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TWENTIETH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
SENATE 
S. No. 1260
of f!)C &i'£rptt!l7
25 AUG 27 A 9 22
RtCEtVED SY.
Introduced by Senator Loren Legarda
AN ACT
PROMOTING INCLUSIVE AND SUSTAINABLE PRODUCTIVITY GROWTH, 
REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 6971, OTHERWISE 
KNOWN AS THE PRODUCTIVITY INCENTIVES ACT OF 1990
EXPLANATORY NOTE
Section 3 of Article XIII of the 1987 Philippine Constitution provides, in part, 
that the State shall promote the principle of shared responsibility between workers 
and employers. Further, the State shall regulate the relations between workers and 
employers, recognizing the right of labor to its just share in the fruits of production.
With this in mind. Congress passed Republic Act No. 6971 or the Productivity 
Incentives Act of 1990 with the aim to encourage higher levels of productivity, 
maintain industrial peace and harmony and promote the principle of shared 
responsibility in the relations between workers and employers. However, it has been 
more than thirty (30) years since the passage of this law. Therefore, a more responsive 
law is needed to ensure that the law can adapt to the current situations prevailing in 
the labor and employment market.
This bill seeks to encourage higher levels of productivity in all industries by 
providing for:
(i) productivity improvement program;
(ii) productivity incentives committee;
(iii) productivity incentives program; and


(iv) tax deduction, among others.
In view of the foregoing, approval of this measure is earnestly sought.
LOREN LEGARDA


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TWENTIETH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
SENATE 
1260
10k gjcnaie
of tlie S'.fiirtcr?
25 AUG 27 A 9 22
RECEIVED BY;
S. No.
Introduced by Senator Loren Legarda
Act'1
AN ACT
PROMOTING INCLUSIVE AND SUSTAINABLE PRODUCnVITY GROWTH, 
REPEALING 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 "Enterprise Productivity
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to:
(a) Encourage higher levels of productivity in all industries to enable 
enterprises to compete globally;
(b) Promote gainful employment, improve working conditions, maintain 
industrial peace and harmony and promote the principle of partnership 
and shared responsibility in the relations between workers and 
employers so as to strengthen the cooperation between employees 
and management/employers, recognizing the right of labor to its just 
share in the fruits of production and the right of business enterprises 
to reasonable returns of investments and for expansion and growth; 
and
(c) Provide corresponding incentives to both labor and management for 
undertaking productivity improvement programs and gainsharing to 
ensure just share by the workers in the fruits of their labor in relation 
to the profit yielded to the employer as a result of increased


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productivity and thus enhance the improvement of the quality of life
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of the employees.
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Sec. 3. Coverage. - This Act shall apply to all business enterprises with or
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without existing and duly recognized collective bargaining agreements. It shall cover
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all employees and workers regardless of their position, designation, or status, and the
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manner by which their wages are paid.
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Sec. 4. Definition of Terms. - As used in this Act:
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(a) Business enterprise refers to an entity duly incorporated, organized, or
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registered pursuant to the prevailing applicable laws, rules and regulations;
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(b) Productivity improvement program refers to a set of actions identifying and
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addressing productivity problem areas formulated by the productivity
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incentives committee using either a principle, tool, technique, method,
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practice, guideline, model or approach towards productivity improvement in
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people, inputs or technologies, products or services, policies, and process.
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It shall contain, among others, a productivity tool or technique, benchmarks
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and measurement of productivity, or efficiency improvements;
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(c) Productivity incentives committee refers to a body in a business enterprise
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composed of representatives of management/employers and employees
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created to formulate and implement the productivity incentives program,
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and to settle issues arising from the interpretation or implementation of the
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said program; and
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(d) Productivity incentives program refers to a formal agreement formulated by
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the productivity incentives committee, containing a productivity
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improvement program and provisions on its coverage, schemes on the
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sharing of the gains, or savings realized therefrom, and the forms, manner,
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and frequency of payment or distribution of such incentives.
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Sec. 5. Productivity Incentives Committee. - Business enterprises employing
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ten (10) or more persons shall establish a productivity incentives committee,
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hereinafter referred to as the Committee, composed of representatives of
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management/employers and employees.
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(a) In business enterprises with legitimate labor organization or workers'
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association, the employee representatives shall be those designated in


