Labor Code of the Philippines - Book Three

 [Presidential Decree No. 442, as Amended]

THE LABOR CODE OF THE PHILIPPINES PRESIDENTIAL DECREE NO. 442, AS

AMENDED
A DECREE INSTITUTING A LABOR CODE THEREBY REVISING AND CONSOLIDATING LABOR AND SOCIAL LAWS
TO AFFORD PROTECTION TO LABOR, PROMOTE EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT
AND INSURE INDUSTRIAL PEACE BASED ON SOCIAL JUSTICE

BOOK THREE
CONDITIONS OF EMPLOYMENT

Title I
WORKING CONDITIONS AND REST PERIODS

Chapter III

HOLIDAYS, SERVICE INCENTIVE LEAVES AND SERVICE CHARGES

ART. 95. Right to service incentive leave.  - (a) Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation
leave with pay of at least five days and those employed in establishments regularly employing less than ten employees
or in establishments exempted from granting this benefit by the Secretary of Labor and Employment after considering
the viability or financial condition of such establishment. Chanroblesvirtuallawlibrary

(c) The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any court or
administrative action.

SERVICE INCENTIVE LEAVE COMPUTATION FOR RESIGNED

EMPLOOYE AND TAX ISSUE
Published by: Atty. Elvin B. Villanueva on April 25, 2018

Service Incentive Leave (SIL) benefit grants five (5) dyas of absence with pay to qualified employees .

The basis of SIL is Article 95 of the Labor Code providing the right to service incentive leave to every
employee who has rendered at least one year of service with five dyas pay.
Such provision however, shall not apply to those who are already enjoying the benefit herein. Those
enjoying the vacation leave with pay of at least five days and those employed in establishments regularly
employing less than ten employees or in establishments excempted from granting this benefit.

Under the implementing Rules and Regulations, the SIL shall not apply to the following:

(a) Those of the government and any of its political subdivisions, including government-owned and
controlled corporations;
(b) Domestic helpers and persons in the personal service of another;
(c) Managerial employees as defined in Book Three of the Labor Code;
(d) Field personal and other employees whose performance is unsupervised by the employer
including those who are engaged on task or contrac basis, purely commission basis, or those who
are paid a fixed amount for performing work irrespective of the time consumed in the
performance thereof;
(e) Those who are already enjoying the benefit herein provided;
(f) Thise enjoying vacation leave with pay of at least five days; and
(g) Those employed in establishments regularly employing less than ten employees.

The term “at least one-year service” means service for not less than 12 months, whether continuous or
broken reckoned from the date the employee started working, Including authorized absences and paid
regular holidays unless the working days in the establishment as a matter of practice or policy, or that
provided in the employment contract in less than 12 months, in which case said period shall be
considered as one year.

An employee needs at least one yesr to avail this benefits. This means that he needs to earn it. If the
employee was hired January 1, 2017 by December 1, 2018 he is already entitled to the S days SIL. As he
continues the service, he keeps on earning the succeeding periods.

Does the SIL apply to vacation leave only or can be used for sick leave?

According to the DOLE Handbook 2017, the service incentive leave may be used sick and vacation leave
purpose. The unused servise incentive leave is commutable to its money equivalent at the end of the year.

The service incentive leave is commutable to its money equivalent if not used or exhausted at he end of
the year. The SIL should be converted to cash if unused at the end of the year.

What is the tax implication of this benefit?

It bears nothing under the TRAIN Law service incentive leave benefit is nto expressly mentioned as
exempt. from tax. Even Sec.2 of RR 8-2018 does not expressly exempt SILvsince the exemption expressly
covers only the holiday pay, overtime pay, night shift differential pay, and hazard pay earned by an MWE.

Yet, under the TRAIN Law this can be covered by the ceiling on non-taxable limit of 20,833.00 if he is a
MWE considering that the total wage may not breach this amount. However, even if it does exceed, it can
still be exempt under the minimis benefits rule.
Under RR 5-2011, monetized unused vacatiin leave credits for private employees not exceeding ten (10)
days during the year shall be considered as de minimas benefits not subject to income tax as well as
withholding tax on compensation income of both managerial and rank-and-fike employees.

It is clear that the monetized vacation leave credits are not taxable.

How about sick leave?

This cannot apply to sick leave credits since an employee must actually goon sick leave to be able to avail
of said leave credits. (BIR Ruling No. 416-2012 dated June 25, 2012; BIR Ruling No. 057-2014)

House approves 10-day service incentive leave

By Filane Mikee Cervantes  August 29, 2018, 6:45 pm

MANILA -- The House of Representatives on Wednesday approved on final reading a bill seeking to increase the yearly
service incentive leave (SIL) of employees from five to 10 days.

With 203 affirmative votes, the lower chamber approved on third reading House Bill 6770, which seeks to amend the
Labor Code of the Philippines.

House committee on labor and employment chairman Randolph Ting, sponsor of the measure, said the current five-day
SIL granted to workers annually is "inadequate to meet the needs of our workers for sufficient rest."

"The complex and stressful lifestyle of our generation leaves the worker susceptible to sickness, aside from stress, due to
natural and man-made calamities and other emergencies that require absence from our jobs," Ting said.

"The increase of the service incentive leave to 10 days gives a balanced work-life to employees. The increase to 10 days
will certainly be more beneficial to the employee as this benefit is readily available when the employee is sick and needs
to seek medical care," he added.

The proposed amendment provides that every employee who has rendered at least one year of service shall be entitled
to a yearly service incentive leave of 10 days.

The provision shall not apply to those already enjoying such benefit, those enjoying vacation leave with pay of at least 10
days, and those in establishments regularly employing less than 10 employees or in establishments exempted from
granting this benefit by the Secretary of Labor and Employment after considering the viability or condition of such
establishment. (PNA)

http://www.chanrobles.com/legal4labor3.htm

https://www.facebook.com/laborandemployment/posts/beinformedworkers-service-incentive-leave-silworkers-service-
incentive-leave-sil/1311322428996277/

https://www.ebvlaw.com/2018/04/25/service-incentive-leave-computation-for-resigned-employee-and-tax-issues/

https://www.pna.gov.ph/articles/1046344
Submitted by:

Jamaica Dagpin & Angelica Dalis