Republic of the Philippines
HOUSE OF REPRESENTATIVES

Batasan Hills, Quezon City

‘SIXTEENTH CONGRESS

First Regular Session

House Bill No. S204

Introduced by REP. FRANCIS GERALD A. ABAYA

EXPLANATORY NOTE

This bill aims to strengthen the promotion of productivity incentives and gainsharing
program in the Philippines, thereby amending for the purpose Republic Act No. 6971, otherwise
known as the “Productivity Incentives Act of 1990” by liberalizing specific provisions, providing
for other incentives for employers and employees to establish productivity incentives and
gainsharing program and enabling the Commission to provide the necessary studies, technical
information and assistance, and expert advice in order for the parties to conclude productivity
agreements.

Despite the declaration in R.A. No. 6971, that it is the policy of the State to encourage
higher levels of productivity, maintain industrial peace, and promote the principle of shared
responsibility in employee-employer relationship, it has been observed that since its effectivity
in November 1990, only eleven (11) companies have applied to avail of the benefits under the
Act and only one (1) firm has met the requirements of the law because of the tight mandatory
requirements on productivity measurement and sharing schemes. This contravenes the
voluntary nature of the law.


The ability of the Philippines to compete in the world market hinges critically on the
ability of its enterprises to produce quality goods and services in the most efficient and reliable
way. To achieve this, it is necessary that firms become oriented towards increasing the overall
productivity and competitiveness of managers and workers.

The proposed bill introduces an incentive based pay on productivity improvement and
gainsharing in support of wage policies under Republic Act 6727 or the Wage Rationalization
Act.

The incentive is a form of compensation, on top of the basic salaries and wages, given to
workers based on improvements in productivity and performance of both the company and its
workforce, It allows workers and management to develop their own productivity incentives
program, determine the sharing scheme, frequency of distribution of bonus and the
measurement of productivity gains.

The creation of a Productivity Committee in the workplace is mandated, but it also
recognizes any labor-management mechanism composed of the representatives of labor and
management created to establish a productivity incentives and gainsharing program. tt also
allows labor and management to decide on the terms and conditions of the productivity
incentives and gainsharing program, and permits the same to be outside the ambit of collective
bargaining agreement.

Further, it entitles business enterprise adopting productivity improvement and
performance incentive program, special deductions from the gross income up to fifty percent
(50%) of the total productivity bonuses given to employees under the program over and above
the total allowable ordinary and necessary business deductions for said grants under the
National Internal Revenue Code, as amended.

In the light of the foregoing, approval of this bill is earnestly sought.

Zac ey,
HON. FRANCIS GERALD A. Aj A

First District, Cavite


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
Sixteenth Congress

First Regular Session

a
HOUSE BILL NOS2OL

Introduced by Representative FRANCIS GERALD A. ABAYA

AN ACT ESTABLISHING A PRODUCTIVITY AND PERFORMANCE INCENTIVES AND GAINSHARING
PROGRAM, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 6971, OTHERWISE KNOWN AS
‘THE PRODUCTIVITY INCENTIVES ACT OF 1990

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled

SECTION 1. Short Title. - This Act shall be known as the “Productivity and Performance

Incentives and Gainsharing Act of 2013.”

SEC.2 Declaration of Policy. - \tis the declared policy of the State to encourage higher
levels of productivity, recognizing the complex challenges of globalization, in order that
Philippine products and services can meet global competition, maintain industrial peace and
harmony and promote the principles of partnership and shared responsibility in the relations
between workers and employers so as to strengthen the cooperation between labor and
capital, and further recognizing the right of labor to its share in the fruits of production and the
right of business enterprises to reasonable returns on investment and to expansion and growth,
and accordingly to provide corresponding incentives to both labor and capital for undertaking

voluntary programs that ensure workers’ just share in the fruits of their labor in relation to the


profit yielded to the employer as a result of increased productivity and, thus, enhance the

quality of life of the worker and employees.

SEC. 3 Coverage. - This Act shall apply to all enterprises with or without existing and
duly recognized collective bargaining representatives, including government-owned and
controlled corporations performing proprietary functions. It shall cover all employees and
workers regardless of their position, designation or status and irrespective of the manner and

mode by which their wages are paid.

