Book III, Chapter III of the Labor Code of the Philippines covers the employee's right for Service Incentive Leaves. This basically entitles the employee working in the Philippines a yearly service incentive leave, or in other words, a paid leave of five days.

The term 'employee' represents an individual who is legally employed under the Philippine law, or any person compulsorily covered by the SSS under Republic Act 1161 or any person compulsorily covered by the GSIS under the Commonwealth Act 186.

The phrase 'one year of service' indicates an employee's length of service, if he/she has provided service to the same establishment that would total 12 months, whether uninterrupted or broken, and starting on the day the employee started working for the establishment. Authorized absences, normally unworked days (restdays and/or weekends), and paid legal and regular holidays are counted as part of the year of service.

Article 95 or what is otherwise known as the Right to Service Incentive Leave is only applicable to any employee who has at least rendered one year of service in the same establishment.

There are employees exempt from Article 95 or the Right to Service Incentive Leaves. These are the employees in the civil service (government employees), administrative employees as defined in Book III of the Philippine Labor Code, field employees or other employment category whose hours of work are unascertained, domestic helpers and like (persons whose nature of employment is in personal service of another), employees who are on task or contract basis, purely on commission basis, or those paid a fixed amount irrespective of the time involved.

Furthermore, those employees not covered above but who are already enjoying a paid leave in kind, such as a vacation leave with pay comprising at least five days, are exempt from Article 95. Employees who are working on establishments with population of less than 10 workers are also exempt of this provision.

The Service Incentive Leave may be used as a Sick Leave and/or Vacation Leave. However, service leave incentives may not be interchanged with Vacation Leave as the latter is not a standard of law but a prerogative of the employer and by extension the establishment or the management.

If unused after a one year period, the Service Incentive Leave will be commuted to its monetary equivalent by the end of the year. In computing, the basis shall be the salary rate at the date of commutation.

(This article features content derived from Art. 95 of the Philippine Labor Code. By no means shall this article be used to substitute Art. 95 of the Philippine Labor Code)