Rule on Applying Leave With Pay Adjacent to Philippine Holidays

(Philippine labor law primer for HR, payroll, and employees)

Bottom line: If you take leave with pay right before or after a regular holiday, your holiday pay remains intact (for daily-paid employees) because the law requires you to be present OR on leave with pay on the workday immediately preceding the regular holiday. “Sandwich” rules that forfeit statutory holiday pay despite approved paid leave are not lawful. Special non-working days are different (generally “no work, no pay” unless company policy/CBA says otherwise).

1) Legal Bases & Who’s Covered

Labor Code, Article 94 (Holiday Pay): Workers are entitled to 100% of the daily wage for regular holidays, even if unworked, provided they are present or on leave with pay on the workday immediately preceding the holiday. If they work on a regular holiday: 200% for the first 8 hours (plus applicable premiums for overtime/night work).
Labor Code, Article 95 (Service Incentive Leave, “SIL”): At least 5 days paid leave per year after one year of service, convertible to cash if unused. Employers may grant more vacation/sick leave by policy/CBA.
Coverage nuances:
- Daily-paid employees: rules below are most impactful.
- Monthly-paid employees: generally paid a fixed salary that already covers all days of the month, including regular holidays (and usually rest days), subject to company payroll scheme (e.g., “Factor 365/313/304”).
- Exempt establishment: Retail/service establishments regularly employing <10 data-preserve-html-node="true" workers may be exempt from paying regular holiday pay.
- Government employees: governed by Civil Service rules, not the Labor Code.

2) Regular Holidays vs. Special (Non-Working) Days

Day type	If unworked	If worked
Regular holiday	100% of basic daily wage, provided present or on leave with pay on the workday immediately preceding the holiday	200% for first 8 hrs (higher if overtime/night/rest day overlaps)
Special (non-working) day	No work, no pay by default (unless company policy/CBA says otherwise). Paid only if there’s a favorable policy/CBA or you charge paid leave credits.	130% for first 8 hrs (typical rule; check current DOLE schedules/company policy/CBA)

Tip: Filing paid leave adjacent to a special day doesn’t create a right to special-day pay. It only ensures you’re paid for the leave day itself.

3) The “Immediately Preceding Workday” Rule (Regular Holidays)

For daily-paid employees to receive unworked regular holiday pay, the law looks at one day:

The employee must be present or on leave with pay on the workday immediately preceding the regular holiday.
If the employee was absent without pay on that day, holiday pay is forfeited (for daily-paid).
If the employee was on leave with pay (vacation leave, sick leave, SIL, or other paid leave), holiday pay is due.

Notes & clarifications

“Succeeding workday” presence is not required by statute for entitlement to an unworked regular holiday. Some companies add an “either preceding or succeeding” test (more generous). They cannot be more restrictive than the law.
Undertime / partial day: If the day immediately preceding is paid (e.g., undertime but still paid), entitlement remains. If it becomes unpaid (leave without pay/AWOL), entitlement may be lost.
Rest days/weekends in between: Rest days don’t break entitlement. What matters is the last scheduled workday before the holiday.

4) Using Leave With Pay Adjacent to Holidays: Scenarios

Assume a Mon–Fri workweek, daily-paid employee, and a Monday regular holiday.

A. Leave with pay on Friday (before Monday holiday)

Friday: Paid VL/SIL
Sat–Sun: Rest days
Monday: Unworked regular holiday → 100% paid Result: Holiday pay preserved.

B. Absent without pay on Friday

Friday: LWOP/AWOL
Monday: Unworked regular holiday → not paid Result: Holiday pay forfeited (for daily-paid).

C. Leave with pay on Tuesday (after Monday holiday)

Monday: Unworked regular holiday
Tuesday: Paid VL/SIL Result: Tuesday is paid (leave), holiday pay unaffected (law looks to the day before the holiday for entitlement).

D. Filing VL around special (non-working) days

Special day (unworked): no pay by default.
VL on adjacent days: those specific leave days are paid if approved/with credits, but the special day itself remains unpaid unless company policy/CBA grants it.

E. Two consecutive regular holidays (e.g., Maundy Thursday & Good Friday)

If present or on paid leave on the workday immediately preceding Maundy Thursday, the employee is entitled to both unworked regular holidays (typical practice).
If LWOP on that preceding workday, both may be unpaid for daily-paid.

F. Monthly-paid employee takes paid leave before a regular holiday

Monthly salary usually already covers regular holidays. The paid leave day is covered by policy; the holiday is paid as part of monthly rate.
Check payroll factor (313/314/365) and policy/CBA; employers cannot diminish statutory holiday pay.