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the collective bargaining agreement or by the said organization or
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association.
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(b)In business enterprises with Labor-Management Councils or Labor-
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Management Committee, it shall be a subcommittee thereof.
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(c) In business enterprises without legitimate labor organization or workers'
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association, the employee representatives shall be those designated by
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at least a majority of all rank-and-file employees.
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Sec. 6. Incentives Program. - The Committee shall develop the productivity
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incentives program. Whenever gains or savings are realized from the implementation
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of the productivity improvement program, the management shall initiate the
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discussion on the sharing thereof.
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Productivity incentives program as provided in this Act shall be based on the
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implemented productivity improvement program, and without prejudice to any
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company policy, program, contract, or collective bargaining agreement providing for
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higher productivity incentives.
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Sec. 7. Tax Deductions. - Private establishments may avail of the following tax
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deductions:
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(a) Subject to the provisions of Section 6, a business enterprise that adopts
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a productivity incentives program duly and mutually agreed upon by the
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employers and employees' representatives, shall be granted a special
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deduction from gross income equivalent to fifty percent (50%) of the
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total productivity incentives given to employees under the productivity
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incentives program, over and above the deductions for total allowable
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ordinary, and necessary trade, business, or professional expenses under
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the National Internal Revenue Code of 1997, as amended, and other
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prevailing laws, rules and regulations.
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(b)A business enterprise shall be granted a special deduction from gross
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income equivalent to fifty percent (50%) of the total grants for training
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and special studies given to employees pursuant to the productivity
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incentives program prepared by the Committee, over and above the
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deductions for total allowable ordinary and necessary trade, business, or


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professional expenses under the National Internal Revenue Code of 1997,
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as amended, and other prevailing laws, rules and regulations.
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Provided, a business enterprise shall submit a copy of its productivity incentives
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program and other required documents to the concerned revenue district office
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of the Bureau of Internal Revenue to avail of the corresponding benefits and
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tax deductions provided in this Act; Provided, further, a business enterprise
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shall be entitled to the aforementioned tax deductions starting the next taxable
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year following the effectivity of this Act.
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Sec. 8. Availment of Tax Deductions. - The Bureau of Internal Revenue shall
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establish a system for availing of tax deductions. It shall maintain and furnish the
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National Wages and Productivity Commission (NWPC) with an annual record of
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business enterprises that avail of tax deductions under this Act for program
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monitoring.
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Sec. 9. Productivity Advisories. - The Regional Tripartite Wages and
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Productivity Board (RTWPB) shali issue advisories on productivity improvement
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programs and schemes, and relative thereto, shall provide training and technical
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assistance to enterprises.
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Sec. 10. Issues and Grievances. - Whenever issues, grievances, or other
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matters arise from the interpretation or implementation of the productivity incentives
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program, the Committee shall meet to resolve the same within fifteen (15) days from
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receipt of a formal complaint from any aggrieved party, subject to the following
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conditions:
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(a) Parties may agree on whether or not to suspend the implementation of
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the productivity incentives program, 
pending 
the resolution 
of the
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complaint;
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(b) Business enterprises shall not be deemed to have forfeited any tax
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incentives accrued prior to the said complaint, and the employees and
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workers shall not be required to reimburse the productivity incentives
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already granted;
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(c) Likewise, productivity incentives that have already accrued prior to the
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said complaint, shall be paid to the entitled employees and workers within
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six (6) months from the date of accrual of the same; and


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(d) Any complaint which remains unresolved within thirty (30) days from the
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time of receipt of complaint shall be referred by the Committee to
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voluntary arbitration pursuant to prevailing laws, rules, and regulations
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on the matter.
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Sec. 11. Loan Availment - All banking institutions shall provide a loan facility
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or extend a credit window to micro, small and medium enterprises (MSMEs) that
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implement a productivity improvement program, at an interest rate lower than the
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prevailing market rate.
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Sec. 12. Submission of Productivity Incentives Program. - A business enterprise
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that implements a productivity incentives program shall submit a copy of the same to
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the RTWPB for their information, record, and appropriate technical assistance.
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Sec. 13. NationaiInnovation Council. - The National Innovation Council, created
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under Republic Act No. 11293, otherwise known as the "Philippine Innovation Act"
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shall have as one of its overriding goals the attainment of high and rising levels of
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productivity. Hence, its National Innovation Agenda and Strategy Document shall
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mainstream strategic actions in support of national development plans to improve the
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country's overall productivity performance.
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Sec. 14. Technical Assistance. - Any member of the Committee may request
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technical assistance from the following agencies in developing and implementing
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productivity improvement programs:
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(a) The Department of Agriculture for agricultural extension or agricultural
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advisory services on current technologies and systems;
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(b)The Department of Budget and Management (DBM) - Systems and
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Productivity Improvement Bureau for implementing a government quality
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management program;
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(c) The Department of Environment and Natural Resources shall encourage
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and promote the use of technology and science to create products and
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services that are environmentally-friendly;
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(d)The Department of Trade and Industry (DTI) - Bureau of Small and
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Medium Enterprise Development shall extend assistance in the effective
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marketing of products and services of MSMEs;


