Philippines Leave Encashment 2026: Service Incentive Leave Explained
→ Open the Philippines Leave Encashment Calculator (Service Incentive Leave)
The Philippines guarantees a small but specific slice of paid leave that — unlike most company vacation policies — the law says must be paid out in cash if unused.
The rule
Article 95 of the Labor Code gives every rank-and-file employee with at least 1 year of service a minimum of 5 days of paid Service Incentive Leave (SIL) per year. Companies with fewer than 10 employees, or that already grant 5+ days of paid vacation leave, are exempt from this specific mandate.
Why SIL is special
SIL is the only leave type the Labor Code requires to be commutable to cash if not used by year-end. Any extra vacation or sick leave your employer offers beyond this is a company-policy benefit — whether that is encashable is between you and your employer's policy, not a legal mandate.
Worked example
PHP 20,000/month, all 5 SIL days unused: daily rate ≈ 20,000 ÷ 30 = PHP 667; encashment = 667 × 5 = PHP 3,333.
Frequently asked questions
What is Service Incentive Leave (SIL)?
A minimum 5 days of paid leave per year that the Labor Code (Article 95) guarantees to rank-and-file employees with at least 1 year of service.
Is SIL the only leave that must be paid out in cash?
Yes — it is the only Labor Code-mandated leave type that must be commuted to cash if unused at year-end. Any additional vacation/sick leave your company grants is a policy benefit, and whether it is encashable depends on that policy.
Who is exempt from SIL?
Companies with fewer than 10 employees, and companies that already grant 5 or more days of paid vacation leave, are exempt from the SIL mandate specifically.
How is the cash value calculated?
Your daily rate multiplied by the number of unused SIL days.