1) The problem in plain terms

In many workplaces, employees see “leave credits” in a payslip or HR system (e.g., sick leave, vacation leave, PTO) but there’s no written policy explaining:

What the credits mean (are they legally required or just a company benefit?)
How they accrue (monthly? yearly grant? pro-rated?)
Whether unused credits carry over
Whether unused credits are convertible to cash
What happens to unused credits when employment ends

In the Philippines, the answer depends on whether the “leave credits” are (a) mandated by law or (b) voluntarily granted by the employer (contract/CBA/company practice). When policy is unclear, labor-law principles on minimum standards, interpretation in favor of labor, and non-diminution of benefits become important.

2) What the law always requires (minimum statutory leaves)

A. Service Incentive Leave (SIL) — the core “leave credit” under the Labor Code

Legal basis: Labor Code, Article 95.

Minimum rule: Every covered employee who has rendered at least one (1) year of service is entitled to five (5) days of service incentive leave with pay per year.

Key points:

SIL is a minimum labor standard. A company policy cannot validly reduce it.
“One year of service” generally includes service within the preceding 12 months; employment need not be continuous in the strictest sense as long as the employee has accumulated one year of service under applicable rules/practice.
SIL is intended to give a worker paid leave days; if the worker cannot use them, the law recognizes commutation to cash (see Section 4).

B. Other statutory leaves (not “leave credits” in the SIL sense, but legally required)

Depending on eligibility, the following leaves are mandated by specific laws:

Maternity Leave — R.A. 11210 (Expanded Maternity Leave Law): generally 105 days with pay for live childbirth, with additional options/allowances under the law.
Paternity Leave — R.A. 8187: 7 days with pay for the first four deliveries/miscarriages of the legitimate spouse (subject to legal conditions).
Solo Parent Leave — R.A. 8972, as amended by R.A. 11861: expanded benefits; leave entitlement exists for qualified solo parents (the amended law increased benefits; employers should follow updated implementing rules).
Special Leave for Women — R.A. 9710 (Magna Carta of Women): up to 2 months with full pay for qualified employees who undergo surgery due to gynecological disorders (subject to statutory conditions).
VAWC Leave — R.A. 9262: 10 days for women employees who are victims of violence (extendible when needed, as provided by law).
Leave for domestic workers (kasambahays) — R.A. 10361 grants a paid leave entitlement analogous to SIL after qualifying service.

Important: These leaves are governed by their own statutes and rules. They do not disappear because a company has no policy.

3) Who is covered by SIL (and who may be excluded)

SIL coverage is broad, but the Labor Code and implementing rules recognize typical exclusions, commonly including:

Government employees (covered by civil service rules, not Labor Code SIL)
Managerial employees
Field personnel (in the technical sense—those whose actual hours of work cannot be determined with reasonable certainty)
Employers with fewer than 10 employees may be exempt from SIL under implementing rules (though many still grant leaves voluntarily)
Employees who are already enjoying at least 5 days leave with pay (or an equivalent benefit) may be treated as already receiving the SIL minimum through substitution (see next section)

Because exclusions are often fact-specific (especially “field personnel” and “managerial”), employers should not assume an exclusion applies without a defensible basis.

4) If there’s no company policy, what happens to SIL?

A. SIL must still exist, and it cannot be “forfeited” by silence

If an employee is covered and has at least one year of service, SIL is due by law. A missing policy does not erase it.

B. SIL can be “substituted” by existing leave benefits—but only if truly equivalent

If a company already provides leave benefits (e.g., 10 days vacation leave), that may satisfy the SIL requirement if the benefit is at least equivalent to 5 paid leave days and is genuinely available to the employee.

A practical compliance rule:

If the employer grants ≥5 days leave with pay annually, and employees can actually use it, that leave can typically be treated as compliance with SIL.
If the employer’s leave is heavily restricted or structured so that the employee can’t realistically enjoy paid leave, substitution arguments weaken.

C. SIL commutation to cash (conversion of unused SIL)

SIL is commonly understood as commutable to cash when unused, particularly:

at the end of the year (or the employer’s defined leave year), and/or
upon separation from employment (resignation, termination, retirement), for the unused portion.

If there is no clear company rule on cash conversion, the safer legal view is:

Unused SIL should not simply vanish without giving the employee either (a) a chance to use it, or (b) the cash equivalent, especially when employment ends.

D. Computing the cash equivalent (high-level)

The cash equivalent is typically based on the employee’s daily pay rate applicable to the leave day(s). Computations can be nuanced (e.g., inclusion of certain wage components), so employers should apply the legally correct “daily rate” rules used for labor standards.

5) What about sick leave, vacation leave, and PTO shown as “credits” but not required by law?

A. In the private sector, sick leave and vacation leave are generally company-granted benefits

Outside SIL and special statutory leaves, there is no general Labor Code requirement that private employers provide a separate bank of sick leave or vacation leave. Many employers do—but that’s usually:

a contractual benefit (employment contract),
a CBA benefit (for unionized workplaces), or
a company practice benefit (consistently granted over time).

B. If there is no written policy, the benefit doesn’t become “nothing”—it becomes a dispute about terms

When leave credits appear in HR systems or are regularly granted, the key legal questions become:

Is this leave part of compensation/benefits the employer has promised or consistently provided?
What have the parties’ acts shown (practice)?
Is the employer trying to unilaterally reduce or withdraw something employees have come to receive?

