Only regular employees are entitled to leave credits

Persida Acosta

Persida Acosta

Dear PAO,
My friend was contracted by a small company for some of its construction needs. A year and a half with the company, he asked to use his leave credits. He was told that he is not entitled to leave credits because he is not an employee of the company. Is this really possible? What are the factors to determine whether a person is an employee or not? Please clarify.

Dear Mace,
Having leave credits is one of the many benefits commonly granted to private employees. More often than not, such benefit is stipulated under the contract of employment. In the absence of such stipulation, private employees may still be entitled thereto provided that they have rendered at least one year of service. This is in consonance with Article 95 of the Labor Code of the Philippines, to wit: “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. x x x”

It bears stressing that there must be an employer-employee relationship in order for the claimant to be entitled to such leave benefit. If there is no employer-employee relationship, no benefit will attach to him. Apart therefrom, the service incentive leave benefit may not be availed by employees who are employed in establishments regularly employing less than 10 employees or in establishments exempted by the Secretary of Labor and Employment after considering the viability or financial condition of such establishment. (Article 95 (b), Id.)

Applying the foregoing in the situation that you have presented before us, we submit that your friend may only demand to avail the service incentive leave benefit if he can establish that he is indeed an employee of the company, vis-a-vis, that there exists an employer-employee relationship between him and the company where he is working. While there may be a contract between him and the company, it does not necessarily follow that such contract is that of employment.

The Supreme Court has, in a long line of cases, pronounced the so-called “four-fold test” to determine the existence of an employer-employee relationship, to wit: the selection and engagement of employee; the payment of wages; the power of dismissal; and the power to control the employee’s conduct (Escario, et al. vs. NLRC, 333 SCRA 257, G. R. No. 124055, June 8, 2000). If any of the abovementioned elements is wanting in your friend’s situation, then the company may be considered correct in informing him that he is not an employee of the company and, therefore, not entitled to leave credits. Conversely, if all of the elements mentioned above are present, then he can rightly demand such benefit provided the company is not one of those exempted under Article 95 (b) of the Labor Code.

We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to


Please follow our commenting guidelines.

Comments are closed.