Under Article 95 of the Labor Code, an employee who has rendered at least one year of service is entitled to five days of service incentive leave with pay each year. If the leave is not used, its cash equivalent is payable at year-end and on separation. The benefit does not apply to those already enjoying at least five days of leave, to managerial employees and field personnel, and to establishments regularly employing fewer than ten workers, among other exemptions.
The Labor Code’s minimum paid leave is modest — five days — but it is real money, because the unused portion must be paid in cash. Many employees separate from a job without ever being paid the leave they never took, simply because no one told them it converts.
The Entitlement
Article 95 of the Labor Code grants every employee who has rendered at least one year of service a yearly service incentive leave of five days with pay. “One year of service” means service within twelve months, whether continuous or broken, reckoned from the date the employee started working. Once the one-year threshold is crossed, the five days accrue for each subsequent year.
The Key Feature: It Converts to Cash
What makes service incentive leave (SIL) valuable is commutation. If the employee does not use the five days, the unused leave is converted to its cash equivalent. This is due at the end of the year and, importantly, upon separation from service — which is why the cash value of unused SIL is a standard component of final pay. An employer who ignores this is underpaying separated workers as a matter of routine.
Who Is Exempt
SIL is a floor, and the law carves out those who do not need the floor or fall outside it:
- Employees already enjoying the benefit — those who already receive at least five days of paid leave (vacation or otherwise) do not get an additional five;
- Managerial employees and field personnel whose hours are unsupervised;
- Members of the employer’s family dependent on them for support, and domestic workers governed by their own law;
- Establishments regularly employing fewer than ten (10) employees; and
- Employers already granting leave benefits at least equivalent, and others the rules specify.
The small-establishment and already-enjoying exemptions are the ones most often invoked, so check whether they genuinely apply to your employer.
SIL Is a Minimum, Not a Ceiling
Nothing prevents an employer from granting more than five days, and many grant separate vacation and sick leave that exceeds the statutory minimum. Where a company’s more generous leave already meets or beats the five paid days, the SIL obligation is deemed satisfied. Where it does not, the five-day floor stands.
Claiming Unused SIL
If you left a job and were never paid the cash value of unused leave, that amount is part of your final pay and recoverable like any money claim — through DOLE’s Single Entry Approach and, if needed, the NLRC, subject to the three-year prescriptive period. Keep your payslips and any leave records, which make the computation straightforward.
Frequently Asked Questions
Who is entitled to service incentive leave? An employee who has rendered at least one year of service, whether continuous or broken within twelve months, is entitled to five days of paid service incentive leave per year, unless an exemption applies.
Is unused service incentive leave paid in cash? Yes. Unused SIL is converted to its cash equivalent, payable at year-end and upon separation. That is why the cash value of unused SIL is a standard part of final pay.
Which employers are exempt from service incentive leave? Among others, establishments regularly employing fewer than ten employees, employers already granting at least five days of leave, and, as to certain workers, managerial employees and field personnel.
Can I still claim SIL after I resign? Yes. The cash value of your unused SIL forms part of your final pay. If it was not paid, you can pursue it as a money claim, subject to the three-year prescriptive period.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If your unused leave was never paid out, our firm can help you recover it as part of your final pay. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.