Service Incentive Leave is the Labor Code’s five-day paid leave for covered employees who have completed at least one year of service. It is not the same thing as a company vacation-leave program, even when employees use SIL for a trip or for illness. TimeBoxHR is designed to support a distinct SIL leave type, entitlement policy, and credit balance so the statutory five days are not mixed with company vacation leave or sick leave unless you have deliberately designed one bank that meets the legal minimum.
Last reviewed: September 2026.
Government rules and contribution schedules may change. This article is provided for general information and should be verified against the latest official government issuance before payroll processing.
This article follows well-established Article 95 and DOLE handbook principles. Handbook editions and implementing-rule interpretations can be updated. Use the current official text for coverage questions and for the commutation illustration that applies to your case.
What Service Incentive Leave is
SIL is paid leave of five days granted to an employee who has rendered at least one year of service. The current handbook states that it may be used for sick, vacation, and other leave purposes. That sentence is the reason SIL is often described as a flexible statutory leave rather than a vacation-only benefit.
SIL is part of the broader employee leave benefits map. It sits beside company VL/SL and beside statute-based leaves such as maternity and paternity. Those other leaves have their own laws. They do not replace SIL, and SIL does not replace them.
For covered employees, five days is the statutory floor, not a suggested starting point. A company may grant more paid leave. It may not treat SIL as optional for someone who is clearly covered and who does not already enjoy a qualifying vacation-leave benefit.
Who is covered, and who is excepted
The benefit applies to every employee who has rendered at least one year of service, except the groups listed in the Labor Code and restated in the current DOLE handbook. As of the 2024 handbook edition, those exceptions include:
- Government employees, including those in political subdivisions and in GOCCs with original charters or created under special laws
- Persons in the personal service of another
- Managerial employees who meet the handbook’s duty, direction, and hiring-or-recommendation tests
- Officers or members of a managerial staff who meet the handbook’s duty tests
- Field personnel and those whose time and performance are unsupervised by the employer
- Those already enjoying this benefit
- Those enjoying vacation leave with pay of at least five days
- Those employed in establishments regularly employing fewer than ten employees
Do not over-claim coverage or exclusion. A “supervisor” title is not enough to treat someone as managerial. Field and unsupervised status depends on whether actual hours of work can be determined with reasonable certainty, not on whether the person sometimes leaves the office.
Pay method is not a slogan either. Some task, contract, or purely commission arrangements may fall outside SIL because they also meet a handbook exception, especially field or unsupervised work. Others may remain covered. Confirm the current materials and the facts of the job before you encode an exclusion.
Establishments regularly employing fewer than ten workers are listed as excepted. Headcount can change. Recheck the count when you hire, and do not keep a ten-year-old exception after the workforce has grown.
Meaning of one year of service
The implementing rules, as restated in the handbook, treat “one year of service” as service within 12 months, whether continuous or broken, reckoned from the date the employee started working. The period includes authorized absences, unworked weekly rest days, and paid regular holidays.
If an individual or collective agreement, company practice, or policy uses a working-year shorter than 12 months, that shorter period may be treated as one year for SIL entitlement. That is a specialized case. Do not invent a shorter year to delay SIL.
Broken service still counts toward the 12 months when the rules say it does. A resignation and a later rehire is a different fact pattern from authorized absences inside one employment. Document the start date you are using.
Probationary status does not create a separate statutory SIL clock. The statutory question is one year of service for covered employees. Company policy may still withhold company VL until regularization. Keep those rules on separate lines so a probationary employee is not told “you have no leave of any kind” when the only true statement is “company VL has not vested yet.”
Relationship to company vacation leave
Employees already enjoying vacation leave with pay of at least five days are excepted from SIL. That is the cleanest operational relationship between company VL and the statute.
Explain it without collapsing the two ideas:
- If VL is at least five paid days, SIL may not be an extra five days on top
- VL remaining days, carry-over, and conversion still follow the company policy or CBA unless you have said that this VL bank is also the SIL vehicle and will follow SIL commutation
- Company sick leave is a separate policy benefit. Granting SL does not, by itself, prove that the employee already enjoys five days of vacation leave
Some employers keep a five-day SIL bank and a larger VL bank. Others keep only VL of 12 or 15 days and document that VL satisfies SIL. Either design can work if it is written down and if unused statutory value is not quietly forfeited for people who are actually SIL-covered and VL-poor.
