.... ' 
~el1iltr 
SIXTEENTH CONGRESS OF THE REPUBLIC) 
tOft,;" of lite ,"i'nl't.nr~ 
OF THE PHILIPPINES 
) 
, 
First Regular Session 
) 
'14 
APR 30 P 3 :59 
SENATE 
Senate Bill No. 2193 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
STRENGTHENING THE PRODUCTIVITY INCENTIVES ACT OF 1990 
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 to 
employers and employees to establish productivity incentives program. 
Despite the declaration in RA 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 between employees and employers, it has 
been observed that since its effectivity in November 1990, only eleven (11) 
companies have tried to avail of the benefits under the Act but only two (2) firms 
has met the requirements of the law because of its 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 , 
enterprises and workers. 
The pfoposed bill introduces an incentives based pay on productivity 
improvement and gainsharing in support of wage policies under Republic Act No. 
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. 
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. 
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 


" 
,1 
program over and above the total allowable ordinary and necessary business 
deductions for said grants under the National Internal Revenue Code, as 
amended, 
This measure is a priority of the Department of Labor and Employment (DOLE) 
for the 16th Congress and was in fact presented and thoroughly discussed in the 
DOLE's Tripartite Industrial Peace Council (TIPC), 
In light of the foregoing, approval of this bill is earnestly sought. 
Senator 


" 
'I.matl? 
SIXTEENTH CONGRESS OF THE REPUBLIC) 
Ili)H.;r..f j~, ~m.I .. ~ 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
Senate Bill No. 2193 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
'14 
APR 30 P 3 :59 
STRENGTHENING THE PRODUCTIVITY INCENTIVES ACT OF 1990 
Be it enacted by the Senate and the House of Representatives of the Philippines 
in Congress assembled: 
:1 
SECTION 1. Declaration of Policy. - It is hereby declared the policy of the 
2 
State to: 
3 
4 
a) Encourage higher levels of productivity in all industries so that Philippine 
5 
products and services can compete in the global economy; and, 
6 
.7 
b) Maintain industrial peace and harmony and promote the principles of 
.8 
partnership and shared responsibility in the relations between workers and 
9 
employers, recognizing the right of labor to its just share in the fruits of 
10 
production and the right of business enterprises to reasonable returns on 
H 
investments for expansion and growth, and to provide corresponding 
12 
incentives to both labor and capital for undertaking voluntary programs to 
13 
improve productivity. 
14 
15 
16 
SEC. 2. Coverage. 
- This Act shall apply to all business enterprises with or 
17 
without existing and duly recognized collective bargaining representatives. 
It 
18 
shall cover all private sector employees and workers regardless of their position, 
19 
designation or status and irrespective of the manner by which wages are paid. 
20 
21 
22 
SEC. 3. Definition of Terms. - As used in the Act: 
23 
24 
(a) "Business Enterprise" refers to industrial, agricultural, or agro-industrial 
25 
private establishments engaged in production, manufacturing, processing, 
26 
repacking, or assembly of goods, including service-oriented enterprises; 
27 
28 
(b) "Labor-Management Committee" refers to a negotiating body in a 
29 
business 
enterprise 
composed 
of representatives 
of 
labor 
and 
30 
management created to establish a productivity incentive program, and to 
31 
settle issues arising therefrom in accordance with Section 9 hereof; 
32 
33 
(c) "Productivity Incentives Program" refers to a formal agreement voluntarily 
34 
established by a joint labor-management committee or any existing labor 
35 
management mechanism containing a productivity incentives program that 


