Library of PH Labor Law

F – Service Incentive Leave

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Summary

▪ 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.

1. Concept

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.

2. 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.

a. Filed personnel

The grant of service incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as “field personnel.” The phrase “other employees whose performance is unsupervised by the employer” must not be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those “whose actual hours of work in the field cannot be determined with reasonable certainty.” (Auto Bus Transport Systems, Inc., v. Bautista, G.R. No. 156367, 16 May 2005)

The same is true with respect to the phrase “those who are engaged on task or contract basis, purely commission basis.” Said phrase should be related with “field personnel,” applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that they follow. Hence, 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. (Ibid.)

In short, in determining whether workers engaged on “pakyaw” or “task basis” is entitled to holiday and SIL pay, the presence (or absence) of employer supervision as regards the worker’s time and performance is the key: if the worker is simply engaged on pakyaw or task basis, then the general rule is that he is entitled to a holiday pay and SIL pay unless exempted from the exceptions specifically provided under Article 94 (holiday pay) and Article 95 (SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or task basis also falls within the meaning of “field personnel” under the law, then he is not entitled to these monetary benefits. (Ibid.)

4. 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.

5. Usage

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.

6. 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.

7. Replenishes yearly

The service incentive leave replenishes yearly.

8. 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.

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References

Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

Book IIII, Omnibus Rules Implementing the Labor Code

2020 DOLE-BWC Handbook on Workers’ Statutory Monetary Benefits

▪ Jurisprudence or Supreme Court Decisions

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