Employee Entitlements to Vacation and Sick Leave After One Year of Service in the Philippines

Philippine private-sector focus, with notes for government and special categories

1) The one statutory baseline in the private sector: Service Incentive Leave (SIL)

What it is. The Labor Code grants five (5) days of Service Incentive Leave with pay each year to employees who have rendered at least one (1) year of service. SIL is a single bucket—you may use it as vacation leave or sick leave.

“One year of service” means 12 months, whether continuous or broken, counted from the date of engagement. Authorized absences, regular holidays, and rest days are generally included in reckoning service.

When it vests. The full 5 days vest after completing the first 12 months. For every year thereafter, another 5 days accrue. (Employers may choose to prorate earlier by policy, but the law requires the grant after a full year.)

Who is covered. All employees not expressly excluded (see below) in the private sector—regardless of rank (rank-and-file or managerial), employment status (regular, probationary, project-based, or seasonal), or work schedule (full-time or part-time)—so long as they meet the one-year service requirement.

Cash conversion and carry-over.

End of year: Unused SIL is “commutable to cash.” In practice, it’s paid out at the employee’s daily basic wage at the time of commutation.
Carry-over: The law guarantees commutation; carry-over is a matter of company policy. Many employers allow carry-over up to a cap; some pay out at year-end (no carry-over).
Upon separation: Any unused (or proportionally earned) SIL must be paid in cash.

Exclusions. SIL does not apply to:

Employees already enjoying at least five (5) days of vacation leave with pay each year (i.e., where company policy already meets or exceeds SIL).
Establishments regularly employing fewer than 10 employees.
Field personnel and other similarly situated workers whose performance is unsupervised, and workers engaged on purely commission, task, or contract basis, or paid a fixed amount for output (as fleshed out in the implementing rules).
Establishments exempted by the Secretary of Labor (rare and case-specific).

Practical tip: If your company already gives, for example, 15 vacation + 15 sick days, SIL no longer applies (you are already better than the legal minimum). If your employer gives 5 sick but no vacation, SIL still applies because the law requires vacation or sick usage at the employee’s option.

Computation basics.

Rate: SIL is paid at the employee’s daily basic wage (excludes overtime, premium pay, and most allowances unless your policy/contract says otherwise).
Partial years: The statute grants 5 days after one year. If employment ends mid-year, many employers pay pro-rated SIL for the year of separation based on months served; this approach aligns with case law principles on equitable commutation.

Documentation and disputes.

Employers should keep leave records and evidence of commutation. In disputes, the employer bears the burden to prove that SIL was granted/paid. Absent records, courts tend to presume non-payment and award SIL pay.

2) “Vacation Leave” and “Sick Leave” beyond SIL: Company policy & contracts

Outside SIL, no national law requires private employers to grant separate vacation or sick leave buckets or higher totals.

Most employers voluntarily grant VL and SL (e.g., 10–15 days each) as a competitive benefit.
Eligibility cliffs: Many policies unlock full VL/SL after regularization or after one year of service. That’s lawful so long as the employee still receives the statutory SIL once they hit one year.
Carry-over & forfeiture: Governed by policy/CBA (subject to fairness and non-impairment rules). Common models: (a) “use-it-or-lose-it” with payout of SIL component; (b) cap (e.g., carry-over up to 10 days); or (c) full commutation at year-end.
Medical proof: Employers may require medical certificates or self-certs for sick leave under policy, provided the rules are reasonable, applied uniformly, and don’t defeat SIL.

3) Government employees (for comparison)

Government workers are covered by Civil Service rules, not the Labor Code. As a baseline, they accrue 15 days Vacation Leave (VL) and 15 days Sick Leave (SL) per year (earned monthly), with broad carry-over and monetization options subject to rules. This is separate from private-sector SIL.

4) Special categories and statutes that interact with “vacation/sick” concepts

These are independent of SIL and typically require separate eligibility:

Maternity Leave (RA 11210): 105 days with full pay for covered female workers (additional 15 days for solo mothers), plus 7 days transferable to the father/alternate caregiver (if employer-employee).
Paternity Leave (RA 8187): 7 days with pay for the first four deliveries/miscarriages of the lawful spouse, subject to conditions.
Solo Parent Leave (RA 11861): 7 days with pay annually for qualified solo parents after at least 6 months of service.
VAWC Leave (RA 9262): Up to 10 days with pay for women employees who are victims of violence, extendible as needed by court order.
Special Leave Benefit for Women (Magna Carta of Women): Two months with full pay following surgery due to gynecological disorders, subject to medical proof.
Domestic Workers (Kasambahay, RA 10361): Entitled to at least 5 days leave with pay after one year; unused leave is not commutable to cash unless agreed otherwise—different from Labor Code SIL.

