Paid time off is one of the most important benefits Filipino employees receive; yet, many aren’t fully aware of how leave credits work or that unused leaves can sometimes be converted to cash. If you’re new to the workforce or reviewing your employee benefits, understanding leave credits and how conversion works can help you maximize what you’re entitled to and make informed decisions about time off and financial planning.
What Are Leave Credits?
Leave credits represent the number of paid days off that employees can accumulate and use throughout their employment. The credits ensure that workers can take time for rest, address health concerns, or attend to personal matters without losing income.
While the Labor Code of the Philippines does not set a universal number of leave days for all employees, it requires employers to grant at least five (5) days of Service Incentive Leave (SIL) to employees who have rendered one year of service. Many companies go beyond this minimum by offering:
- Vacation Leave (VL): For rest or personal reasons
- Sick Leave (SL): For illnesses or medical needs
- Emergency Leave (EL): For unexpected, urgent events
- Special company-granted leaves: Bereavement leave, birthday leave, family care leave, etc.
Leave credits differ per company, making it essential for employees to review their contracts or HR handbooks.
Service Incentive Leave (SIL): The Mandatory Minimum
Under Philippine law, every employee who has worked for at least one year is entitled to five days of Service Incentive Leave annually. Here’s what to know:
- SIL can be used as leave with pay, or
- If unused, it can be converted to cash at the end of the year.
SIL does not apply to:
- Government employees
- Household helpers
- Field personnel and workers paid purely on commission
- Employees already receiving leave benefits equal to or better than SIL
Example:
If your daily rate is ₱1,000, and you have 5 unused SIL days at year-end:
₱1,000 × 5 = ₱5,000 is your leave conversion payout.
How Leave Credits Accumulate
Most companies use an accrual system, where employees earn leave credits gradually. For example, a company offering 15 vacation leave days per year may grant:
1.25 leave days per month
(15 days ÷ 12 months = 1.25)
Your earned leaves appear on your payslip or company HR portal. Depending on company policy, unused leaves may:
- Carry over to the next year
- Be reset annually
- Be convertible to cash
- Be subject to a use-it-or-lose-it policy
Important Tip: Always clarify these with HR, as policies vary widely.
What Is Leave Conversion?
Leave conversion, also known as leave monetization, is the process of converting unused leave credits into cash, which applies to:
- Unused SIL, which must be converted if not taken
- Company-granted leaves, depending on internal policy
- All unused leave credits upon resignation or separation
Conversion is calculated based on your daily rate, which is your basic pay divided by the number of working days per month (usually 22).
Sample Computation
If your monthly salary is ₱30,000:
₱30,000 ÷ 22 = ₱1,364. (daily rate)
If you have 4 unused leave credits:
₱1,364 × 4 = ₱5,456 is your leave conversion payout.
When Can You Convert Leave Credits?
Policies vary per company, but the most common scenarios are:
1. Year-End Leave Conversion
Some employers convert unused leave credits annually, either fully or partially, into cash or other benefits.
2. Conversion Upon Resignation or Separation
All unused leave credits must be paid out as part of your final pay, applying to both SIL and company-granted leaves.
3. Special Conversion Windows
Some companies allow mid-year or request-based conversions, usually depending on budget availability or internal guidelines. If you are unsure, please ask your HR department for your company’s specific rules on leave conversion.
How to Compute Leave Conversion
Here’s the simplest formula:
Leave Conversion = Daily Rate × Number of Unused Leave Credits
Where:
- Daily Rate = Monthly Salary ÷ Working Days per Month (usually 22)
Example:
Monthly Salary: ₱25,000
Daily Rate: ₱25,000 ÷ 22 = ₱1,136
Unused Leave Credits: 3
Leave Conversion = ₱1,136 × 3 = ₱3,408
Note: Some companies may use different bases (e.g., deducting absences or excluding allowances), so always check your payroll policy.
Frequently Asked Questions (FAQs)
1. Do unused leave credits expire?
Unused leave credits may expire depending on company policy. Some companies allow carry-over, while others enforce a “use it or lose it” rule for non-SIL leaves.
2. Are all leave credits convertible to cash?
Not all leave credits are convertible to cash. Leave credits are convertible depending on your company’s policy, except for SIL, which is mandated to be converted if unused.
3. Can I request leave conversion anytime?
You can request leave conversion in accordance with company guidelines. Many employers only convert leaves at year-end or during separation.
4. How will I receive my leave conversion pay?
Leave conversion pay is usually released through payroll or as part of the final pay if you resign or are separated from the company.
5. What should I do if my employer refuses to pay my leave credits?
If your employer refuses to pay your unused leave credits, you may bring the matter to the Department of Labor and Employment for assistance or mediation.
Final Thoughts
Leave credits are part of your compensation and a recognition of your need for rest and well-being. Understanding how leave credits work, how they accumulate, and when they can be converted ensures you’re maximizing your benefits.
Before the year ends, take a moment to check your leave balance, clarify your company’s conversion policy, and ensure your earned leave credits are accounted for.
Friendly tip: This is a brief overview of leave credits and their conversion. For additional questions or inquiries, it is best to contact your HR department directly or reach out to the government agency via the DOLE Hotline 1349 or email hotline1349@dole.gov.ph.
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