(Legal article; Philippine labor-law context; general information based on the Labor Code framework, special laws, and common DOLE practice as generally understood up to mid-2025.)

1) The starting point: there is no single “mandatory sick leave law” for all private employers

In the Philippines, private-sector sick leave (SL) is not universally mandated by one single statute in the way Service Incentive Leave (SIL) is. Instead, sick leave rights typically come from one or more of the following:

Company policy (employee handbook, established practice)
Collective Bargaining Agreement (CBA) (if unionized)
Individual employment contract
Service Incentive Leave (SIL) under the Labor Code (often used in practice to cover sick leave, subject to rules)
Special leave laws (e.g., SSS sickness benefit; maternity leave; violence against women and children leave; solo parent leave; etc.)
Other legal obligations triggered by health/safety or anti-discrimination principles (e.g., fitness-to-work rules, disability accommodation in some cases)

For small businesses, the same legal framework generally applies—but the SIL coverage threshold (and sectoral exclusions) often becomes the most important differentiator.

2) Service Incentive Leave (SIL): the main “baseline” leave for many employees

2.1 What SIL is

Service Incentive Leave (SIL) is a statutory leave benefit under the Labor Code that grants:

Five (5) days leave with pay per year to qualified employees who have rendered at least one (1) year of service.

SIL is leave with pay that may be used for vacation or sick leave purposes in most company implementations, unless the employer’s policy restricts use (policies may regulate scheduling/notice, but cannot reduce below the legal minimum where SIL applies).

2.2 Who is covered

SIL applies to employees in the private sector unless excluded by the Labor Code and its implementing rules. Common exclusions include certain categories such as:

Government employees (covered by civil service rules)
Managerial employees (as defined by law and regulations)
Field personnel and other employees whose hours are not reasonably ascertainable, under specific conditions
Domestic workers (kasambahay) have their own regime (see below)
Employees already enjoying a leave benefit at least equivalent to SIL (in which case the employer is treated as compliant)

Practical point: For many businesses, “sick leave entitlement” in the strict statutory sense is effectively SIL, unless the company voluntarily provides a separate sick leave bank.

2.3 One-year service requirement

An employee generally becomes entitled to SIL after one year of service. Company policies can grant earlier, but the statutory minimum is tied to one year.

2.4 Conversion to cash

Unused SIL is generally convertible to cash at year-end (or as provided by policy), because SIL is a statutory benefit intended to be commutable. Employers commonly cash-convert unused SIL based on the employee’s daily rate (subject to payroll computation rules and policies).

2.5 Why SIL matters to “small businesses”

SIL is the most frequent “gotcha” for small employers because:

They may not have formal leave policies, yet SIL can still apply.
Records (attendance/payroll) are crucial to defend compliance.
Misclassification of employees as “field personnel” or “managerial” is a common source of disputes.

3) The small-business carve-out: the “less than 10 employees” SIL exemption

3.1 The threshold rule

A key Labor Code feature is that certain establishments employing less than ten (10) employees are generally exempt from SIL.

This is often the most relevant “small business” rule: if the establishment genuinely has fewer than 10 employees, SIL may not be legally required—though the employer may still be bound by contract, policy, or practice.

3.2 What counts as “employees” for the threshold

In disputes, the headcount question is fact-driven. Typical considerations in practice include:

Regular, probationary, and casual employees may be counted.
Part-time employees may still be employees depending on the relationship (control test), though entitlement calculations differ.
If a business operates through multiple “units,” questions arise whether it is one establishment or separate establishments—this is frequently litigated on the facts (common ownership/control, integrated operations, single payroll, etc.).

3.3 Risk area: artificial splitting

Artificially splitting a business into paper “entities” or “branches” to keep headcount below 10 can be challenged, especially where operations are integrated.

3.4 Even if exempt from SIL…

An employer can still be required to provide sick leave if:

It promised it in a contract or handbook;
It has an established practice (e.g., consistently granting paid sick leave over time);
A CBA applies.

4) If there is no mandatory sick leave, what happens when an employee gets sick?

This is where Philippine law relies on a combination of pay rules, social insurance, and management prerogative within legal limits.

4.1 “No work, no pay” as the default—subject to exceptions

As a general principle, if an employee does not work due to illness, the day may be unpaid unless:

The employee uses SIL or company sick leave credits; or
Another paid leave law applies (e.g., maternity leave is separate); or
The employer’s policy provides paid sick days; or
Payment is required by a CBA/contract.

4.2 SSS Sickness Benefit (private sector): the major safety net

For employees covered by the Social Security System (SSS), illness may trigger an SSS sickness benefit if the statutory conditions are met (e.g., required number of contributions, proper medical certification, timely notice, confinement rules, etc.).

Key features in practical terms:

It is a daily cash allowance for days the employee cannot work due to sickness/injury.
It is not automatically “salary continuation” by the employer; it is a social insurance benefit administered through SSS rules.
Employers typically have administrative roles (receiving notice, forwarding forms, sometimes initial payment subject to SSS reimbursement depending on the applicable procedures).

For small businesses, compliance hinges on:

Correct SSS registration and remittances
Proper documentation flow (medical certificate, forms, employer certification)
Timely reporting to SSS

4.3 PhilHealth and HMO

PhilHealth generally addresses healthcare cost coverage, not paid leave wages. HMOs are contractual benefits. They may reduce out-of-pocket expenses but do not automatically create paid sick leave unless the company policy says so.