Two labor-law doctrines often decide these disputes:

1) Interpretation in favor of labor (when terms are ambiguous)

If the employer drafted the program or controls the records and the terms are unclear, ambiguities are commonly construed against the drafter and in favor of the employee, especially for labor standards and benefits.

2) Non-diminution of benefits (Labor Code, Article 100)

If employees have been consistently and deliberately receiving a benefit over time (often discussed in case law as a “company practice”), the employer generally cannot withdraw or reduce it unilaterally.

How this plays out with leave credits:

If employees have long been allowed to carry over unused leave, HR may have difficulty abruptly declaring “no carryover” without risking a non-diminution issue.
If employees have long been allowed to encash unused leave on resignation/retirement, removing encashment may be challenged.
If a system shows accrued leave monthly and employees rely on it, that record can support the claim that the benefit was granted, even if HR failed to publish rules.

6) Common “no-policy” scenarios and what Philippine labor standards imply

Scenario 1: Leave credits appear in the HR portal, but HR says “those aren’t real”

If credits are reflected in official records, and especially if employees have used them before, an employer may face difficulty denying them outright. At minimum, employees can demand clarification and may claim the credits reflect a granted benefit.

Best legal framing: employer records and consistent granting can evidence an enforceable benefit (contract/practice).

Scenario 2: Employer suddenly imposes forfeiture (“use it or lose it”) without prior rule

For SIL, forfeiture is risky because SIL is a minimum standard and is commonly commutable if unused. For company leaves, forfeiture might be permissible if clearly communicated prospectively and not inconsistent with established practice (non-diminution concerns).

Scenario 3: Employee resigns; employer refuses to pay unused leave credits because “no policy”

Unused SIL: strong basis to claim cash equivalent of unused SIL upon separation.
Unused VL/SL: depends on contract/CBA/practice. If the employer historically pays it out (or system language implies cash value), refusal can be challenged as benefit diminution or breach of undertakings.

Scenario 4: Employer says VL/SL already “includes SIL,” but VL/SL is not usable by probationary employees

SIL legally attaches after one year of service; probationary status alone isn’t the key. But if the employer’s claimed “substitute leave” is structured so employees can’t realistically enjoy the minimum, the substitution argument can be contested.

7) Employer obligations: documentation and compliance posture

Even when the law does not force a company to offer VL/SL beyond SIL, once an employer does offer leave credits, good compliance practice (and risk reduction) requires:

Written policy defining:
- eligibility (regular/probationary/project, etc.)
- accrual method (front-loaded vs earned monthly)
- scheduling/approval rules
- carryover caps and expiration
- conversion to cash (when, how, limits)
- treatment on separation (resignation/termination/retirement)
- relationship to SIL (is SIL embedded or separate?)
Accurate leave records consistent with payroll records
Clear communication: employee handbook, contract clause, or HR memo acknowledged by employees

A missing policy increases the chance that any dispute will be resolved using employee-favorable presumptions, records, and past practice.

8) Employee remedies when leave credits are denied or unclear

If internal escalation (HR/ticketing/grievance mechanism) fails, Philippine employees commonly use:

SEnA (Single Entry Approach) through DOLE for mandatory conciliation-mediation; and/or
filing an appropriate labor standards complaint (for underpayment/benefits like SIL) or other labor action depending on the issue and employer-employee relationship.

Which forum is proper can depend on whether the claim is a labor standards issue (e.g., SIL nonpayment) versus a more complex money claim tied to employment disputes.

9) Practical guidance: what a “legally safe” leave policy should cover

If a company currently has “leave credits” but no clear policy, these are the minimum items that prevent disputes:

Identify statutory minimums
- State that policy meets or exceeds SIL (Art. 95) and other applicable statutory leaves.
Define leave types clearly
- SIL vs VL vs SL vs PTO vs special leaves.
Accrual method
- Front-load annually or accrue monthly; pro-rate rules for partial year.
Carryover and expiration
- Caps; expiry date; transition rules for existing balances.
Encashment
- SIL commutation (end of year and/or separation).
- Company-leave encashment rules (if any), including approvals and caps.
Separation rules
- What gets paid out, what doesn’t, and why (with SIL handled correctly).
Non-diminution-safe transition
- If changing long-standing practice, use prospective implementation, clear notices, and legal review.

10) Bottom line

When a company has no clear leave policy, Philippine law still supplies a minimum floor:

SIL (5 paid days after 1 year) is required for covered employees, and missing policy does not erase it.
Statutory special leaves (maternity, paternity, solo parent, VAWC, special leave for women, etc.) apply based on their laws.
For “extra” leave credits (VL/SL/PTO), the absence of policy does not automatically favor the employer—records, consistent practice, and non-diminution of benefits can make those credits enforceable.
The highest-risk employer move is denying, forfeiting, or refusing payout of leave balances without a clear rule and against established practice.

General information only, not legal advice. If a dispute is active, the best next step is to gather the employment contract, handbook/memos, payroll/leave ledgers, and evidence of past approvals/payouts, because those usually determine whether credits are enforceable beyond SIL.