Service Incentive Leave

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 government-owned 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 pro-rata 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 employee’s services, as the case may be. (Auto Bus Transport, Inc. vs. Bautista, 2005)
3. Petitioner’s 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 employer’s 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.)