Dear Atty. Kathy,

My former employer, Company F, terminated my employment due to redundancy, and I am now processing my clearance and final pay requirements. I have been employed in Company F for six years, during which I got a perfect attendance award each year and never used my service incentive leave (SIL) nor asked for the cash equivalent. However, in the computation of my final pay, only three years worth of SIL was credited, because, according to the payroll officer, monetary claims can only be applied within a three-year prescriptive period. Is this correct?

Christopher

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Dear Christopher,

The Supreme Court has held that the three-year prescriptive period to claim service incentive leave pay commences “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.”

According to the Supreme Court, this is owing to the nature of service incentive leave credits which the employee may choose to use within the year or commute to its monetary equivalent if not exhausted at the end of the year.

However, if the employee does not use or commute their service incentive leave, they are entitled to the commutation of their accrued service incentive leaves upon his resignation or separation from service. Thus, 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.

Based solely on your narration, you did not use your SIL during your employment with Company F, up until your separation from employment due to redundancy. If Company F did not pay you the cash equivalent of your SIL anytime during your employment, then your right to claim payment of your accrued SIL arose only when Company F terminated your employment and failed to pay your accumulated SIL credits.

The payroll officer, therefore, is not correct. If you are able to file a claim for your SIL pay within the three-year prescriptive period, from the time of the termination of your employment with Company F, you would be entitled to payment of your SIL during the entire period of your employment, and not just for the last three years of your employment.

(Joy M. Villarico vs. D.M. Consunji Inc., et al., G.R. No. 255602, 3 March 2025).

Atty. Kathy Larios