Service Incentive Leave
Service Incentive Leave is 5 paid days given every year to employees who have served at least one year.
This is a mandatory employer benefit and we made this easy to understand guide for both employees and HRs, so that you could answer your own questions – before consulting with one of our Philippine Labor Lawyers.
- The Law and DOLE guidelines
- Exemptions and eligibility
- Service Incentive Leave Calculations with examples
- 6 Common FAQs
Definition of Service Incentive Leave DOLE Guidelines/Labor Law
Service Incentive Leave is based on Article 95 of the Philippine Labor Code, its Implementing Rules and Regulations, DOLE Guidelines and several Supreme Court cases.
Taken together, the law defines SIL as
- 5 days of paid leave are given per year of service with exemptions (see next section for Service Incentive Leave Exemptions).
- Convertible to cash if unused
- Employee must have 1 year of service to avail of it, reckoned from date of hire
- Mandatory benefit
Supreme court decisions reinforce that.
In G.R. 105892, Service Incentive Leave is fully defined.
“…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…”
The Implementing Rules and Regulations and jurisprudence are quite extensive, so I’ll take them up in throughout the article.
Let’s start with eligibility.
Who is eligible for Service Incentive Leave?
Not all employees are eligible for Service Incentive Leave as Philippine Labor Law and DOLE makes quite clear.
Service Incentive Leave DOLE/Labor Code Exemptions:
- Gov’t employees
- Those in personal service
- Managerial staff and officers when 80% of their work involves management, when they can hire and fire and when they work with autonomy
- Field personnel
- Those who have this benefit or who have 5 days paid vacation leave.
- Those who have less than 10 employees
If you fall under any of these Service Incentive Leave exemptions, you are NOT eligible for this benefit.
If you have any questions, first discuss with your HR before consulting with one of our Philippine Labor Lawyers, especially if you are a management employee.
Management employees are not eligible for this benefit – in fact, this was what G.R. 222416 was all about.
In this case, the Supreme Court analyzed the work done by employee Ramil.
It labeled her work rank and file and not managerial.
As a rank and file employee, Ramil was entitled to SIL – which she would not have been had the Supreme Court decided that the managerial Service Incentive Leave Exemption applied to her.
This managerial exemption – as well as others around piece rate workers, field personnel, or those paid by task are a frequent source of confusion.
If you find yourself wondering whether SIL applies to you, your first option should be to clarify with your HR.
Is Service Incentive Leave Convertible to Cash?
Yes, Service Incentive Leave Law is clear that it is convertible to cash.
In Section 5 of Rule 5 of the implementing rules, the guidelines state:
“The service incentive leave shall be commutable to its money equivalent if not used or exhausted at the end of the year.”
So, if you haven’t used your SIL, this can be converted to cash.
For how to compute the Service Incentive Leave Pay if you convert to cash, please take a look at the next section.
How much is Service Incentive Leave in the Philippines?
If you decide to convert your benefit to cash, the Service Incentive Leave calculation to determine how much you would receive is the daily rate multiplied by the number of days.
Let’s do a few examples.
Service Incentive Leave Example 1
Hired on Jan 1, 2020 and decided to leave May 31, 2021 with 1 SIL was used.
Below is the Service Incentive Leave computation:
So, she can convert 6.083 to cash.
To do this, she would multiply her daily rate by 6.083.
If her daily rate is Php 600, then her total SIL is:
Php 600 * 6.083 or Php 3,649.80.
Her total Service Incentive Leave Pay is Php 3,649.80
Service Incentive Leave Example 2
What if an employee left after 5 months?
Is he or she still entitled to SIL conversion?
No, he is not entitled to Service Incentive Leave Pay since he did not complete 1 year of service.
Service Incentive Leave Example 3
Employee was hired July 1, 2021.
He earns 10 days of paid vacation leave per year. He used 6 days.
In this situation, can he convert the vacation leave to cash?
The law only considers 5 days of leave as convertible to cash, unless there is a favorable company policy in place. In this instance, he has already exceeded the 5 day conversion.
So, he would not have any leave days to convert.
What if he used 4 days only?
If he used 4 days, then he can convert 1 day to cash.
The Service Incentive Leave Computation is thus only for 1 day, as shown below.
Although Service Incentive Leave Pay can be confusing, it is really just about determining how many days paid leave remains out of the 5 were used for that year and then multiplying it by the daily rate.
When can I avail of Service Incentive Leave in the Philippines?
