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Labor Code on sick, vacation leaves

August 17, 2009

Dear PAO,

I was hired by a company in Valenzuela City in February 2007. By September, I was a regular employee. As a regular employee, I understand that I am entitled to five days of sick leave and five days of vacation leave. Am I correct? Our company made me sign a document stating that I must first earn my sick and vacation leave benefits before I can use them. The company’s policy is that for a month, I will earn the equivalent of 0.8 day of leave benefits. I have been with the company for almost two years now, but the company’s policy on leave benefits remains the same. Is it correct that I have to first earn my leave benefits before I can use them? Is the company policy consistent with the Labor Code? Is the company making a mistake in doing this? 

Concerned Employee

Dear Concerned Employee,

The pertinent provision of the Labor Code applicable to your query is in Article 95, which provides: Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.

This provision shall not apply to 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 with fewer than 10 employees or in establishments exempted from granting this benefit by the Secretary of Labor after considering the viability or financial condition of such establishment.

The grant of benefit in excess of that provided the Labor Code shall not be made subject of arbitration or any court or administrative action.

Prescinding from the foregoing, regular employees who have rendered at least one year of service are entitled to yearly service incentive leave of five days with pay. What the law grants is five days service incentive leave. No law requires the grant of vacation leave or sick leave to private sector employees. Granting vacation and sick leaves depends on voluntary employer policy or collective bargaining agreement (CBA). What are legally required are the service incentive leave, paternity leave by Republic Act 8187, approved on June 11, 1996, and maternity leave benefits by the SSS law. Thus, sick leave and vacation leave are considered voluntary benefits, while service incentive leave, paternity leave and maternity leave are statutory and mandatory benefits.

But establishments employing fewer than 10 employees, as shown by evidence, are not legally bound to give the five days service incentive leave, unless obliged by contract, policy or practice (Everybody’s Labor Code by Azucena, 2007 edition, Page 75).

Under Section 3, Rule V of the Implementing Rules of Book III of the Labor Code of the Philippines, the term of “at least one year service” shall mean service 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 contract is less than 12 months, in which case said period shall be considered as one year.

You failed to mention in your letter whether your company grants the five-day service incentive leaves with pay, maternity leave or paternity leave. These leave benefits are mandatory and statutory. Failure on the part of your company to provide you with these kinds of leave benefits will make it liable for violation of the Labor Code, unless your employer employs fewer than 10 employees and that you are enjoying vacation leave with pay of at least five days.

If your company at present is granting service incentive leave benefits to you, its policy of granting earned vacation and sick leaves equivalent to 0.8 day for each month of service is not contrary to the Labor Code. In fact, it is an additional and voluntary benefit granted to you or it could be an existing practice or policy by your employer that supplements other benefits granted to you by the Labor Code.

The law is clear that what is required only is the grant of service incentive leaves of five days. Your company is not mandated to grant vacation and sick leaves. But you are entitled to a leave for five days for each year, provided that you have rendered at least one year of service. You can either use these days or you can convert them to cash in accordance with the law. Under the law, unused service incentive leaves shall be commutable to its money equivalent if not used or exhausted at the end of the year (Section 5, ibid.)

We hope that we were able to substantially answer your query. But all information contained here is based on your narration of facts and our appreciation of your question. Our opinion may vary if other facts are added or elaborated. –Persida Acosta, Manila Times

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net or via text message (key in: Times dearpao <YOUR QUESTION> and send to 2299).

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