Book III- Labor Code -Service Incentive Leave -Service Charges

1. LABOR STANDARDS
Ma. Joana G. Barrion

2. Service Incentive Leave
◦ ART. 95. Right to service incentive leave. - (a) 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.

3. “At least one year of Service” Meaning
◦ Service for not less than 12 months, whether continuous or broken.
◦ 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.

4. Purpose of the Grant
“The granting of such incentive boosts the morale and satisfaction of
employees which is manifested in their increased productivity. Leave
credits also minimize the risks of health and safety issues among
employees which may be even costlier for both employers and
employees in the long run.”

5. Under the Implementing Rules and Regulations,
the SIL shall not apply to the following:
◦ 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.

6. 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.

7. Commutability to cash
◦ Under the Omnibus Rules, the unused service incentive leave is commutable to its
money equivalent at the end of the year.
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.

8. 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.

9. Part-time Workers
Are part-time workers
entitled to the full five days
SIL, or should the
entitlement be on pro-rata
basis?

10. The bill seeks to increase the yearly service incentive leave (SIL) of employees from five to 10 days.

11. Service Charges

12. What is a service charge exactly?
A service charge is basically an additional fee charged by a service establishment
(e.g., restaurants or hotels) on top of your bill. While service charges in general are
accrued to cover a variety of miscellaneous business expenses, but their most
common purpose is to contribute to a service employee’s wages.

13. How is Service Charge Computed?
In the Philippines, the service charge is usually comprised of a percentage of the
total bill (anywhere between 10-15%).

14. Does It Go Directly to the Employees?
ART. 96. Service charges. - All service charges collected by hotels, restaurants and
similar establishments shall be distributed at the rate of eighty-five percent (85%)
for all covered employees and fifteen percent (15%) for management. The share
of the employees shall be equally distributed among them.

15. Are Service Charges Part of an Employee’s Wage?
Service charges are not included in an employee’s basic wage, but are added on to
such.
Incidentally, if the establishment were to stop collecting service charges, they would
be required to provide their employees with the average amount of service charges
(in addition to their basic wage) that the latter received in the last twelve months.

16. Senate Bill No. 1299 - An Act Providing that 100% of the Service Charge
Collected in Hotels and Other Establishments Be Distributed to All Covered
Employees and for Other Purposes.