THIRTEENTH CONGRESS OF THE REPUBLIC 
FIRST REGULAR SESSION 
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OF THE PI-IILIPPINES 
Republic Act No. 6971, known as the “Productivity Incentives Act 
of 1990”, was enacted to create an environment conducive to productivity 
improvement. 
The statute has for its main objective the achievement of higher 
levels of productivity, the maintenance of industrial peace and harmony 
and the promotion of the principle of shared responsibility in employee - 
employer relationship, among others. 
It provides fiscal incentives to 
establishments or organizations which voluntarily adopt Productivity 
Incentives Programs (PIP) to improve respective productivity and in the 
process share with their workers productivity bonuses. 
Indeed, 
appropriate productivity improvement policies and 
programs could create additional non-wage benefits to workers and 
confer competitive advantage to our products in both domestic and 
international markets. 
However, since the effectivity of the law ii? November 1990, only a 
handful of business enterprises have considered adopting productivity 
improvement programs and fewer still have actually embraced the policy, 
due to operational difficulties arising from hard-to-implement provisions 
of the law. 
The amendments to R.A. 6971 embodies in this bill pertain to 
provisions which tend to unduly limit or regulate the process of 
productivity improvement. These amendments were recommended by 
the National Wages and Productivity Commission, the tripartite 
consultations on productivity Boards (RTWPBs), the National Tripartite 
Conference and the other productivity experts including Philippine 
Quality 
Productivity 
Movement, 
UP-SOLAIR, 
DTI-CLARA, 
and 
Productivity Development Center, as well as the National Conciliation 
and Mediation Board, National Manpower and Youth Council and 
Bureau of Internal Revenue, the Tripartite Industrial Peace Council 
(TIPC), and the Networking Committee on Productivity under the Export 
Development Council. 
Approval of the attached bill is strq~lgly recommended! 


THIRTEENTH CONGRESS OF THE REPUBLIC 
FIRST REGULAR SESSION 
OF THE PHILIPPINES 
AN ACT 
AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NO. 6971 
OTHERWISE KNOWN AS “THE PRODUCTIVITY INCENTIVES ACT OF 
1990’’ 
AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the 
Philippines in Congress assembled 
SECTION 1. Section 2 of Republic Act No. 6971, otherwise known 
as the “Productivity Incentives of 1990”, is hereby amended to read, as 
follows: 
“SEC. 2. Declaration of Palicy - It is declared policy 
of the State to encourage higher levels of productivity IN 
ORDER THAT PHILIPPINE PRODUCTS AND SERVICES CAN 
MEET GLOBAL COMPETITION, maintain industrial peace 
and harmony and promote the principle of 
shared 
responsibility in the relations between workers and 
employers SO AS TO STRENGTHEN THE COOPERATION 
BETWEEN LABOR AND CAPITAL, recognizing the right of 
labor to its just share in the fruits of production and the 
right of business the right business enterprises to reasonable 
returns on investments and to expansion and growth, and 
accordingly to provide corresponding incentives to both labor 
and capital for undertaking voluntarily programs 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 PRODUCTIVITY 
AND THUS, ENHANCE THE IMPROVEMENT OF THE 
QUALITY OF LIFE OF THE EMPLOYEES [greater sharing by 
the workers in the fruits of their labor.]” 
SEC. 2. Section 3 of R.A. 6971 is hereby amended to read, as 
follows: 
“SEC. 3. Coverage - This Act shall apply to all 
business enterprises with or without existing and duly 
recognized COLLECTIVE BARGAINING REPRESENTATIVES 
[or certified labor organizations] including ALL government 
[owned and controlled corporations performing proprietary 
functions] 
INSTRUMENTALITIES 
AND 
SUBDIVISIONS 
THEREOF [INCLUDING] AND 
SECOND 
GENERATION 
GOVERNMENT CORPORATION OR ENTITIES. It shall cover 


