Annual Sick Leave and Vacation Leave Entitlements Under Philippine Labor Law
(private-sector employees, government employees, and special categories)
1. Legislative Framework at a Glance
| Sector | Main Statutory Sources | Core Annual Entitlement |
|---|---|---|
| Private sector | • Labor Code of the Philippines, Art. 95 (Service Incentive Leave) • Social Security Act of 2018 (RA 11199)—Sickness Benefit • Employees’ Compensation Law (PD 626, as amended) |
• 5 days Service Incentive Leave (SIL) after 1 year of service—may be used as vacation or sick leave and is convertible to cash if unused. • Up to 120 days/yr SSS sickness benefit (cash allowance) when illness/injury lasts ≥ 4 days. |
| Government sector | • Administrative Code of 1987, Book V, Title I-A, Sub-title A, Ch. 3 • Civil Service Commission (CSC) Memorandum Circular No. 41-98 & later issuances |
15 days Vacation Leave (VL) + 15 days Sick Leave (SL) every calendar year, cumulative without cap and monetizable under set conditions. |
| Domestic workers | • Batas Kasambahay (RA 10361) | 5 days SIL (separate from weekly rest day), convertible to cash. |
| Seafarers / OFWs | • POEA Standard Employment Contract, Maritime Labour Convention | Shipboard contracts routinely grant 2.5-2.75 days VL/SL per month of service (contractual, not statutory). |
| Teachers | • DepEd rules: 70-day vacation service credit system | See DepEd/CHED/CSC issuances (outside Labor Code). |
Important: Except for the 5-day SIL, Philippine labor statutes do not guarantee additional “vacation leave” or “sick leave” in the private sector. Extra leave credits are purely a matter of company policy, collective bargaining, or individual contract.
2. Service Incentive Leave (SIL) ― Article 95, Labor Code
Coverage & Eligibility
- Who qualifies? Rank-and-file employees in the private sector who have rendered at least 12 months of service, whether continuous or broken, unless exempt (see below).
- “One year” is credited upon completing at least 12 cumulative months of service within a rolling or fixed 12-month period, as confirmed by Department Advisory No. 01-2010.
Exempt Establishments / Employees
- < 10 total employees (micro-enterprise exemption).
- Field personnel and other employees whose actual work hours cannot be determined with reasonable certainty.
- Government employees, managerial employees, domestic helpers (but see RA 10361), and workers already enjoying ≥ 5 days leave or its equivalent.
- Employees paid on task, contract, or purely commission basis, if they fall within the “field personnel” concept.
- Supreme Court jurisprudence (e.g., Auto Bus Transport v. Bautista, G.R. No. 156367, Feb 10 2005) narrowly construes “field personnel”; the burden rests on the employer to prove exemption.
Utilization
- The 5 days may be taken as vacation or sick leave at the employee’s option, subject to reasonable scheduling rules.
- Undertime/ partial-day absences may be charged proportionally (DOLE LA 06-2020).
Conversion to Cash
- Any unused balance as of year-end must be converted to cash based on the employee’s latest daily wage.
- Upon separation, all accrued but unused SIL must be paid out, subject to the 3-year prescriptive period for money claims.
Commutation vs. Carry-Over
- The law does not require carry-over. Common practice: either (a) automatic year-end commutation, or (b) carry-over with a running balance, provided eventual monetization is allowed.
Prescriptive Period
- Claims prescribe 3 years from the time each entitlement accrues (i.e., at year-end or upon separation), per Del Monte Phil. v. Saldivar (G.R. No. 153477, Feb 11 2005).
3. Sickness-Related Benefits in the Private Sector
| Aspect | Company Sick Leave | SSS Sickness Benefit |
|---|---|---|
| Nature | Purely contractual unless counts toward SIL. Common range: 5-15 paid SL per year. | Statutory cash benefit reimbursed by SSS. |
| Eligibility | Based on policy/CBA | • At least 4 days confinement (home or hospital) • 3 monthly contributions in the 12 months preceding semester of sickness • Proper notice to employer & SSS |
| Benefit Level | 100 % pay (common) or graduated pay | 90 % of Average Daily Salary Credit (ADSC), maximum ₱960/day (2025 ceiling). |
| Duration Limit | Policy-based | Maximum 120 days per calendar year; 240 days per illness; beyond 240 treated as disability. |
| Procedure | Employee files leave request | Employer advances payment ≤ 30 days, then seeks reimbursement from SSS within the prescriptive window. |
Interaction with SIL: An employer may deduct approved sick days from the 5-day SIL if the policy so provides; otherwise, SIL remains untouched.
4. Vacation Leave Beyond SIL in the Private Sector
There is no law obliging employers to grant more than 5 SIL days. Nevertheless, additional VL credits have become standard (often 10-15 days) as a management prerogative or under collective bargaining agreements. Key practices:
- Accrual formula (e.g., 1.25 days per month).