You can avail of SIL 1 year from the start of your employment.
Your employment can be broken or continuous and can include authorized absences as well as holidays. (Section 3 of the IRR of the Philippine Labor Code)
Service Incentive Leave FAQs
Is Service Incentive Leave Mandatory?
Yes, SIL is Mandatory so long as the employee does not fall under one of the Service Incentive Leave Exemptions I’ve enumerated above and has completed 1 year of service.
Are field personnel eligible for Service Incentive Leave?
No, field personnel are not eligible for Service Incentive Leave.
In G.R. 156367, the Supreme Court spent a lot of time discussing what field personnel are.
According to the court, field personnel are those:
· Who regularly perform their work away from the principal place of business
· Whose actual hours of work cannot be determined with any degree of certainty.
In this case, the employee was a driver conductor of a bus.
Because the bus had to be in a certain place at a certain time, because of frequent inspections, because of regular maintenance, the court concluded that he was not field personnel, and thus was entitled to service incentive leave.
If he had been field personnel, he would have fallen under one of the Service Leave Exemptions, and so would not be entitled to the benefit.
Are piece rate, task or commission based employees eligible for Service Incentive Leave?
If the employee is paid on a task or commission basis and is classified under field personnel, then he falls under one of the Service Incentive Leave Exemptions.
He would not be eligible under the Service Incentive Leave Law. (Also based on G.R. 156367)
The same is true for piece rate worker. Piece rate workers are not entitled to SIL, but they must also fall under the classification of field personnel.
G.R. 187698 elaborates on this
“…employees engaged on task or contract basis or paid on purely commission basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field personnel.”
Field personnel are those whose work is unsupervised by the employer and whose hours cannot be determined with accuracy.
Thus if a piece rate worker is also field personnel, he will not be entitled to Service Incentive Leave Pay.
Are contractual workers eligible for Service Incentive Leave?
No, contractual workers fall under one of the Service Incentive Leave Exemptions as per MOLE Rules and Regulations, Rule V, Book III.
“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”
This holds true, so long as the workers are contractual and fall under the field personnel classification.
In GR. L-58870, the court stated that it was clear that the teachers were not under this classification, and so were entitled to Service Incentive Leave.
Who has the Burden of Proof in a court case?
The burden of proof falls upon an employer to prove that SIL was paid.
In G.R. No. 207613, the Court ruled that the employer should prove payment of things like salary differential, service incentive leave, holiday pay and 13th month pay.
The court states that this is because all personnel files such as payroll and remittances are with the employer.
Thus, he should be the one to present the records.
What is the prescriptive period?
The prescriptive period with regard to his claim for Service Incentive Leave Pay is from the time the employer failed to compensative his accumulated SIL or at dismissal.
In G.R. 234466, the Court reinforced this.
The employee was termination October 2010 and the complaint was filed April 2013.
The demand was thus still under the 3 years prescriptive period in Art 291 of the Labor Code, since the court once again stated that the period commences either when the employer refused to pay its monetary equivalent or upon termination.
(This is also echoed in G.R. 156367.)
How do I file a court case?
Filing a court case can be done by going to the DOLE, but a court case can take years and there is no guarantee of success.
The initial Petition and evidence should be clearly given and constant communication and coordination is important between you and your lawyer.
A good suggestion would be to first try to clear things up with your HR.
It is possible it is a misunderstanding because there is confusion sometimes on the Service Incentive Leave Calculation (Check up top for the computation and several Service Incentive Leave Calculations.)
Although we have several Philippine Labor lawyers for consultation, speaking with your HR might help you avoid many issues.
What is the difference between Service Incentive Leave vs Sick Leave?
The difference between Service Incentive Leave vs Vacation leave is the SIL is a mandatory government benefit while the other is at the discretion of the employer.
So, Vacation Leave is entirely up to an employer.
The employer defines the amount, availability and applicability for Vacation Leave while SIL is defined by law.
Can you use SIL for vacation?
Yes – the law doesn’t define how SIL can be used and it is commonly used for Vacation.
Is Service Incentive Leave Taxable?
There is no Service Incentive Leave exemption provided for specifically for Service Incentive Leave Pay in the TRAIN Law.
Additionally, the Implementing Rules and Regulations for the TRAIN law in RR 8-2018 do not expressly exempt it.
The exemptions identified by the law are overtime, night shift differential, hazard pay and holiday pay and make no mention of exemptions for Service Incentive Leave pay.