Service Incentive Leave Pay

Dear Atty. Vlad,

I used to work with a software development company. I stayed there for five years. However, during that period, I always reported for work and never used any of my leaves.

Last week I resigned. When I was asking for my service incentive leave pay, I was only given the equivalent of three years because according to my employer, prescription has already set in.

Is my employer correct? Please help me.

John Rey

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Dear John Rey,

From what you told me, it appears that you have not used any of your leaves nor have you been paid your Service Incentive Leave Pay for five years. As such, you are claiming compensation for the equivalent amount of two more years or 10 days worth of service incentive leave pay.

In the case of Lourdes C. Rodriguez vs Park N Ride Inc. Nicest (Phils.) Inc.,/Grand Leisure Corp./Sps. Vicente & Estelita B. Javier, 20 March 2017, G.R. No. 222980, the Supreme Court citing the case of Auto Bus Transport System Inc. vs Bautista (497 Phil. 863, 2005), explained:

"However, Auto Bus Transport System Inc. v Bautista clarified the correct reckoning of the prescriptive period for service incentive leave pay:

It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other benefits granted by the law to every employee. In the case of service incentive leave, the employee may choose to either use his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year. Furthermore, if the employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v NLRC:

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that "[e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay."

Service incentive leave is a right which accrues to every employee who has served "within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year."

It is also "commutable to its money equivalent if not used or exhausted at the end of the year." In other words, an employee who has served for one year is entitled to it. He may use it as leave days or collect its monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such right.

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of said leave credits but instead chose to avail of its commutation.

Accordingly, if the employee wishes to accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such amount at the time of his resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three-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 employee's services, as the case may be.

The above construal of Art. 291, vis-a-vis the rules on service incentive leave, is in keeping with the rudimentary principle that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration.

The policy is to extend the applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to give maximum aid and protection to labor. (Emphasis supplied).

Thus, the prescriptive period with respect to petitioner's claim for her entire service incentive leave pay commenced only from the time of her resignation or separation from employment. Since petitioner had filed her complaint on 7 October 2009, or a few days after her resignation in September 2009, her claim for service incentive leave pay has not been prescribed.

Accordingly, petitioner must be awarded service incentive leave pay for her entire 25 years of service-from 1984 to 2009-and not only three (3) years' worth (2006 to 2009) as determined by the Court of Appeals."

From the foregoing Decision of the Court, since you made the demand within the three-year prescriptive period, you are entitled to SILP equivalent to five years or 25 days. However, since you were already paid the equivalent of three years SILP, your remaining SILP entitlement is for two years or 10 SILP.

I hope that I was able to help you based on the facts you stated.

Atty. Vlad del Rosario