In the Philippines, the Labor Code provides for a mandatory benefit known as the Service Incentive Leave (SIL). While it is a relatively straightforward benefit, disputes often arise regarding its accrual, the categories of employees entitled to it, and the extent of an employer’s discretion in approving its use.

I. Legal Basis and Accrual

Under Article 95 of the Labor Code, as amended, every employee who has rendered at least one year of service is entitled to a yearly service incentive leave of five (5) days with pay.

Definition of "One Year of Service": This is interpreted as service within twelve months, whether continuous or broken, reckoned from the date the employee started working. This includes authorized absences and paid regular holidays.
The "Five-Day" Rule: This is the minimum requirement. Employers are free to provide more than five days via employment contracts or Collective Bargaining Agreements (CBA), but they cannot provide less.

II. Coverage and Exemptions

The SIL is a general benefit, but it does not apply to all workers. The following are excluded from the mandatory SIL requirement:

Government Employees: They are governed by the Civil Service Rules.
Domestic Helpers: They are governed by the Batkas ni Lani (Republic Act No. 10361).
Persons in the Personal Service of Another: Such as private drivers or personal bodyguards.
Managerial Employees: Those who possess the authority to lay down and execute management policies.
Field Personnel: Those who perform their duties away from the principal place of business and whose actual hours of work cannot be determined with reasonable certainty.
Employees already enjoying the benefit: Those who are already receiving at least five days of paid vacation/sick leave.
Establishments regularly employing fewer than ten (10) employees: This is a common exemption for micro-businesses.

III. The Rule on Employer Approval

One of the most frequent points of contention is whether an employee has a "right" to take the leave whenever they choose.

Under Philippine jurisprudence and the implementing rules, the employer retains the management prerogative to schedule and approve leaves. While the benefit is mandatory, the timing of its enjoyment is subject to the following principles:

Management Prerogative: Employers have the right to regulate all aspects of employment, including the scheduling of leaves, to ensure that business operations are not disrupted.
Reasonable Approval: An employer cannot arbitrarily deny a leave request if the employee has complied with company policy (e.g., filing the request 3-5 days in advance). However, if a "business exigency" exists—such as a peak season or a critical project deadline—the employer may validly deny or reschedule the leave.
Company Policy: Most firms have internal rules requiring prior notice. Failure to follow these rules can lead to a "Disapproved" status, and taking the leave regardless could be construed as "Abandonment" or "Insubordination."

IV. Commutability: The "Cash-Out" Feature

A unique feature of the SIL is its commutability. If the five days of leave are not used or exhausted by the end of the year, the unused balance must be converted into its cash equivalent.

Calculation: The cash conversion is based on the salary rate at the time of conversion.
Separation from Service: If an employee resigns or is terminated, the pro-rated SIL earned but not yet used or converted must be paid out as part of the final pay (backpay).

V. Recent Jurisprudence on "Vested Rights"

The Supreme Court has consistently held that SIL is a vested right once the one-year service requirement is met. Employers who fail to pay the SIL or its cash equivalent can be held liable for money claims before the Labor Arbiter. Notably, the prescriptive period for filing a claim for SIL is three (3) years from the time the cause of action accrued (usually from the date of resignation or termination).

Summary Table: SIL Quick Facts

Feature	Description
Minimum Requirement	5 days with pay per year of service.
Qualifying Period	At least 1 year of service (continuous or broken).
Cash Conversion	Mandatory for unused leaves at the end of the year.
Employer Right	Right to schedule/approve based on operational needs.
Exemptions	Establishments with <10 data-preserve-html-node="true" employees, Managers, Field Personnel.