Using SIL during the year
Covered employees may charge SIL for vacation, illness, or other approved leave purposes. The approval path still belongs to the employer’s attendance rules. SIL is a paid entitlement, not an unannounced absence.
The DTR should show SIL, not a generic absence, so payroll pays the day and decrements the correct balance. If the company also has SL, a medical day should follow the policy on which bank is used first. Do not let encoders pick whichever code has remaining days without a written order of charging.
Partial-day SIL is a policy and timekeeping question. If you allow half-day SIL, define the hour equivalent and keep the raw attendance record. Rounding every SIL request up to a full day will exhaust five days faster than employees expect.
Conversion at year-end and at separation
The employee may use the leave or commute it to its monetary equivalent if it is not exhausted at the end of the year. If the employee does not use or commute SIL, the employee is generally entitled, upon resignation or separation, to commutation of the unused SIL.
The handbook states that the basis of computation is the salary rate at the date of the commutation, and that use and conversion may be on a pro rata basis.
The 2024 handbook illustration uses an employee hired 1 January 2023 who resigns 1 March 2024 with a daily salary rate of ₱610.00 at commutation:
| Component | Days |
|---|---|
| SIL earned as of 31 December 2023 | 5.000 |
| Proportionate SIL for January and February 2024 (2/12 × 5 days) | 0.833 |
| Total accrued SIL as of 1 March 2024 | 5.833 |
Monetary equivalent in that illustration is daily rate times remaining accrued SIL, or ₱3,558.13. Recalculate with the employee’s actual rate and dates. Do not copy ₱610.00 into live payroll.
How to compute leave pay covers daily-rate methods and final-pay placement. How to calculate leave credits covers proration, rounding, and mid-year events. SIL commutation is one of the few leave-credit outcomes that statute and handbook treat as generally payable rather than purely optional.
What not to do with SIL in payroll
- Do not hide unused SIL by renaming it VL and then forfeiting VL
- Do not refuse commutation because “we already gave Christmas extras”
- Do not use an old daily rate from the hire year when the handbook points to the rate at commutation
- Do not skip pro rata SIL for a resignation in February because “the year is not finished”
- Do not apply SIL conversion rules to paternity, solo-parent, or VAWC leave
- Do not assume every monthly-paid employee is outside SIL
A payroll computation should show SIL used as paid days during the year and SIL converted as a separate line when cash is released. Employees contest a lump sum they cannot tie to a balance.
Records that support SIL
Keep the employment start date, the coverage determination, the five-day (or pro rata) grant, dates used, remaining balance, year-end commutation or carry decision, and the rate used for any cash conversion. If VL is the vehicle that satisfies SIL, keep that policy page with the employee’s VL ledger.
If the employee is excluded, keep the factual basis: headcount under ten, qualifying VL of at least five days, or a documented managerial or field analysis. Update it when duties change.
How TimeBoxHR Handles This
TimeBoxHR is designed to support a Service Incentive Leave type, an entitlement policy assigned to eligible employees, leave credit balances, accrual or grant batches, and manual adjustments when tenure or coverage is corrected. Employees can apply and check balances in the portal. Supervisors approve dates. Approved SIL is designed to flow into DTR and payroll. Configurable payroll rules can treat used SIL as paid time and unused SIL as a conversion line when you process year-end or final pay.
Simplify Service Incentive Leave tracking with TimeBoxHR
Give SIL its own type even if employees also have company VL. Assign the SIL policy only to groups you have classified as covered. Run the grant when the one-year mark is reached, or accrue on the documented pro rata method. At year-end, review remaining SIL instead of discovering it during a resignation. Holiday calendars remain available so a leave date is not confused with a worked holiday.
TimeBoxHR does not decide whether a person is a managerial employee or field personnel. That determination stays with HR against current official rules. The system is designed to record the entitlement you assign and to keep usage aligned with attendance and pay.
Explore TimeBoxHR leave and payroll features, or start a 30-day free trial to see SIL balances beside DTR instead of in a side worksheet.
