Legal Framework Governing Leave Benefits

In the Philippine private sector, leave benefits are primarily governed by the Labor Code of the Philippines (Presidential Decree No. 442, as amended), its Omnibus Implementing Rules, and Department of Labor and Employment (DOLE) issuances. The most relevant provision for vacation-type leave is Article 95 of the Labor Code on Service Incentive Leave (SIL).

Article 95 states:

“Every employee who has rendered at least one (1) year of service shall be entitled to a yearly service incentive leave of five (5) days with pay.”

This 5-day Service Incentive Leave is the statutory minimum vacation/sick leave benefit in the private sector. It is the legal floor that all employers must comply with unless they provide a more generous benefit.

Probationary vs. Regular Employment

Under Article 296 (formerly Article 281) of the Labor Code, probationary employment shall not exceed six (6) months from the date the employee started working, unless a longer period is established by company policy or covered by an apprenticeship agreement.

Upon satisfactory completion of the probationary period, the employee automatically becomes a regular employee by operation of law. Regularization is not discretionary on the part of the employer if performance standards (which must be made known to the employee at the start of probation) have been met.

When Does Vacation Leave Entitlement Begin?

Legal Minimum (Service Incentive Leave)

The 5-day Service Incentive Leave is earned only after rendering at least twelve (12) months of service, whether continuous or broken (Section 1, Rule V, Book III, Omnibus Rules Implementing the Labor Code).

Important points:

The counting of the 12-month period includes the probationary period.
Therefore, an employee hired on, say, January 1, 2025, who successfully completes probation on June 30, 2025, and becomes regular on July 1, 2025, will be entitled to his/her first 5-day SIL only on January 1, 2026 (completion of 12 months).
The SIL is granted upon completion of the 12-month service, not on the date of regularization.
The leave is yearly — meaning another 5 days upon completion of the next 12 months, and so on.

Company-Provided Vacation Leave and Sick Leave (Common Practice)

Most medium- to large-sized companies in the Philippines provide benefits superior to the statutory minimum. It is very common to see the following upon regularization:

Employee Status	Typical Vacation Leave (VL)	Typical Sick Leave (SL)	Total Credited Annually
Probationary	0–5 days (often none, or emergency leave only)	0–5 days (often none)	0–10 days
Regular (after probation)	15 days (1.25 days per month)	15 days (1.25 days per month)	30 days

These 15+15 days are in addition to, or more accurately, in lieu of the 5-day SIL. Once an employer grants vacation leave with pay of at least five (5) days, the SIL requirement is deemed complied with (DOLE Explanatory Bulletin on Service Incentive Leave, 1995).

Accrual Upon Regularization

The prevailing and legally accepted practice is:

Upon regularization, the employee immediately begins earning leave credits on a monthly basis (usually 1.25 days VL and 1.25 days SL per month).
For the first year of regularization, leaves are often pro-rated.

Example:
Employee regularized on July 1, 2025 (after 6 months probation).
Company policy: 15 VL + 15 SL per year for regular employees.
→ From July to December 2025 = 6 months → entitled to 7.5 VL + 7.5 SL (pro-rated).
→ On January 1, 2026, the employee gets the full 15+15 for the new year.

Many companies credit the full 15+15 on the anniversary date or on a calendar-year basis starting from regularization.

Key Rules on Usage, Conversion, and Forfeiture

Aspect	Service Incentive Leave (5 days minimum)	Typical Company VL/SL (15+15)
Commutable to cash if unused	Yes, mandatory at the end of the year (DOLE)	Usually yes, at separation or year-end
Carry-over to next year	No (must be converted to cash)	Usually allowed up to a certain limit (commonly 30–60 days maximum accumulation)
Pro-ration upon resignation/termination	Yes, proportional to service rendered	Yes, almost universal practice
Requires prior approval	Yes	Yes
May be offset against absences	Yes	Yes

Supreme Court jurisprudence (e.g., Imasen Philippine Manufacturing Corp. v. Alcon, G.R. No. 194884, October 22, 2014; Philippine Spring Water Resources, Inc. v. CA, G.R. No. 205278, June 8, 2016) has consistently upheld that unused SIL must be converted to cash upon separation, and that the 5-day SIL is the absolute minimum.

Special Cases

Employee resigns before completing 12 months
→ No SIL entitlement (since the 12-month service requirement was not met). However, if company policy grants pro-rated VL/SL, the employee gets the pro-rated amount.
Employee terminated (just cause or authorized cause) before 12 months
→ No SIL. Pro-rated company leaves may or may not be paid depending on company policy (though DOLE leans toward payment).
Apprentices or learners
→ Generally follow the same SIL rule after 12 months, but apprenticeship agreements may stipulate differently.
Project employees
→ Entitled to SIL pro-rated to the duration of the project phase if it lasts at least one year.
Part-time employees
→ Entitled to pro-rated SIL/VL based on hours rendered.
Kasambahay (domestic workers)
→ Governed by Republic Act No. 10361 (Batas Kasambahay): entitled to at least 5 days SIL after 12 months — same as regular employees.

Summary Table: Entitlement Timeline (Typical Scenario)

Month	Status	Leave Credits Earned (Typical Company Policy)	Statutory SIL
1–6	Probationary	Usually 0 (or only emergency leave)	None
7	Regularized	Starts earning 1.25 VL + 1.25 SL per month	None yet
12	1st year completed	Pro-rated VL/SL for months 7–12 + full credits for next year	5 days SIL earned (or deemed complied with via company VL)
24	2nd year completed	Another full set (15+15 or whatever policy)	Another 5 days

Conclusion

Under Philippine law, there is no automatic entitlement to the 5-day Service Incentive Leave immediately upon regularization. The employee must complete at least twelve (12) months of service (including the probationary period) before the statutory 5-day SIL vests.

However, in actual practice throughout Metro Manila, Cebu, Davao, and the rest of the country, virtually all reputable employers grant vacation leave and sick leave credits starting from the date of regularization, typically at the rate of 15 days each per year (or higher for long-tenured employees). This practice has become so widespread that it is now considered part of the customary benefits package expected by Filipino employees.

Employees are therefore well-advised to carefully review their employment contract and company handbook upon regularization to know the exact leave policy that applies to them. In the absence of a more generous policy, the 5-day Service Incentive Leave under Article 95 remains the irreducible minimum.