SEC. 4. Definition of Terms. - As used in this Act:

(a) “Business enterprise” refers to industrial, agricultural or agro-industrial
establishments engaged in the production, manufacturing, processing, repacking or
assembly of goods, including service-oriented enterprises that are established and

operated for profit or gain.

(b) “Labor-Management Committee” refers to a negotiating body in a business
enterprise composed of representatives of labor and management created to
establish a productivity and performance incentives and gainsharing program, and
to settle disputes arising therefrom in accordance with Section 10 hereof.

(c) “Productivity Improvement Performance Incentive Program” refers to a formal
agreement voluntarily established by a joint labor-management committee or any
existing labor management mechanism containing a productivity and performance
incentives program that will promote gainful employment, improve working

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(d)

(e)

conditions, attain and maintain industrial peace and result in increased productivity
and efficiency, including cost savings, as well as a gainsharing program whereby the
employer and the workers share in the positive results of business operation
brought about by improvement in productivity. The agreement shall be ratified by
at least a majority of the employees who have rendered at least six (6) months of

continuous service

“Gainsharing” refers to a reward system formulated to complement the
productivity and performance incentives program designed to improve the
productivity performance of the organization. The gainsharing system to be
adopted by business enterprises may take the form of profit sharing or other forms
of gainshairing mechanisms such as productivity bonus, performance bonus,

production bonus and employee stock option plan, among others.

“NWPC”, refers to the National Wages and Productivity Commission, an attached
agency of the Department of Labor and Employment duly created and established
by virtue of Republic Act No. 6727 or otherwise known as the “Wage Rationalization

Act”.

“RTWPBs”, refers to the Regional Tripartite Wages and Productivity Boards, duly
created and established by virtue of Republic Act No. 6727 or otherwise known as

the “Wage Rationalization Act”.


SEC. 5. Advisory on Productivity incentive Schemes. Enterprises may refer to the
Advisory on Productivity Incentive Schemes that will be issued by the RTWPBs for
specific industries. The Advisory contains an assessment of the industry's past
performance, outlook or prospects for the next year and a recommendation on a range
of productivity incentives that may be considered by enterprises in industries covered
by the Advisory.

Upon request of enterprises, the RTWPBs shall provide capacity building on
productivity improvement and technical assistance or advise on the design and
implementation of productivity incentive schemes.

SEC. 6. Labor-Management Mechanism. - (a) A business enterprise or its
employees, through their authorized representative, may initiate the formation of a
labor-management mechanism such as labor-management committee that shall be
composed of representatives from the management and from the rank-and-file
employees which shall establish and implement an incentive pay based on productivity
improvement and gainsharing and settle disputes arising therefrom in accordance with
Section 9 hereof: Provided, That both management and labor shall have equal
representation in said committee or mechanism, Provided, further, That at the request
of any party to the negotiation, the NWPC or the RTWPBs of the Department of Labor
and Employment shall provide the necessary studies, technical information and
assistance, and expert advice to enable the parties to conclude productivity agreements.

In case there is already an exis

i labor management mechanism in the enterprise,

such mechanism may suffice; Provided, That it includes as one of its objectives, the


development and implementation of an incentive pay based on productivity

improvement and gainsharing

{b) In business enterprises with duly recognized collective bargaining
representatives, the representatives of labor shall be those designated by the collective

bargaining agent(s) of the bargaining unit(s).

(<) In business enterprises without duly recognized collective bargaining
representatives, the representatives of labor shall be elected by at least a majority of all
rank-and-file employees who have rendered at least six (6) months of continuous

service.

SEC. 7. Incentive Pay based on Productivity Improvement and Gainsharing -

(a) The incentive pay based on productivity improvement and gainsharing shall
contain provisions for measuring productivity, performance and efficiency
improvements, the gainsharing or reward system adopted in the sharing of productivity
bonuses, coverage, percentage sharing, and forms of bonus payment in accordance with
the terms and conditions that may be agreed upon by both labor and management:
Provided; That the productivity bonus shall be distributed at least once a year, or at
such frequency as may be determined by the parties. Provided further, that the amount
to be received as productivity incentive may vary depending on the productivity

performance of the establishment.


(b) Productivity agreements voluntarily reached by the parties as provided

in this Act may supplement existing collective bargaining agreements.