- Carry-over cap (e.g., use-it-or-lose-it after 18 months unless converted).
- Monetization typically allowed for up to 50 % of accumulated credits each year, echoing the monetization rule for public servants.
- Forced leave: Employers may require employees to use VL credits during temporary suspension of operations (Art. 301 [286]).
5. Government Sector: Vacation & Sick Leave
Basic Credits: 15 VL + 15 SL earned simultaneously at 1.25 days per month of service.
Cumulative & Non-forfeitable: Leave credits accumulate without limit; only monetization or conversion to service credit reduces balance.
Monetization Rules (CSC MC 41-98):
- Up to 50 % of total leave credits may be monetized once a year for valid reasons.
- Terminal Leave Pay = Total accumulated leave × latest salary rate, collectible upon resignation, retirement, or death.
Split vs. Commutation: Agencies may require employees to consume VL before approving leave without pay. SL may be commuted to vacation leave upon exhausting the latter, subject to agency head approval.
6. Special Statutory Leaves (Quick Reference)
Although outside “annual” VL/SL, these interact with leave balances:
| Law | Leave | Remarks |
|---|---|---|
| RA 11210 | 105-day Maternity Leave (paid) | May extend by 30 days without pay; may be offset against unused VL. |
| RA 8187 | 7-day Paternity Leave | With pay;charged against employer not SSS. |
| RA 8972 | 7-day Solo Parent Leave | Requires 1 year service & Solo Parent ID. |
| RA 9710 (Magna Carta of Women) | 60-day Special Leave for Gynecological Surgery | Paid; must have 6 months aggregate service in 12 months. |
| RA 9262 | 10-day VAWC Leave | For women employees victim-survivors. |
These are add-ons, not substitutions, unless the employee elects to charge them to existing VL/SL per policy.
7. Jurisprudential Highlights
- Auto Bus Transport v. Bautista (2005) ― Field personnel exemption strictly construed; bus conductors/drivers not field personnel → entitled to SIL.
- Davao Integrated Port v. Abarquez (G.R. No. 193492, Jan 13 2016) ― Employees who already enjoy ≥ 5 days vacation leave convertible to cash are deemed already compliant; no double counting.
- Montilla v. NLRC (G.R. No. 164652, Jan 17 2005) ― Proof of grant rests on employer; absent records, SIL presumed unpaid.
- PSALM v. CA (G.R. No. 198680, Apr 25 2017) ― Terminal leave pay is a property right protected by due process.
- Halliburton v. Paladas (G.R. No. 167000, Nov 14 2012) ― SIL applies even to seafarers if contract silent and employer fails to prove exemption.
8. Compliance, Record-Keeping, and Enforcement
Leave Ledger: DOLE Visitorial Power (Art. 128) covers inspection of SIL records.
Payslip Disclosure: While not mandated, best practice is to show leave balances on payslips or separate statements.
Penalties: Failure to grant SIL or pay its monetary equivalent constitutes wage underpayment, subject to double indemnity and possible criminal liability under Art. 303.
Dispute Resolution:
- SEnA (Single-Entry Approach) compulsory first step for monetary claims ≤ ₱5 K (DOLE Dept. Order 107-10).
- NLRC for unresolved claims or if > ₱5 K.
- Prescription: 3 years from accrual; action interrupted by filing.
9. Practical Guidance for Employers
- Draft a unified “PTO Policy” that folds SIL, vacation, sick, and special leaves into a single pool only if total credit exceeds 5 days and complies with conversion rules.
- Clarify accrual cut-off (calendar year vs. employee anniversary).
- State documentation requirements for sick leave (medical certificate threshold, notification timeline).
- Set carry-over or forfeiture caps consistent with Article 95’s right to commutation.
- Align with SSS procedures—designate an officer to file SSS sickness notifications promptly.
- Monitor micro-enterprise headcount; once the 10-employee threshold is crossed, SIL applies retroactive to service rendered after reaching 10 employees.
10. Key Take-Aways
- Private-sector “vacation leave” is not statutory; only the 5-day Service Incentive Leave is. Everything beyond that is a benefit voluntarily conferred or collectively bargained.
- Sick leave is likewise contractual, but the SSS sickness benefit provides a social-insurance safety net up to 120 days per year.
- Government workers enjoy the highest statutory leave (15-15), with monetization and unlimited carry-over.
- Conversion to cash of unused leave balances is a vested monetary benefit protected by law.
- Proper classification and record-keeping are the employer’s best defenses against money claims.
This article is for informational purposes only and does not constitute legal advice. For specific concerns, consult the Department of Labor and Employment, the Civil Service Commission, or competent counsel.