all employees, and workers REGARDLESS OF THEIR 
STATUS AND THE MANNER THEY ARE PAID THEIR 
SALARIES 
AND 
WAGES 
[including casual, 
regular, 
supervisory and managerial employees]” 
SEC. 3. Section 4 of R.A. 6971 is hereby amended to read as 
follows: 
SEC. 4. Definition of Terms - As used in this Act: 
a. “Business Enterprises” refer to industrial, agricultural, or 
agro-industrial establishments engaged in the production, 
manufacturing, processing, repacking, or assembly of 
goods, including 
service-oriented enterprises [, duly 
certified as such by appropriate government agencies]. 
b. rLabor-Management Committee” refers to a negotiating 
body in a business enterprise composed of 
the 
representatives of labor and management created to 
establish a productivity incentives program, and to settle 
disputes arising therefrom in accordance with Section 9 
hereof. 
c. ] “Productivity Incentives Program” refers to a formal 
agreement VOLUNTARILY established by a [the] JOINT 
Labor-Management Committee OR ANY EXISTING LABOR 
MANAGEMENT 
MECHANISM 
containing 
a 
PRODUCTIVITY IMPROVEMENT PROGRAM (PIP)[process] 
that will promote gainful employment, improve working 
conditions, MAINTAIN INDUSTRIAL PEACE, [and] result 
in increased productivity [including cost savings] AND 
YIELD PROFITS TO THE EMPLOYER, AS WELL AS 
PRODUCTIVITY GAINSHARING PROGRAM whereby the 
EMPLOYERS AND THE WORKERS SHARE IN THE 
RESULTS 
OF 
IMPROVEMENT 
IN 
PRODUCTIVITY 
[whereby the employees are granted salary bonuses 
proportionate to increase in current productivity over the 
average for the preceding three (3) consecutive years. The 
agreement shall be ratified by at least a majority of the 
employees who have rendered at least six (6) months of 
continuous service].” 
SEC. 4. 
Section 5 of R.A. 6971 is hereby amended to read as 
follows: 
“SEC. 5. Labor4Zanagement Committee - 
a. A business enterprise and/or its employees, through 
their authorized representatives, may initiate the 
formation of a labor-management committee OR ANY 
LABOR-MANAGEMENT MECHANISM that shall be 
composed of [an equal number of] representatives from 
the 
management 
and 
from 
the 
rank-and-file 
employees.[:] IN 
CASE THERE 
IS ALREADY 
AN 
EXISTING LABOR MECHANISM IN THE ENTERPRISE, 
SUCH MECHANISM MAY BE USED, PROVIDED THAT IT 
INCLUDES AS ONE 
OF ITS 
OBJECTIVES THE 
DEVELOPMENT 
AND 
IMPLEMENTATION 
OF 


PRODUCTIVITY INCENTIVES PROGRAM: Provided, [That 
both management and labor shall have equal voting 
rights: Provided, further,] That at the request of any 
party to the negotiation, the National Wages and 
Productivity 
Commission 
AND 
THE 
REGIONAL 
TRIPARTITE WAGES AND PRODUCTIVITY BOARDS 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. 
b. In 
business enterprises without 
duly recognized 
COLLECTIVE BARGAINING REPRESENTATIVES, [or 
certified labor organizations,] 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. 5. Section 6 of R.A. 6971 is hereby amended to read as 
follows: 
“SEC 6. Productivitg Incentives Pmgram - 
a. The productivity incentives program shall contain 
FLEXIBLE PROVISIONS for MEASURING PRODUCTIVITY 
CHANGES [the manner of sharing] and the factors in 
determining productivity bonuses AS WELL AS THE 
COVERAGE AND MANNER OF SHARING BONUSES [: 
Provided, That the Productivity bonuses granted to labor 
under this program shall not be less than half of the 
percentage increase in the productivity of the business 
enterprises]. 
b. Productivity agreements reached by the parties as 
provided in this Act MAY [shall] supplement existing 
collective bargaining agreements. 
c. If during the existence of the productivity incentives 
program or agreement, the employees will join or form a 
union, such program or agreement may, in addition to 
the terms and conditions agreed upon by labor and 
management, be integrated in the collective bargaining 
agreement that may be entered into between them. 
SEC. 6. Section 7 of R.A. 6971 is hereby amended to read as 
follows: 
a. Subject to the provisions of Section 6 hereof, a business 
enterprises which adopts a productivity incentives 
program, duly and mutually agreed upon by parties to 
the labor-management committee, shall be granted a 
special deduction from gross income equivalent to fifty 
percent (50%) of the total productivity bonuses given to 
employees under the PRODUCTIVITY 
INCENTIVES 
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 
SKILLS 