SEC. 8. Benefits and Tax Incentives. - (a) Subject to the provisions of Section 7
hereof, a business enterprise which adopts an incentive pay based on productivity
improvement and gainsharing, duly and mutually agreed upon by parties to the labor-
management committee or any labor-management mechanism, shall be granted a
special deduction from the gross income equivalent to fifty percent (50%) of the total
productivity bonuses given to employees under the program over and above the total
allowable ordinary and necessary business deductions for said bonuses under the

National Internal Revenue Code, as amended

(b) Grants for manpower training and special studies given to rank-and-file

employees pursuant to a skills development program prepared by the labor-

management committee under the incentive pay based on productivity improvement
and gainsharing shall also entitle the business enterprise to a special deduction from
gross income equivalent to fifty 2 (50 %) of the total grants over and above the
allowable ordinary and necessary business deduction for said grants under the National
Internal Revenue Code, as amended.

(c) Bonuses provided for under the incentive pay based on productivity
improvement and gainsharing shall be given to the employees in a manner determined

by the parties from the start of such system over and above the existing bonuses


granted by the business enterprise and by law: Provided, That the said bonuses shall
not be deemed as salary increases due the employees and workers.
(d) The special deductions from the gross income provided for herein shall

be allowed starting the next taxable year after the effectivity of this Act.

SEC. 9. Notification. - A business enterprise which adopts an incentive pay
based on productivity improvement and gainsharing shall submit copies of the same to
the appropriate Regional Tripartite Wages and Productivity Board for evaluation and
certification. The Board shall then forward the certifiable productivity incentives
program(s) of business enterprises to the Bureau of Internal Revenue for record

purposes.

SEC. 10. Disputes and Grievances. - Whenever disputes, grievances, or other
matters arise from the interpretation or implementation of the incentive pay based on
productivity improvement and gainsharing, the labor-management committee shall
meet to resolve the dispute within fifteen (15) days and shall suspend the effectivity of
the program pending settlement of such dispute or grievance; Provided, however, That
if within the period the dispute remains unresolved, the committee may seek the
assistance of a third party such as the National Conciliation and Mediation Board of the
Department of Labor and Employment, the Regional Tripartite Wages and Productivity
Boards or a facilitator acceptable to both parties in resolving the conflict. The third
party shall act only in an advisory capacity for purposes of rendering interpretation and

clarification to facilitate the adoption of a final resolution by the parties. Provided,


further, That the business enterprise shall not be deemed to have forfeited any tax
incentives accrued prior to the date of occurrence of such dispute or grievance, and the
workers shall not be required to reimburse the productivity bonuses already granted to
them under the incentives program. Likewise, bonuses that have already accrued
before the dispute or grievance shall be paid the workers within six (6) months from
their accrual. Any dispute which remains unresolved within thirty (30) days from the
time of its submission to the labor-management committee shall be submitted for
voluntary arbitration in line with the pertinent provisions of the Labor Code, as

amended.

The incentive pay based on productivity improvement and gainsharing shall
include the name(s) of the voluntary arbitrator or panel of voluntary arbitrators

previously chosen and agreed upon by the parties.

SEC. 11. Non-Diminution of Benefits. - Nothing in this Act shall be construed to
diminish or reduce any benefits and other privileges enjoyed by the workers under
existing laws, decrees, executive orders, company policy or practice, or any agreement

or contract between the employer and employees.

SEC. 12. Rule Making Power. - The Secretary of Labor and Employment and the
Secretary of Finance, in consultation with the National Wages and Productivity
Commission, Bureau of Internal Revenue, Government Corporate Monitoring and
Coordinating Committee, Technical Education and Skills Development Authority, and
labor and employer sectors shall jointly promulgate and issue within six (6) months from

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the effectivity of this Act such rules and regulation as are necessary to carry out the

provisions hereof.

‘As part of its labor education program, the Department of Labor and
Employment shall conduct an extensive public information campaign to promote the

incentive pay based on productivity improvement and gainsharing.

SEC. 13. Separability Clause. - \f any provision of this Act is declared
unconstitutional, the same shall not affect the validity and effectivity of the other

provisions thereof.

SEC. 14. Repealing Clause. - Republic Act No. 6971, otherwise known as the
Productivity Incentives Act of 1990, is hereby repealed. Alll laws, executive orders,
presidential decrees, presidential proclamations, rules and regulations or parts thereof

inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

SEC. 15. Effectivity. This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in at least two (2) newspapers of national

circulation.

Approved.

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