Overview

In the Philippines, “vacation leave” can mean very different things legally:

Statutory leave (mandated by law), such as Service Incentive Leave (SIL) under the Labor Code, and special leaves under special laws (maternity leave, paternity leave, solo parent leave, leave for VAWC victims, special leave for women, etc.).
Company-granted leave (benefit by policy, contract, CBA, or established practice), often labeled “Vacation Leave (VL)” and “Sick Leave (SL).”

Because of that split, the answers to:

(a) whether an employer may revoke an approved vacation leave, and
(b) whether unused leave must be paid in final pay, depend primarily on (i) the type of leave, and (ii) what the employer promised through policy/contract/CBA/practice—all interpreted under the general standards of fairness, good faith, and reasonableness in labor relations.

Part I — The Legal Nature of Vacation Leave in the Philippines

1) Service Incentive Leave (SIL) is the main “default” leave in the Labor Code

Under Article 95 of the Labor Code, covered employees who have rendered at least one (1) year of service are entitled to five (5) days SIL with pay per year.

Key points about SIL:

It is statutory (a legal minimum), but it applies only to covered employees (there are exemptions).
SIL is commonly “satisfied” by company VL, as long as the company leave is at least 5 paid days per year.
SIL is generally commutable to cash if unused (details below).

2) “Vacation Leave” (VL) beyond SIL is usually a management-granted benefit

Most private-sector “VL” is not directly mandated by the Labor Code. It exists because:

it is in the employment contract, company policy/handbook, CBA, or
it has become an established company practice (a benefit consistently and deliberately given over time).

Once a benefit is promised or has ripened into practice, it cannot be withdrawn or reduced arbitrarily or in a manner that violates the rule against diminution of benefits (a core labor principle applied in Philippine labor jurisprudence).

Part II — Can an Employer Revoke an Approved Vacation Leave?

A. General Rule (Company VL): Employer approval creates a legitimate expectation, but it may be changed only for valid reasons and with fair handling

In day-to-day practice, employers manage scheduling through management prerogative—the recognized right to regulate work operations, including leave scheduling. However, this prerogative must be exercised:

in good faith,
for legitimate business reasons, and
without discrimination or arbitrariness.

So, an employer may sometimes revoke or reschedule an approved VL, but it is not “free-for-all.” The more an employee has relied on the approval (tickets booked, event commitments, family arrangements), the more unreasonable an abrupt cancellation becomes unless the reason is truly compelling.

Common examples that may justify revocation/rescheduling (fact-dependent):

unforeseen operational emergency (critical outage, safety incident, regulatory inspection, calamity response),
sudden understaffing due to illness/accident of key personnel,
essential deadlines where the employee’s role is genuinely indispensable.

Red flags suggesting improper revocation:

retaliation (e.g., after a complaint, union activity, or refusing unlawful instructions),
selective enforcement (allowing others but cancelling one targeted employee),
chronic “approvals” that are repeatedly cancelled so employees can never actually use leave,
cancellation without a real operational basis or without any attempt to mitigate impact.

B. Stronger limits apply when the leave is contractual, CBA-based, or part of a formalized policy with strict rules

If your CBA or company policy says, for example, “Once approved, VL shall not be cancelled except for declared emergencies, and the company shall shoulder non-refundable costs,” that language controls. A CBA can set stricter employee protections than the Labor Code minimum.

C. Statutory/special leaves: “Revocation” is far harder to justify and can be unlawful

Some leaves are protected by specific statutes and are not simply “schedule at management’s convenience,” such as:

maternity leave (105 days or more under applicable rules),
paternity leave,
solo parent leave,
VAWC leave,
special leave for women.

For these, an employer’s refusal or interference can expose it to administrative and legal consequences, because the leave is a legal entitlement under specific laws.

D. Practical legal framing: revocation is assessed as an issue of fairness, policy compliance, and labor standards—not just “approval equals absolute right”

In disputes, what typically matters is:

What kind of leave is it (SIL vs. company VL vs. special law leave)?
What do the contract/CBA/handbook/policy say about scheduling and cancellation?
Was the employer’s action reasonable and in good faith?
Was the employee treated fairly compared with others similarly situated?
Were losses caused and was there any attempt to address them?

E. Remedies if an approved leave is revoked improperly

Possible avenues depend on the workplace setup:

Internal grievance procedure (especially if unionized/CBA-covered).
DOLE/NLRC route depending on the claim:
- If the dispute becomes a money claim (e.g., losses or benefit denial) or a labor standards issue, employees often seek relief through labor dispute mechanisms.
If the revocation is part of a pattern of harassment or unreasonable work practices, it may support broader claims (e.g., unfair labor practice in union contexts, or constructive dismissal claims in extreme cases—highly fact-specific).

Important: Philippine labor forums generally look for concrete proof of bad faith, discrimination, retaliation, or clear policy violations; mere disappointment is usually not enough.

Part III — Must Unused Leave Be Paid in Final Pay?

A. The “final pay” rule (timing) and what it usually includes

DOLE policy guidance generally expects final pay to be released within a reasonable period (commonly referenced as within 30 days from separation, subject to clearance and company policy, and depending on the applicable DOLE issuance and workplace circumstances).

Final pay typically includes:

unpaid wages,
proportionate 13th month pay,
cash conversion of certain leave credits (when required),
other benefits due under contract/CBA/company policy,
deductions authorized by law/contract (subject to rules).