DEVELOPMENT 
ACTIVITIES 
UNDER 
THE 
PRODUCTIVITY INCENTIVE [a] program [prepared by the 
labor-management committee for the development of 
skills identified as necessary by the appropriate 
government agencies] shall also entitle the business 
enterprises to a special deduction from gross income 
equivalent to fifty percent (50%) of the total grants over 
and above the allowable ordinary and necessary business 
deductions for said grants under the National Internal 
Revenue Code, as amended. 
c. Any AGREEMENT [strike or lockout] arising from any 
violation of the productivity incentives program shall BE 
RESOLVED BY PARTIES INVOLVED. 
HOWEVER, IN 
CASES WHERE A THIRD PARTY IS NEEDED, THE 
COMMITTEE MAY SEEK THE ASSISTANCE OF THE 
TRIPARTITE WAGES 
AND 
PRODUCTIVITY 
BOARD 
(TWPB) WHICH WILL MEDIATE BETWEEN INVOLVED 
PARTIES TO ARRIVE AT AN AGREEMENT. THE TWFB 
WILL ACT ONLY AS AN ADVISORY BODY RENDERING 
INTERPRETATION AND CLARIFICATION TO HELP THE 
INVOLVED PARTIES TO ADOPT A FINAL RESOLUTION 
[suspend the effectivity thereof pending settlement of 
such strike or lockout]: 
Provided, That the business 
enterprise shall not be deemed to have forfeited tax 
incentives accrued prior to the date of occurrence of such 
DISAGREEMENT [strike or lockout,] and the workers 
shall not be required to reimburse the productivity 
bonuses already granted to them under the incentives 
program. Likewise, bonuses which have already accrued 
before the DISAGREEMENT [strike or lockout] shall be 
paid the workers within THE PERIOD OF six (6) months 
from their accrual. 
d. THE FREQUENCY OF PAYMENT OF PRODUCTIVITY 
BONUS SHALL BE THE RESULT OF THE STUDY MADE 
BY PARTIES CONCERNED [Bonuses provided €or under 
the productivity incentives program shall be given to the 
employees not later than every six (6) months from the 
starts of such program over and above existing bonus 
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. 
e. SUCH BONUSES PROVIDED TO THE EMPLYOEES 
SHALL BE TAX FREE [The special deductions from gross 
income provided for herein shall be allowed starting the 
next taxable year after the effectivity of this Act].” 
SEC. 9. Section 8 of R.A. 6971 is hereby amended to read as 
follows: 
“SEC. 8. Notification - A business enterprise which 
adopts a productivity incentives program shall submit copies 
of the same to the APPROPRIATE REGIONAL TRIPARTITE 
WAGES AND PRODUCTIVITY BOARD (RTWPB) OF THE 
National Wages and Productivity Commission (NWPC) and 
[to] the Bureau of Internal Revenue for their information and 
record.’ 


e 
Section 9 of R.A. 6971 is hereby amended to read as 
follows: 
“SEG. 9. ~ i s a ~ r e e ~ ~ ~ ~  
- [Disputes and Grievances] 
- Whenever DISAGREEMENT [disputes, grievances,] or other 
matters arise from the interpretation or implementation of 
the productivity incentives program, the [labor-management] 
committee CREATED TO ESTABLISH THE PRODUCTIVITY 
INCENTIVES 
PROGRAM 
shall 
meet 
to 
resolve 
the 
DISAGREEMENT [dispute, and]. THE COMMITTEE may 
REFER THE DISAGREEMENT OR DIFFERENCES TO THE 
REGIONAL TRIPARTITE WAGES 
AND 
PRODUCTIVITY 
BOARD 
(TWPB) WHICH 
WILL 
MEDIATE 
BETWEEN 
INVOLVED PARTIES TO ARRIVE AT AN AGREEMENT. THE 
TWPB 
WILL 
ACT 
ONLY 
AS 
AN 
ADVISORY 
BODY 
RENDERING INTERPELATION AND CLARIFICATION TO 
HELP THE INVOLVED PARTIES TO ADOPT A FINAL 
RESOLUTION [seek assistance of the National Conciliation 
and Mediation Board of the Department of Labor and 
Employment for such purpose. Any dispute which remains 
unresolved within twenty (20) days from the time of its 
subrnission to the labor-management committee shall be 
submitted for voluntary arbitration in line with the pertinent 
provisions of the Labor Code, as amended. 
The productivity incentives program shall include the 
name(s) of the voluntary arbitrator or panel voluntary 
arbitrators previously chosen and agreed upon by the labor- 
management committee] .” 
SEC. 9. Section 10 of R.A. 6971 is hereby amended to read, as 
follows: 
“SEC. 10. Rule Making Power - The Secretary of 
Labor and Employment and the Secretary of Finance, IN 
CONSULTATION WITH THE DEPARTMENT OF BUDGET 
AND MANAGEMENT, CIVIL SERVICE COMMISSION AND 
THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION, 
[after due notice and hearing], shall jointly promulgate and 
issue [within six (6) months from the effectivity of this Act] 
such rules and regulations as necessary to carry out the 
provisions OF THE ACT [hereofl,” 
SEG. 10. Section 2 to 9 of R.A. 6971 and all references thereto in 
said law are hereby repealed or modified accordingly. All other laws, 
rules, and regulations and/or parts thereof inconsistent with the 
provisions of this Act are hereby repealed or modified accordingly. 
SEC. 11. The Department of Labor and Employment is hereby 
directed to make the necessary amendments to the Implementing Rules 
and Regulations of R.A. 6971 in order to reflect the changes embodied in 
this Act. 


SEC. 12. 
If any part or section of this Act is declared 
untsonstitutional for any reason whatsoever, such declaration shall not in 
any way affect the other parts or sections of this Act. 
SEC. 13. This Act shall take effect fifteep (15) days after 
publication in two (2) newspapers of general circulation in the 
Philippines. 
Approved,