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(e) The DTI - Competitiveness Bureau shall promote and provide counseling
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services on business operations to enhance productivity growth and
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competitiveness of companies and enterprises;
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(f) The Department of Science and Technology shall provide and promote
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technology acquisition and use to improve the operational growth of
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companies and enterprises;
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(g) The Department of Tourism shall promote and encourage tourism quality
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standards accreditation, and the development of the tourism value chain;
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(h)The Development Academy of the Philippines (DAP) shall conduct free
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enterprise-appropriate training that will provide the necessary
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productivity tools and advice on the technologies to enhance enterprise
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operations and achieve their productivity goals;
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(i) The NWPC and RTWPB shall provide training and technical assistance on
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productivity improvement and performance incentives schemes to
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companies and enterprises;
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0) The Technical Education and Skills Development Authority shall provide
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and promote skills training, assessment, and certification; and
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(k) The University of the Philippines - Institute for Small Scale Industries shall
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offer technical assistance to small scale industries.
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Provided, that any member of the Committee may also seek assistance from
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other government agencies or private institutions in the development and
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implementation of their productivity improvement and gainsharing programs.
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Sec. 15. Accreditation of Productivity Experts. - The NWPC shall establish an
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accreditation system for productivity experts who shall provide productivity-related
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services to enterprises. The NWPC may charge an accreditation fee of not more than
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Five Thousand Pesos (P5,000.00), which amount may be adjusted by the NWPC as it
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may deem necessary. The NWPC shall be allowed to utilize fifty percent (50%) of the
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collected accreditation fees for the administration and management of the
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accreditation system.
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An initial seed fund of Fifty Million Pesos (P50,000,000.00) shall be drawn from
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the innovation fund under R.A. No. 11293, or the "Philippine Innovation Act."


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Sec. 16. Assistance to Micro Enterprises. - The NWPC shall develop guidelines
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in the engagement of productivity experts who shall provide technical assistance to
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micro enterprises. Relative to this, accredited productivity experts shall be entitled to
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receive an honorarium pursuant to DBM's rules and regulations.
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The DAP shall regularly conduct trainings, free of charge, to enhance the
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capabilities of the pool of productivity experts on advanced productivity technologies
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and systems.
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Sec. 17. Strengthening Workpiace Bipartite Mechanism. - The Department of
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Labor and Employment (DOLE) shall formulate a program, in consultation with
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employer and labor groups, to strengthen the bipartite mechanism especially in the
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area of bargaining on productivity schemes and standards.
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Sec. 18. Penalty. - Any person who shall make any fraudulent claim under this
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Act, regardless of whether or not a tax benefit has been granted, shall, upon
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conviction, be punished with imprisonment of not less than six (6) months but not
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more than one (1) year, or a fine of not less than Twenty Thousand Pesos
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(P20,000.00) but not more than Fifty Thousand Pesos (P50,000.00), or both, at the
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discretion of the Court, without prejudice to prosecution for any other acts punishable
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under existing laws.
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In the case of partnerships or corporations, the penalty shall be imposed upon
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the officers, employees, and other persons responsible who knowingly approved,
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authorized, or ratified the filing of a fraudulent claim.
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Sec. 19. Non-Diminution of Benefits. - Nothing in this Act shall be construed to
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diminish or reduce any benefits and other privileges enjoyed by workers under existing
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laws, decrees, executive orders, company policy or practice, or any agreement or
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contract between employers and their employees.
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Sec. 20. Monitoring of Compliance of Private Enterprises. - The Secretary of
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Labor and Employment shall, under Article 128 of P.D. 442, as amended, otherwise
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known as the "Labor Code of the Philippines," ensure the compliance of private
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enterprises with the provisions of this Act.
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Sec. 21. Public Sector. — The Civil Service Commission and the DBM may
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establish a similar system in the public sector.


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Sec. 22. Implementing Rules and Regulations. - Within one hundred eighty
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(180) days from the effectivity of this Act, the NWPC and the DOLE shall, in
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consultation with other government agencies, and concerned stakeholders, issue the
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rules and regulations necessary to effectively implement the provisions of this Act.
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Sec. 23. Separability Clause. - Should any provision of this Act be declared
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unconstitutional, the remainder thereof not otherwise affected shall remain in full force
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and effect.
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Sec. 24. Repealing Clause. - Republic Act No. 6971, otherwise known as the
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"Productivity Incentives Act of 1990," is hereby repealed. All laws, presidential
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decrees, executive orders, proclamations, or administrative regulations that are
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inconsistent with the provisions of this Act are hereby repealed, amended, or modified
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accordingly.
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Sec. 25. Effectivity. - This Act shall take effect fifteen (15) days after its
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publication in the Official Gazette or in a newspaper of general circulation in the
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Philippines.
Approved,
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