B. SIL: unused statutory SIL is generally payable (commutable), including at separation

Service Incentive Leave is commonly treated as commutable to cash if unused, and employees who separate from employment are typically entitled to payment of accrued unused SIL, unless the employer can show the SIL was already properly granted/used/converted, or that the employee is exempt.

However, in many companies, employees are not labeled as having “SIL” because the company VL already satisfies SIL. This leads to the next point.

C. Company VL/SL: payout depends on policy, contract, CBA, or established practice

For leave credits beyond the statutory minimum, the default legal position is:

There is no automatic legal requirement that all unused VL/SL be converted to cash unless:
1. the company policy/handbook provides cash conversion, or
2. the employment contract or CBA provides it, or
3. consistent past practice has made conversion an enforceable benefit, or
4. the “VL” is effectively the statutory SIL and has not been properly granted/converted.

What employers often do (and what becomes enforceable):

Convert a portion of VL/SL annually (e.g., “up to 5 days convertible”).
Convert all unused VL upon separation.
Convert only if the employee has completed clearance and has no accountabilities.
Impose caps (e.g., only up to X days may be carried over or converted).

Once these rules are clearly written and consistently applied, disputes usually hinge on interpretation and consistency, not on an across-the-board Labor Code mandate.

D. The “diminution of benefits” angle

If an employer has consistently paid unused VL upon resignation for many years and employees relied on it, abruptly stopping can trigger a diminution of benefits issue—unless the employer can justify that:

the payments were not a deliberate, consistent practice,
or they were conditional and conditions were not met,
or the policy was lawfully changed with proper basis and not in a way that unlawfully reduces a benefit already integrated into employment terms.

E. Resignation vs. termination: does the cause of separation affect leave conversion?

It can, but only if policy/CBA makes it so and it is not illegal or unconscionable. Many policies differentiate:

Voluntary resignation: full conversion, or conversion subject to clearance.
Termination for cause: reduced or no conversion of certain company-granted leaves (not statutory entitlements).
Redundancy/retirement: different computation rules.

Statutory entitlements (like SIL) are harder to forfeit by policy. Company-granted benefits are more policy-sensitive.

Part IV — How to Analyze a Real Situation

Step 1: Identify the leave type

Is it SIL (Labor Code minimum)?
Is it company VL satisfying SIL?
Is it a special law leave?

Step 2: Check controlling documents (in this order)

CBA (if any)
Employment contract
Company handbook/leave policy
Established practice (how it has actually been applied over time)

Step 3: For revocation of approved leave, ask:

What was the stated reason?
Is it an actual emergency or simply poor planning?
Was notice given as early as possible?
Was the employee singled out?
Were alternatives offered (swap schedule, remote coverage, different dates)?
Were employee losses addressed (refunds/non-refundable costs, rebooking fees)?

Step 4: For final pay of unused leave, ask:

Does policy/CBA promise conversion?
Has conversion been consistently practiced?
Is the leave really the statutory SIL in another label?
Are there caps/carry-over rules?
Are there clearance/accountability conditions—and are they reasonable and consistently enforced?

Part V — Illustrative Scenarios (Philippine Workplace Patterns)

Scenario 1: Approved VL cancelled for “sudden workload”

If it’s a predictable seasonal workload the employer failed to plan for, cancellation looks weaker.
If it’s a genuine unforeseen emergency, cancellation may be defensible—but fair handling matters.

Scenario 2: Employee resigns with 12 days VL unused

If policy says “unused VL is convertible upon separation” → it should be paid in final pay.
If policy is silent → not automatically payable unless it is actually the statutory SIL (or conversion is an established practice).
If the company VL is at least 5 days and is treated as SIL compliance, the employee may still claim cash conversion consistent with how the company treats unused statutory leave.

Scenario 3: Employer refuses to pay any leave credits at separation

Employer must still comply with statutory minimums and any enforceable policy/CBA/practice benefits.
A blanket refusal can be challenged if it effectively denies SIL commutation or violates established conversion practice.

Part VI — Employer Best Practices (Risk Reduction)

For leave revocation

Define in writing when approved leave may be recalled (e.g., “declared operational emergency”).
Require high-level approval for cancellations.
Provide mitigation: rebook options, alternative dates, and a rule on reimbursing non-refundable costs when cancellation is employer-initiated and not due to employee fault.

For final pay leave conversion

Clearly state:
- what leave types are convertible,
- caps, carry-over, and expiry rules,
- whether conversion happens annually, upon separation, or both,
- conditions (clearance, documentation), applied consistently.

Key Takeaways

Yes, an employer may sometimes revoke/reschedule approved vacation leave, but only within the bounds of management prerogative exercised in good faith, for legitimate reasons, and consistent with policy/CBA/contract, and not in a discriminatory, retaliatory, or arbitrary manner.
Unused leave must be paid in final pay only when legally or contractually required:
- Statutory SIL is generally commutable and payable if unused (including upon separation), subject to coverage/exemptions and proof it hasn’t already been granted/converted.
- Company VL/SL beyond SIL is payable only if the policy/contract/CBA/practice makes it payable (or it has become enforceable through consistent practice).
Disputes are decided by the type of leave, the governing documents, actual company practice, and fairness/reasonableness in how leave rules are implemented.