Basis

The basis of the grant of Service Incentive Leave to qualified

employees is found in Article 95 (Book Three, Title I) of the Labor
Code.
Section 2, Rule V, Book III of the Omnibus Rules contains the rules
and regulations for the implementation this right.
Employees entitled to SIL
Every employee (subject to the exceptions below) who has
rendered at least one year of service is entitled to yearly service
incentive leave of five days with pay.
At least one year of service Meaning

The term at least one-year service means service for not less
than 12 months, whether continuous or broken.
The 12-month period shall be reckoned from the date the
employee started working, including authorized absences and
paid regular holidays.
However, where the operation of the establishment as a matter
of practice or policy, or that provided in the employment
contract, is less than 12 months, such period shall be considered
as one year.
Employees not covered
The following employees are excluded from entitlement to SIL
under the Labor Code (but they may be entitled to the same or
similar benefits if so provided under other laws, or collective
bargaining agreement or employment contract):
1.
2.
3.
4.

5.
6.
7.

Those of the government and any of its political subdivisions,

including government-owned and controlled corporations;
Domestic helpers and persons in the personal service of another;
Managerial employees as defined in Book Three of the Labor
Code;
Field personnel and other employees whose performance is
unsupervised by the employer including those who are engaged
on task or contract basis, purely commission basis, or those who
are paid a fixed amount for performing work irrespective of the
time consumed in the performance thereof;
Those who are already enjoying the benefit herein provided;
Those enjoying vacation leave with pay of at least five days; and
Those employed in establishments regularly employing less than
ten employees. (Omnibus Rules)
Manner of availment

The service incentive leave may be used for sick and vacation
leave purposes. And, at the end of the year, the unused SIL may
be commuted to cash.
Commutability to cash
Under the Omnibus Rules, the unused service incentive leave is
commutable to its money equivalent at the end of the year. [N.B.
Not found in the LC.]
Accumulation of Leave Credits
Instead of using up SIL, the employee may accumulate it and opt
for its commutation to cash upon his resignation or separation
from employment.
Computation of SIL

In computing SIL, the basis shall be the salary rate at the date of
commutation. The availment and commutation of this benefit
may be on a pro rata basis. (DOLE Handbook)
Illustration

An employee was hired on January 1, 1997, and resigned on

March 1, 1998. Assuming he has not used or commuted any of
his SIL credits, he is entitled upon his resignation to the
commutation of his accumulated SIL as follows:
SIL earned as of Dec. 31, 1997 = 5 days
Proportionate SIL for Jan. and Feb. 1998 = (2/12) x 5 days =
0.833 day
Total as of March 1, 1998 = 5.833 days
Part-time Workers
Are part-time workers entitled to the full five days SIL, or should
the entitlement be on pro-rata basis? Part-time workers are
entitled to full five days SIL. (BWC Advisory Opinion)
The reason is that the Labor Code speaks of number of months
worked in a year, not number of hours worked in a day, as basis
for entitlement.
Vacation and Sick leave
The Labor Code treats vacation leave and sick leave under the
same category as Service Incentive Leave or leave with pay.
Thus, the grant of vacation or sick leave with pay of at least five
days may be credited as compliance with SIL. For example, if a
company is giving its employees 15 days vacation leave, five
days of which is with pay, the five-days paid vacation leave may
be credited as SIL.
Case

1.

2.

3.

4.

Petitioner CIT claimed that teachers are not entitled to SIL

because they are engaged by the school on contractual basis.
The claim was not sustained. It was held that the phrase those
who are engaged on task or contract basis as mentioned in the
Omnibus Rules should be read in relation to field personnel.
Teachers, not being field personnel, are entitled to SIL. (CIT vs.
Ople, 1987.)
Applying Article 291 of the Labor Code in light of this peculiarity
of the service incentive leave, we can conclude that the three (3)year prescriptive period commences, not at the end of the year
when the employee becomes entitled to the commutation of his
service incentive leave, but from the time when the employer
refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employees services, as
the case may be. (Auto Bus Transport, Inc. vs. Bautista, 2005)
Petitioners contention that respondent is not entitled to the grant
of service incentive leave just because he was paid on purely
commission basis is misplaced. What must be ascertained in
order to resolve the issue of propriety of the grant of service
incentive leave to respondent is whether or not he is a field
personnel. (Auto Bus Transport, Inc. vs. Bautista, 2005)
Exemptions. To claim exemption from payment of service
incentive leave pay, it is the employers duty to prove that it is
covered under the exemption. Thus, where the employer claims
that the employee is not entitled to service incentive leave pay
inasmuch as establishment employing less than ten (10)
employees are exempted from paying service incentive leave
pay, it has the duty to prove that there were less than ten
employees in the company. (C. Planas Commercial, et al. vs.
NLRC, G.R. No. 144619, November 11, 2005.)

DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner,

vs.
RUBEN V. ABARQUEZ, in his capacity as an accredited Voluntary Arbitrator

and THE ASSOCIATION OF TRADE UNIONS (ATU-TUCP), respondents.

