Service Incentive Leave
- P.D. 442 is the legal basis for service incentive leave.
- Service incentive leaves are given to employees who may want to take a leave from work and still get paid on their absences.
- There are five (5) service incentive leave credits given to an employee who has rendered at least 12 months of service.
- The leave credits may be used for whatever reason.
- The employer is required to pay the cash equivalent of the unused leave credits.
- The service incentive leave credits replenish yearly.
The legal basis is Presidential Decree No. 442 (“P.D. 442”), otherwise known as the “Labor Code of the Philippines”.
Service incentive leaves are five (5) leave credits with full pay given to qualified employees who have rendered at least one (1) year of service.
Covered and excluded
The benefit applies to all employees except:
1. Government employees, whether employed by the National Government or any of its political subdivisions, including those employed in government-owned and/or controlled corporations with original charters or created under special laws;
2. Persons in the personal service of another;
3. Managerial employees, if they meet all of the following conditions:
3.1. Their primary duty is to manage the establishment in which they are employed or of a department or subdivision thereof;
3.2. They customarily and regularly direct the work of two or more employees therein; and
3.3. They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to hiring, firing, and promotion, or any other change of status of other
employees are given particular weight.
4. Officers or members of a managerial staff, if they perform the following duties and responsibilities:
4.1. Primarily perform work directly related to management policies of their employer;
4.2. Customarily and regularly exercise discretion and independent judgment
4.3. (a) Regularly and directly assist a proprietor or managerial employee in the management of the establishment or subdivision thereof in which he or she is employed; or (b) execute, under general supervision, work along specialized or technical lines requiring special training, experience, or knowledge; or (c) execute, under general supervision, special assignments and tasks; and
4.4. Do not devote more than twenty percent (20%) of their hours worked in a workweek to activities which are not directly and closely related to the performance of the work described in
paragraphs 5.1, 5.2, and 5.3 above;
5. Field personnel and those whose time and performance are unsupervised by the employer;
6. Those already enjoying this benefit;
7. Those enjoying vacation leave with pay of at least five (5) days; and
8. Those employed in establishments regularly employing less than ten (10) employees.
Interpretation of 1 year
The 1-year of service means that the covered employee has rendered service for at least twelve (12) months, whether continuous or broken, counting form the start of his employment.
The service incentive leave is a leave credit which may be used at the discretion of the employee who may use it for sick leave, vacation leave, or for any other personal reasons.
Convertible to cash
Unused service incentive leaves are required to be converted to cash at the end of the year or upon the termination of employment due to just causes or separation from the service due to authorized causes.
The service incentive leave replenishes yearly.
Employment contract, company policies, CBA
The above discussion may be superseded by any stipulation favorable to the employee via an employment contract, company policies, collective bargaining agreement, or analogous thereto.
- Presidential Decree No. 442, a.k.a. Labor Code
- Omnibus Rules Implementing the Labor Code
- DOLE-BWC Handbook on Workers’ Statutory Monetary Benefits
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