" 
1 
will 
promote gainful employment, 
improve working 
relations and 
2 
conditions, and result in increased productivity and efficiency, including 
:3 
cost savings, as well as a gainsharing program. The agreement shall be 
4 
ratified by employees in accordance with the guidelines that may be 
5 
issued for the purpose; 
6 
7 
(d) "Gainsharing" refers to a productivity based incentives pay formulated to 
8 
complement the productivity incentives program where employers and 
9 
workers share in the positive results of business operations brought about 
10 
by productivity improvements. The gainsharing system may take the form 
1 ~ 
of profit sharing or other forms of gainsharing mechanisms such as 
12 
productivity bonus, performance bonus, production bonus and other 
13 
similar schemes; 
14 
15 
(e) "NWPC" refers to the National Wages and Productivity Commission, an 
16 
attached agency of the Department of Labor and Employment duly 
17 
created and established by virtue of Republic Act No. 6727 or otherwise 
18 
known as the "Wage Rationalization Act"; 
19 
20 
(f) "RTWPBs" refers to the Regional Tripartite Wages and Productivity 
21 
Boards, duly created and established by virtue of Republic Act No. 6727 
22 
or otherwise known as the "Wage Rationalization Act". 
23 
24 
25 
SEC. 4. AdviSOry on Productivity Incentive. Schemes. - The RTWPBs shall 
26 
issue an advisory on productivity incentive schemes based on the guidelines 
27 
issued by the NWPC. 
2.8 
29 
30 
SEC. 5. Labor-Management Committee. -
3.1 
32 
(a) A business enterprise or its employees, through their authorized 
3;;l 
representatives, may initiate the formation of a labor-management 
34 
mechanism such as labor-management committee that shall be composed 
35 
of an equal number of representatives from the management and from the 
36 
employees and shall have equal voting rights which shall establish and 
37 
implement a productivity incentives program and settle issues arising 
38 
therefrom in accordance with Section 9 hereof. 
39 
40 
Provided, That at the request of any party to the negotiation, the NWPC or 
41 
the RTWPBs may provide the necessary studies, technical information 
42 
and assistance, and expert advice to enable the parties to conclude 
43 
productivity agreements in case there is an existing labor management 
44 
mechanism in the enterprise, such mechanism may suffice; Provided 
45 
further, That its composition, voting rights, and the manner by which the 
46 
labor-management mechanism is created is in accordance with the 
47 
provisions of this Section. 
48 
49 
(b) In business enterprises. with duly recognized collective bargaining 
50 
representatives, the representatives of labor shall be those designated by 
51 
the collective bargaining agent(s). of the bargaining unit(s). 
52 
53 
(c) In business enterprises without duly recognized or certified labor ' 
54 
organizations, the representatives of labor shall be elected by at least a 
55 
majority of all rank-and-file employees who have rendered at least six (6) 
56 
months of continuous service. 
57 


1 
SEC. 6. Productivity Incentives Program. -
:2 
3 
(a) The productivity incentives program shall contain among others 
.4 
provisions for measuring productivity, efficiency improvements, 
5 
sharing of productivity bonuses, coverage, percentage sharing, 
6 
forms of bonus payment, and manner and frequency of distribution, 
7 
in accordance with the terms and conditions that may be agreed 
8 
upon by both labor and management. 
9 
10 
(b) Productivity agreements voluntarily reached by the parties as 
1 ~ 
provided in this Act are without prejudice to any company policy, 
12 
contract, and/or Collective Bargaining Agreement (CBA) providing 
13 
higher productivity incentives. 
14 
15 
16 
SEC. 7. Incentives.-
17 
18 
(a) Subject to the provisions of Section 6 hereof, a business enterprise 
19 
which adopts a productivity incentives program, duly and mutually 
20 
agreed upon by parties to the labor-management committee or any 
21 
labor-management mechanism, 
shall 
be granted 
a special 
22 
deduction from gross income equivalent to fifty percent (50%) of the 
2,3 
total productivity bonuses given to employees under the program 
24 
over and above the total allowable ordinary and necessary 
25 
business deductions for said bonuses under the National Internal 
26 
Revenue Code, as amended. 
27 
28 
(b) Grants for manpower training and special studies given to 
29 
employees, pursuant to the skills development program prepared 
30 
by the labor-management. committee under the productivity 
3,1 
incentives program, shall also entitle the business enterprise to a 
32 
special deduction from gross income equivalent to fifty percent 
33 
(50%) of the total grants over and above the allowable ordinary and 
34 
necessary business deductions under the National Internal 
35 
Revenue Code, as amended. 
36 
37 
(c) The special deductions from gross income provided herein shall be 
3,8 
made retroactive to the fiscal' year that the program was 
39 
implemented after the effectivity of this Act. 
40 
41 
(d) Priority training programs and services from DOLE and other 
42 
government partner agencies shall 
be 
given 
to 
business 
43 
establishments adopting productivity incentives programs. 
44 
45 
46 
SEC. 8. 
Notification. -
A business enterprise which adopts a productivity 
47 
incentives program shall submit copies of the same to the appropriate Regional 
48 
Tripartite Wages and Productivity Board and to the Bureau of Intemal Revenue 
49 
for their informatiol'l and record. 
50 
51 
52 
SEC. 9. 
Issues and Grievances. - Whenever issues, grievances, or other 
~3 
matters arise from the interpretation or implementation of the productivity 
54 
incentives program, the labor-management committee shall meet to resolve the 
55 
,issue within fifteen (15) days. The parties shall agree on whether to suspend the 
56 
implementation of the productivity incentives program pending the resolution of 
57 
the issue; Provided, That the business enterprise shall not be deemed to have 


