Service Incentive Leave (SIL): Rules and Entitlement

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Written by nikki

What is the service incentive leave or SIL, and when should employees receive such benefits?

What is Service Incentive Leave?

Service Incentive Leave in the Philippines
Service Incentive Leave in the Philippines

Service Incentive Leave (SIL) is a mandatory leave benefit given to qualified employees as an incentive for the service they have rendered to the company.

The service incentive leave benefit is five (5) days of paid leave that employers must give to their employees as mandated by the Philippine Labor Code.

Aside from being an incentive to employees, SIL also serves as a way for employees to rest, engage in sports, hobbies, or other fun activities, and have a chance of maintaining a better work-life balance.

How is Service Incentive Leave different from Sick Leave and Vacation Leave?

Service incentive leave is different from sick leave and vacation leave in several ways.

Mandatory?

First, SIL benefits are mandatory while vacation and sick leaves are not. Employers in the Philippines are not mandated to provide vacation or sick leaves to their employees.

However, vacation and sick leave are pretty typical benefits given by the majority of employers in the Philippines.

Convertible to cash?

SIL is commutable or convertible to cash. SIL is a yearly benefit and is renewed yearly.

Moreover, if the employee does not use all their SIL credits by the end of the year, the leave credits are automatically converted to their cash equivalent.

Finally, vacation and sick leaves are not commutable unless a favorable company policy or employment contract declares them so.

Entitlement

They vary in the time of entitlement. Depending on the company policy, sick leave and vacation leave with pay are given to employees upon hiring or upon regularization.

On the other hand, SIL is only given to employees upon completion of at least one year of service.

Purpose

They vary in their purpose of use. Vacation leaves are used when the employee intends to take days off work to rest, engage in recreational activities, and go on vacation.

Sick leaves are used during the employee’s inability to work due to an injury, illness, or situations relating to medical or health issues.

Service incentive leaves may be used for any purpose as the manner of its use was not specifically stated by the Philippine Labor Law.

What is the basis for service incentive leave computation?

The basis for SIL computation is the amount of time that the employee has been rendering service to the company in excess of a year. This is called prorated service incentive leave.

For the first year after the first work anniversary, the employee can enjoy five days of paid leave.

Furthermore, for the second and following years, the SIL are given prorata, and in case of separation from the company, the conversion to cash is done base on the prorated SIL.

For example, Juan resigned six (6) months after his work anniversary. His service incentive leave credit will be computed this way:

  • SIL credit = (number of months/12 months) x 5 days
  • SIL credit = (6 months/12 months) x 5 days
  • SIL credit = 0.5 x 5 days
  • SIL credit = 2.5 days

Juan gets a total of 2.5 days’ worth of prorated service incentive leave credits.

Related: Computing Employee Leave Credits

Is the yearly Service Incentive Leave convertible to cash?

Yes, SIL is commutable or convertible to cash. However, it is not convertible to cash upon request. Moreover, SIL is only converted to cash if the employee has remaining leave credits at the end of the year. SIL is a benefit that is given and renewed yearly.

How much is the money equivalent of a service incentive leave?

How much is the SIL conversion
How much is the SIL conversion

The SIL pay is equal to the amount of the basic daily salary of the employee at the time that the remaining SIL credits are converted.

Let’s say that Juan earns Php 483.00 per day as her daily basic salary. As mentioned above, he has earned 2.5 days of prorated SIL credits. The computation for his SIL conversion is as follows:

  • SIL cash equivalent = prorated service incentive leave credits x daily basic salary
  • SIL cash equivalent = 2.5 x Php 483.00
  • SIL cash equivalent = Php 1,207.50

Juan has earned a total amount of Php 1,207.50 as her SIL’s converted amount.

What is the purpose of the Service Incentive Leave?

The Labor Code did not specifically mention the manner, state, or purpose of using SILs. Therefore, SILs may be used for vacation, sickness, recreation, or any other purpose or reason that the employee chooses.

Who is qualified to receive Service Incentive Leaves?

Qualified employees are those who have rendered service to the company for at least one year or 12 months, whether in a broken or continuous manner.

Moreover, this means that the count for one year starts from the date of hiring and is continuous, whether the period includes authorized absences, paid vacation, and other absences.

For example, Employee A is a female employee hired on March 12, 2020. On December 10, 2020 she started using her maternity leave credits and was away for 105 days.

However, her work anniversary will still be on March 12, 2021, and her service incentive leave benefit will be given on that same day.

Qualified employees are awarded yearly service incentive leave of five (5) days with full pay.

Are there exceptions to Service Incentive Leave?

Who are exempt from the SIL?
Who are exempt from the SIL?

Yes, there are several exceptions to the application of the SIL. It applies to all employees except:

Government employees.

Those who are employed by the National Government, any of its subdivisions, including government-owned and/or controlled corporations are nor entitled to receive SIL.

Persons in the personal service of another.

Managerial employees.

Those whose primary duty is to manage the establishment, have the authority to hire or fire other employees, and customarily and regularly direct at least two or more employees are not entitled to receive SIL.

Officers or members of managerial staff

  • Those whose primary function is directly related to management policies can exercise discretion and independent judgment
  • Moreover, they can also be those who assist a proprietor or managerial employee in the management of the establishment.
  • Those working along specialized or technical lines, doing special assignments and tasks, and not devoting more than 20% of work time to tasks unrelated to the mentioned functions.

Other exemptions

  • Field personnel and those whose time and performance are unsupervised by the employer.
  • Those already enjoying this benefit.
  • Those enjoying vacation leave with pay of at least five days
  • Those employed in establishments regularly employ less than ten employees.

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