Usage of Service Incentive Leave (SIL)

Can I use my Service Incentive Leave (SIL) for Vacation Leave (VL) or Sick Leave (SL)?

Service Incentive Leave (SIL) may be used for scheduled leave / pre-approved leave / vacation leave or unscheduled leave / sick leave. The Labor Code of the Philippines does not explicitly state or mandate the manner of usage of Service Incentive Leave (SIL)

Can I convert my Service Incentive Leave (SIL) to Cash?

The law mandates that the five (5) Service Incentive Leave (SIL) earned by the employee is required to be converted to cash. The rate of which is the salary rate of the employee at the date of conversion.

In the computation of the final pay, the employee is still eligible to receive his accrued leave at the time of his separation. Given that the employee has rendered more than one (1) year of service.

Commutation or Conversion of Service Incentive Leave (SIL) to cash

Is Service Incentive Leave (SIL) convertible to cash?

Yes, Service Incentive Leave (SIL) is convertible to cash.

The conversion rate of Service Incentive Leave (SIL) is based on the salary rate of the employee at the time of the conversion.

Does Service Incentive Leave (SIL) expire?

Yes, the remaining Service Incentive Leave (SIL) is automatically commuted or converted to cash if not used at the end of year. This is based on the following provision stated in Section 5, Rule V, Book Three of the Implementing Rules and Regulations of the Labor Code of the Philippines:

Treatment of benefit. — The service incentive leave shall be commutable to its money equivalent if not used or exhausted at the end of the year.

Is a resigned employee entitled to their remaining Service Incentive Leave (SIL)?

Yes, an employee who resigned from their work is entitled to the remaining cash equivalent of unused Service Incentive (SIL). It shall form as part of the Final Pay to be given to the employee within 30 days from date of separation.

This includes if the person has already submitted a Service Incentive Leave (SIL) application in advance but severed their employment prior to the usage. A single Service Incentive Leave (SIL) is equivalent to a day's worth of wage. The employee is severely penalized for filing a leave application in advance should the company refuse to convert the SIL to its cash equivalent.

To the Human Resource Officers, please be remember that this benefit is part of the General Labor Standards (GLS) and should be given to all employees who are covered. Not only that, HR Officers should be considerate as leaves are often taken by employees to attend important personal matters. Giving more humane policies would be for the benefit of both employer and employee.

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