These special leaves coexist with SIL and any company VL/SL. They cannot be substituted by SIL unless the specific law or its rules allow.

5) Tax treatment of monetized leave (private sector snapshot)

Monetized unused vacation leave of private-sector employees up to ten (10) days within a year is generally treated as a de minimis benefit and excluded from taxable income; amounts beyond 10 days are taxable.
Monetized sick leave is typically taxable unless covered by specific exemptions (e.g., certain terminal/retirement contexts).
SIL commutation follows the same rules: if your employer treats a portion as “monetized vacation leave,” the first 10 days may be tax-exempt; anything in excess is taxable. Exact treatment depends on how your employer classifies/commutes leave and prevailing BIR issuances.

6) Frequently asked practical questions

Q1: I finished my first 12 months. Do I get both 5 SIL days and my company’s VL/SL?

If your company grants at least 5 days paid vacation (or combined leave that you control), it already satisfies SIL for that year. You’re entitled to the better of company policy or the Labor Code minimum, not double-counting.

Q2: I’m in a company with 8 employees. Do I get SIL after a year?

Establishments with fewer than 10 employees are exempt from SIL (unless they voluntarily grant it by policy/contract).

Q3: I’m on commission/task basis or I’m a true field worker. Do I get SIL after a year?

Likely excluded from SIL if you fall under the field/commission/task categories recognized by the rules. (Your actual work arrangement—not just your title—controls.)

Q4: Can my employer require a medical certificate for SIL taken as “sick”?

Yes, via reasonable, even-handed policy. But SIL should remain usable for sickness or personal reasons; documentation standards can’t nullify the benefit.

Q5: If I resign mid-year, what happens to SIL?

You’re generally entitled to cash conversion of any unused SIL and, commonly, a pro-rated amount for the current year (policy or jurisprudence-based practice). This is typically paid with final pay.

Q6: Are managers entitled to SIL?

Yes, unless they fall into a specific exclusion (e.g., they already enjoy ≥5 days paid vacation, they’re in an exempt establishment, or their role is truly field/unsupervised under the rules).

7) Compliance checklist for employers (post-one-year employees)

✅ Policy states leave buckets (SIL vs. VL/SL) and eligibility (including the 12-month trigger).
✅ Recordkeeping: track accrual, usage, and commutation; reflect in payslips or year-end statements.
✅ Cash conversion of unused SIL at year-end and upon separation.
✅ Clear rules on carry-over, documentation for sick leave, and forfeiture (if any).
✅ Alignment with special-leave laws (maternity, paternity, solo parent, VAWC, women’s special leave, etc.).
✅ Tax handling of monetized leave consistent with BIR rules (de minimis thresholds).

8) Quick examples

Minimum-only employer (≥10 employees): After 12 months, Employee A gets 5 SIL days. If A uses 2 days and has 3 left on December 31, the 3 days are paid out at A’s daily basic wage (unless policy allows carry-over and pays only at separation).
Employer with 10 VL + 10 SL: SIL is already satisfied. After 12 months, Employee B gets 20 paid days under policy. Any carry-over or payout is per policy.
Resignation in June: Employee C resigns with 2 unused SIL days and served 6 months in the current accrual year. Employer typically pays the 2 days plus pro-rated SIL for the half-year (if company policy or settled practice provides), together with final pay.

9) Key takeaways

In the private sector, after one year, the only nationwide statutory floor for “vacation/sick” is the 5-day SIL—usable for either purpose.
Many employers grant more generous VL/SL after one year; those supersede SIL in practice but cannot be less than SIL.
Cash conversion of unused SIL at year-end and upon separation is a legal right; carry-over depends on policy.
Exclusions (micro-employers, field personnel/commission/task workers, etc.) and special leaves may change the picture; always test your facts against these categories.
Taxes can apply to monetized leave beyond de minimis limits—classification and payroll treatment matter.

Final note

This article distills black-letter rules plus standard practices. For specific scenarios (mixed pay structures, unusual schedules, or contested “field personnel” status), evaluate the actual work arrangement, written policies/CBAs, and payroll records against the Labor Code, its implementing rules, and relevant issuances.