1· 
forfeited any tax incentives accrued prior to the date of occurrence of such issue 
2 
or grievance, and the workers shall not be required to reimburse the productivity 
~ 
bonuses already granted to them under the incentives program. 
Likewise, 
4 
bonuses that have already accrued before the issue or grievance shall be paid to 
5 
the workers within six (6) months from their accrual. Any issue which remains 
6 
unresolved within thirty (30) days from the time of its submission to the labor-
t 
management committee shall be submitted for voluntary arbitration in line with 
8 
the pertinent provisions of the Labor Code, as amended. 
9 
10 
The productivity incentives program may include the name(s) of the voluntary 
11 
arbitrator or panel of voluntary arbitrators previously chosen and agreed upon by 
12 
the parties. 
13 
14 
15 
SEC. 10. Non-Diminution of Benefits. - Nothing in this Act shall be construed 
16 
to diminish or reduce any benefit and other privileges enjoyed by the workers 
17 
under existing laws, decrees, executive orders, company policy or practice, or 
1~ 
any agreement or contract between the employer and employees. 
19 
20 
21 
SEC. 11. Rule Making Power. - The Secretary of Labor and Employment and 
22 
the Secretary of Finance, in consultation with the National Wages and 
23 
Productivity Commission, National Conciliation and Mediation Board, Bureau of 
24 
Internal Revenue, Center for Industrial Competitiveness, Technical Education 
25 
and Skills Development Authority and labor and employer organizations shall 
26 
jointly promulgate and issue within six (6) months from the effectivity of this Act 
27 
such rules and regulations as are necessary to carry out the provisions hereof. 
28 
29 
The Department of Labor and Employment, the Department of Trade and 
30 
Industry and the designated National Productivity Organization in the Philippines 
31 
shall conduct and extensive public information campaign to promote the adoption 
32 
of productivity incentives programs at the workplace. 
33 
34 
35 
SEC. 12. 
Separability Clause. -
If any provIsion of this Act is declared 
36 
unconstitutional, the same shall not affect the validity and effectivity of the other 
37 
provisions thereof. 
38 
39 
40 
SEC. 13. Repealing Clause. - Republic Act No. 6971, otherwise known as the 
41 
Productivity Incentives Act of 1990, and pertinent provisions under the National 
42 
Internal Revenue Code are hereby amended. 
All laws, executive orders, 
43 
presidential proclamations, rules and regulations or parts thereof inconsistent 
44 
with the provisions of this Act are hereby repealed or modified accordingly. 
45 
46 
47 
SEC. 14. Effectivity Clause. - This Act shall take effect fifteen (15) days after , 
48 
its publication in the Official Gazette or in at least two (2) national newspapers of 
49 
general circulation. 
50 
51 
52 
53 
54 
55 
Approved, 
!