Facts:
Petitioner and private respondent and the exclusive collective bargaining agent of
the rank and file workers entered into collective bargaining agreement under
Sections 1 and 3, Article VIII thereof, provide for sick leave with pay benefits
each year to its employees who have rendered at least one (1) year of service
with the company, thus:
Section 1. Sick Leaves The Company agrees to grant 15 days sick leave with
pay each year to every regular non-intermittent worker who already rendered at
least one year of service with the company. However, such sick leave can only
be enjoyed upon certification by a company designated physician, and if the
same is not enjoyed within one year period of the current year, any unenjoyed
portion thereof, shall be converted to cash and shall be paid at the end of the
said one year period. And provided however, that only those regular workers of
the company whose work are not intermittent, are entitled to the herein sick leave
privilege.
Section 3. All intermittent field workers of the company who are members of
the Regular Labor Pool shall be entitled to vacation and sick leaves per year of
service with pay under the following schedule based on the number of hours
rendered including overtime.
Upon its renewal, the coverage of the said benefits was expanded to include the
"present Regular Extra Labor Pool as of the signing of this Agreement." Section
3, Article VIII, as revised, provides, thus:
"Section 3. All intermittent field workers of the company who are members of
the Regular Labor Pool and present Regular Extra Labor Pool as of the signing
of this agreement shall be entitled to vacation and sick leaves per year of service
with pay under the following schedule based on the number of hours rendered
including overtime.
Also, all the field workers of petitioner who are members of the regular labor pool
and the present regular extra labor pool hours were extended sick leave with pay
benefits. Any unenjoyed portion thereof at the end of the current year was
converted to cash and paid at the end of the said one-year period pursuant to
Sections 1 and 3, Article VIII of the CBA.
The commutation of the unenjoyed portion of the sick leave with pay benefits of
the intermittent workers or its conversion to cash was, however, discontinued or
withdrawn when petitioner-company under a new assistant manager, Mr.
Benjamin Marzo (who replaced Mr. Cecilio Beltran, Jr. upon the latter's
resignation), stopped the payment of its cash equivalent on the ground that they

are not entitled to the said benefits under Sections 1 and 3 of the 1989 CBA.
The Union objected said discontinuance because it would violate the principle in
labor laws that benefits already extended shall not be taken away and that it
would result in discrimination between the non-intermittent and the intermittent
workers of the petitioner-company. The Union brought it before the National
Conciliation and Mediation Board and said public respondent issued an award in
favour of the Union. Hence, this instant petition.
Issue:
Whether or not the intermittent field workers are entitled to conversion to cash of
any unused sick leave.
Held:
The Supreme Court dismissed the petition. It was said that CBA is not an
ordinary contract but impressed with public interest, thus it must yield to the
common good.
It must be noted that the 1989 CBA has two (2) sections on sick leave with pay
benefits which apply to two (2) distinct classes of workers in petitioner's
company, namely: (1) the regular non-intermittent workers or those workers who
render a daily eight-hour service to the company and are governed by Section 1,
Article VIII of the 1989 CBA; and (2) intermittent field workers who are members
of the regular labor pool and the present regular extra labor pool as of the signing
of the agreement on April 15, 1989 or those workers who have irregular working
days and are governed by Section 3, Article VIII of the 1989 CBA.
It is thus erroneous for petitioner to isolate Section 1, Article VIII of the 1989 CBA
from the other related section on sick leave with pay benefits, specifically Section
3 thereof, in its attempt to justify the discontinuance or withdrawal of the privilege
of commutation or conversion to cash of the unenjoyed portion of the sick leave
benefit to regular intermittent workers because well-settled is it that the said
privilege of commutation or conversion to cash, being an existing benefit, the
petitioner-company may not unilaterally withdraw, or diminish such benefits.
It is a fact that petitioner-company had, on several instances in the past, granted
and paid the cash equivalent of the unenjoyed portion of the sick leave benefits
of some intermittent workers. Under the circumstances, these may be deemed to
have ripened into company practice or policy which cannot be peremptorily
withdrawn.

Ace Navigation Co., Inc. vs CA, 338 SCRA 70

Facts: Under the POEA approved contract of employment, private respondent,

who works as a bartender on board the vessel MV Orient Express, shall receive
a monthly basic salary of US S450.00, flat rate, including overtime pay for 12
hours of work daily plus tips of US S2.00 per passenger per day. He was also
entitled to 2.5 days of vacation leave with pay each month.
Private respondent filed a complaint before the labor arbiter for vacation leave
pay and unpaid tips amounting to US S36,000.00. The Labor Arbiter ordered the
recruitment agency and the principal to pay jointly and severally private
respondent his vacation leave pay. The claim for tips was dismissed for lack of
merit.
On appeal, NLRC ordered the payment of unpaid tips.
Issue: WON employers are liable to pay tips.
Held: No. Payment for overtime was included in the monthly salary, the supposed
tips mentioned in the contract should be deemed included thereat. It is presumed
that the parties were aware of the plain, ordinary and common meaning of the
word tip. A bartender cannot feign ignorance on the practice of tipping and that
tips are normally paid by customers and not by the employer.
It has been said that a tip denotes a voluntary act, but whether considered from
the standpoint of the giver or the recipient, a tip lacked the essential element of a
gift, namely, the free bestowing of a gratuity without a consideration, and that
despite its apparent voluntariness, there is an element of compulsion in tipping