5) Special leave laws that can function like “sick leave” in certain situations

Even if a company does not grant a dedicated sick leave bank, several laws mandate paid leave for specific conditions:

5.1 Maternity leave (not “sick leave,” but medical-related leave)

The 105-day expanded maternity leave regime (with options/allocations) is paid under a statutory framework and applies regardless of business size, subject to legal conditions.

5.2 Leave for violence against women and their children (VAWC)

Qualified women employees may be entitled to VAWC leave under the law, which can overlap with medical recovery needs connected to violence-related circumstances.

5.3 Solo Parent Leave

Eligible solo parents may have additional leave under applicable law (not inherently sick leave, but it is a statutory leave entitlement).

5.4 Special leave for women (gynecological surgery)

There is a statutory special leave benefit for women for certain gynecological conditions requiring surgery, subject to qualifying requirements.

5.5 Kasambahay (domestic workers)

Domestic workers are covered by special rules under the Kasambahay law, which includes leave and benefit provisions different from ordinary establishments. Small household employers are not “small businesses,” but micro-enterprises employing kasambahays must follow the kasambahay regime for those workers.

6) Company-provided sick leave: how it interacts with the law

6.1 Contract/policy can exceed the legal minimum

Many small businesses voluntarily grant:

Separate paid sick leave (e.g., 5–15 days)
Combined VL/SL leave banks
“Sick leave convertible” or “non-convertible” systems
Sick leave accrual monthly

These are allowed as long as they do not undercut statutory minima that apply.

6.2 “At least equivalent to SIL” principle

If a company grants a leave benefit that is at least equivalent to SIL (e.g., a combined VL/SL of 10 paid days), it is typically treated as compliant with SIL obligations.

6.3 Established practice becomes enforceable

If a small business consistently grants paid sick leave over time, employees may argue it is:

A company practice that cannot be unilaterally withdrawn, or
An implied term of employment

Any change should be carefully managed to avoid illegal diminution of benefits.

6.4 Documentation and medical certificates

Policies often require:

Notice to supervisor/HR
Medical certificate for absences beyond a certain number of days or where abuse is suspected
Fit-to-work clearance for certain illnesses

These are generally permissible if applied reasonably and non-discriminatorily.

7) Common compliance issues for small businesses

7.1 Misclassifying employees to avoid SIL

Classifying workers as “independent contractors,” “field personnel,” or “managerial” to avoid leave obligations can backfire if the factual tests show they are employees or non-exempt.

7.2 Headcount threshold disputes

Small firms may mistakenly believe they are under 10 employees when:

They have multiple part-timers, relievers, probationary staff, or project-based workers who still count.
They use multiple business names but operate as one establishment.

7.3 Payroll and timekeeping gaps

Even when leave is minimal, poor records can create liability because:

DOLE and NLRC disputes often turn on documentation.
In the absence of records, employee claims may be given more weight.

7.4 Unclear leave conversion rules

SIL is generally convertible; company sick leave may be convertible or not depending on policy. If the policy is silent and the leave is presented as SIL or equivalent, disputes arise.

7.5 Termination or discipline due to sickness

Employers cannot treat sickness as simple misconduct. Lawful separation due to health reasons has strict conditions, including:

The employee’s continued employment is prohibited by law or prejudicial to health (their own or others)
A competent public health authority certification and other procedural requirements (and payment of separation pay where required)

Small businesses often mishandle this area, creating illegal dismissal exposure.

8) How sick leave interacts with DOLE standards inspections and labor disputes

8.1 DOLE labor standards

DOLE inspections typically focus on:

Minimum wage compliance, holiday pay, 13th month pay, overtime, etc.
SIL compliance where applicable (including proof of leave credits and cash conversion)

8.2 NLRC/LA disputes

Common claims include:

Non-grant of SIL or non-payment of cash equivalent
Unpaid wages for sick days where employees allege company practice or policy
Illegal dismissal or constructive dismissal arising from sickness-related absences
Discrimination/retaliation claims connected to health conditions

9) Best-practice structuring for small businesses (legal-risk lens)

9.1 Put a written leave policy in place

A simple policy should define:

Leave types (SIL, sick leave, vacation leave, emergency leave)
Eligibility (including one-year rule if relying on SIL baseline)
Accrual/crediting and carry-over rules
Medical documentation requirements
Conversion rules (SIL conversion; treatment of unused sick leave)
Approval/notice process and abuse controls

9.2 Align policy with headcount reality

If the establishment is under 10 employees and relying on SIL exemption, document:

The headcount basis
Who is considered an employee
How affiliates/branches are treated

But be cautious: policy language should not accidentally promise SIL where the company intends not to.

9.3 Coordinate with SSS sickness benefit procedures

Set a clear internal workflow for:

Notice timelines
Submission of medical certificates
Employer certification
Tracking reimbursable claims (if applicable)

10) Summary of the “real-world rule set”

Mandatory paid sick leave is not a single universal entitlement for private employers; the most common baseline paid leave is SIL (5 days/year after 1 year) where applicable.
Small establishments with fewer than 10 employees are generally exempt from SIL, but they can still be bound by contract, policy, or established practice granting sick leave.
SSS sickness benefit often provides the wage-replacement mechanism for qualified private-sector employees when they are sick, independent of whether the employer grants paid sick leave.
Many specific statutes create paid leave entitlements that may overlap with medical circumstances (maternity leave, special leave for women, VAWC leave, etc.), and they apply according to their own conditions regardless of business size.
The main legal risks for small businesses are misclassification, headcount mistakes, poor documentation, and improper handling of sickness-related absences/termination.