5) “Sandwich Leave” Policies: What’s Allowed vs. Not

“Sandwich leave” (leave taken on the workday before and/or after a holiday, with a weekend/holiday in between) is common. Keep these guardrails:

Not allowed: Forfeiting regular holiday pay when the employee was on leave with pay on the day immediately preceding the holiday. This would diminish a statutory benefit.
Allowed:
- Denying holiday pay to daily-paid employees who were absent without pay on the required preceding workday.
- Reasonable operational rules (e.g., prior approval, blackout dates) so long as they don’t reduce statutory entitlements.
Weekends/Rest days don’t count as absences. You generally cannot charge ordinary rest days as leave or AWOL just to make the sandwich “unpaid.”

6) Interaction With Different Kinds of Leave

SIL/VL/SL (paid): Counts as leave with pay. Satisfies the “preceding workday” requirement for regular holiday pay.
LWOP (leave without pay): Does not satisfy the requirement; daily-paid employees lose unworked regular holiday pay.
Company-granted leaves (e.g., birthday, emergency, calamity leave) paid by policy/CBA: Treated as leave with pay, same effect as VL/SL.
Sick leave without sufficient credits: If it becomes unpaid, it fails the requirement unless the employer still pays the day (e.g., humanitarian discretion).
Maternity/Paternity leaves (paid by law): Paid absences; do not diminish holiday pay for monthly-paid; for daily-paid, treat as paid for the purpose of the “preceding workday” rule.

7) Payroll Computation Reminders

Daily-paid, unworked regular holiday (entitled): 100% x basic daily rate.
Daily-paid, worked on regular holiday: 200% x basic daily rate for first 8 hours (+ OT/night shift differentials as applicable).
Daily-paid, special non-working day worked: typically 130% (plus premiums).
Monthly-paid: Follow the company’s payroll factor. Ensure statutory holiday pay is embedded and not offset by forced leave deductions.

No offsetting: Employers can’t require employees to spend leave credits just to be paid a regular holiday that is otherwise payable by law.

8) Policy Drafting for HR (Best-Practice Clauses)

Clarity clause: “For regular holidays, daily-paid employees are entitled to holiday pay if **present or on approved leave with pay on the workday immediately preceding the holiday. Approved paid leave satisfies this requirement.”
Sandwich clause (compliant): “If an employee is absent without pay on the workday immediately preceding a regular holiday, the employee shall not be entitled to unworked regular holiday pay. Approved paid leave preserves holiday pay.”
Special day clause: “Special non-working days follow the no work, no pay rule unless otherwise provided by company policy/CBA. Employees may apply paid leave credits to be paid on a special day at the employee’s option and subject to approval.”
Non-diminution safeguard: “Nothing in this policy shall reduce or waive statutory benefits under the Labor Code, DOLE issuances, or applicable CBAs.”

9) Edge Cases & Practical FAQs

Q: I worked a few hours on the day before the holiday but went undertime. A: If the day remains paid, you meet the requirement. If it was converted to LWOP, you may lose entitlement (for daily-paid).
Q: Holiday falls on my rest day. A: For daily-paid, if unworked, many payroll schemes still pay 100% for a regular holiday that falls on a rest day provided you were present/on paid leave on the preceding workday. Company/CBA may improve this.
Q: I was on approved paid sick leave the day before the holiday. A: That’s leave with pay—holiday pay (regular) is preserved.
Q: Can HR refuse my VL on the day before a holiday? A: HR may regulate when leave can be used for operational reasons, but cannot use approval mechanics to defeat statutory holiday pay where paid leave is granted.
Q: We’re a small retail shop with 8 employees. Do we have to pay regular holiday pay? A: Establishments regularly employing fewer than 10 workers in retail/service may be exempt from regular holiday pay (check your current status and DOLE guidance). If exempt, the “preceding workday” rule doesn’t apply because the base entitlement doesn’t attach.
Q: What if there’s a work suspension (e.g., calamity) right before the holiday? A: Follow DOLE advisories and company policy/CBA on pay during suspensions. If the day is paid or deemed worked, the “preceding workday” condition is generally satisfied.

10) Quick Decision Tree (Daily-Paid, Unworked Regular Holiday)

Was the employee present or on paid leave on the workday immediately preceding the holiday?

Yes → Pay 100% holiday pay.
No (LWOP/AWOL) → No holiday pay.

Is the day a special (non-working) day instead?

Unworked → No pay by default (unless favorable policy/CBA).
Worked → Pay applicable premium (typically 130%).

11) Takeaways

Paid leave adjacent to a regular holiday (before/after) does not cancel holiday pay; it protects it.
Only an unpaid absence on the immediately preceding workday can defeat a daily-paid worker’s unworked regular holiday pay.
Special days ≠ regular holidays: filing VL/SL doesn’t turn a special day into a paid day unless policy/CBA says so.
Policies can add benefits, not reduce them.

This article provides general guidance under Philippine labor standards. For specific cases, review your CBA/company handbook and consult counsel/DOLE for current holiday schedules and any special advisories.