Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Thirteenth Congress
First Regular Session _

HOUSE BILLNo.__ 390

Introduced by Representative Roseller L. Barinaga

EXPLANATORY NOTE

This bill seeks to establish a Productivity and Performance Incentives and Gainsharing
Program, repealing for the purpose Republic Act No. 6971, otherwise known as the
“Productivity Incentives Act of 1990.”

As stipulated in R.A. No. 6971, 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, among others. It provides fiscal incentives to establishments
that voluntarily undertake productivity improvement programs and encourages sharing of
workers in the gains of improved productivity performance.

This law is widely seen as a good piece of social legislation which can effectively
contribute to the attainment of development for the country. However, it is widely igngyed by
target sectors because of its seemingly unrealistic provisions. It has been observed, for ine,
that since its effectivity in November 1990, only a handful of business enterprises have
manifested their interest to implement productivity improvement programs because of perceived
policy and operational difficulties.

In view of this, between 1992 and 1993, the National Wages and Productivity
Commission (NWPC) conducted a series of regional and sectoral evaluation of R.A. No. 6971
with the Regional Tripartite Wages and Productivity Boards, the Tripartite Peace Council and
productivity experts to identify the policy and operational constraints of the Act. The
consultations conclude that there is a need to liberalize the law to make it consistent with ifs
voluntary nature, and therefore, to make it more attractive to its.intended beneficiaries.

With the intention of legislating a more responsive productivity incentives program, this
bill is being proposed to introduce a new law that will improve upon R.A. No. 6971 by
eliminating the conditions that unduly limit or regulate the process of productivity improvement

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

.OSELLER L. BARINAG.


Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

Thirteenth Congress
First Regular Session

350

HOUSE BILL NO.

Introduced by Representative Roseller L. Barinaga

AN ACT.
ESTABLISHING A PRODUCTIVITY AND PERFORMANCE INCENTIVES
AND GAINSHARING PROGRAM, 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 “Productivity and
Performance Incentives and Gainsharing Act of 2004.”

SEC 2. Declaration of Policy. — \t is 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 ang
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 retums

on investment and to expansion and growth, and accordingly to provide corresponding

1


incentives to both labor and capital for undertaking voluntary programs that ensure
workers with a 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
workers and employees. ‘

SEC. 3. Coverage. — This Act shall apply to all business 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:

(@) “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 the 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 9 hereof.

(©) “Productivity and Performance Incentives 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
improvement program that will promote gainful employment, improve working
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. In case the joint labor-management committee makes fundamental changes in the
program, the employees shall likewise ratify such changes.

(@ — “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 gainsharing mechanisms
such as productivity bonus, performance bonus, production bonus, employee stock option
plan, among others.

SEC. 5. Labor-Management Committee. - (a) A business enterprise or its
employees, through their authorized representative, may initiate the formation of a labor-
management committee or any labor-management mechanism that shall be composed of
representatives from the management and from the rank-and-file employees which shall
establish and implement a productivity and performance incentives program 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 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. In case there is already an existing labor mechanism in the

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


objectives the development and implementation of a productivity and performance
incentives and gainsharing program.

(b) In business enterprises with duly recognized collective bargaining
representatives, the representatives of labor shall be those designated by the coilective
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. 6, Productivity and Performance Incentives and Gainsharing Program. -
(a) The productivity and performance incentives program shall contain provisions for
measuring productivity, performance and efficiency improvements, the gainsharing or
reward system adopted in sharing productivity bonuses, coverage, percentage sharing,
and forms of bonus payment in accordance with the terms and conditions that may be
agreed upon by 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.

(b) Productivity agreements voluntarily reached by the parties as provided in this
Act may supplement existing collective bargaining agreements.

SEC. 7, Benefits and Tax Incentives. ~ (a) Subject to the provisions of Section 6
hereof, a business enterprise which adopts a productivity and performance incentives and
gainsharing program, duly and mutually agreed upon by parties to the labor-management
committee, 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 productivity and performance incentives program shall also entitle
the business enterprise to a special deduction from gross income equivalent to fifty (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.

(©) Bonuses provided for under the productivity and performance incentives and
gainsharing program shall be given to the employees in a manner determined by the
parties from the start of such program over and above 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. 8. Notification. - A business enterprise which adopts a productivity and
performance incentives and gainsharing program 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. 9. Disputes and Grievances. - Whenever disputes, grievances, or other
matters arise from the interpretation or. implementation of the productivity and
performance incentives program, 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 productivity and performance incentives and gainsharing program shall
include the name(s) of the voluntary arbitrator or panel of voluntary arbitrators previously
chosen and agreed upon by the parties.

SEC. 10. Penalty. — Any person who shall make any fraudulent claim under this
Act, regardless of whether or not a tax benefit has been granted, shall upon conviction be
punished with imprisonment of not less than six (6) months but not more than one (1)
year or a fine of not less than two thousand pesos (P2,000.00) but not more than six
thousand pesos (P6,000.00), or both, at the discretion of the Court, without prejudice to

prosecution for any other acts punishable under existing laws.


In case of partnerships or corporations, the penalty shall be imposed upon the
officer(s) or employee(s) who knowingly approved, authorized or ratified the filing of the
fraudulent claim, and other persons responsible therefor.

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
Corrdinating Committee, Technical Education and Skills Development Authority, and
labor and employer sectors shall jointly promulgate and issue within six (6) months from
the effectivity of this Act such rules and regulations 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 productivity and
performance incentives ad gainsharing program.

SEC. 13. Separability Clause. - If 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. All 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,