SEVENTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
SENATE 
S.B. No.
tSJfifp o( Ilif f  rti ftiup
T7 HAY-2 P2 52
P.ECLlViiU bV.
Introduced by Senator JOEL VILLANUEVA
AN ACT
ENHANCING WORKPLACE PRODUCTIVITY THROUGH 
PROMOTION OF PRODUCTIVITY INCENTIVES AND 
GAINSHARING, AMENDING FOR THE PURPOSE REPUBLIC 
ACT NO. 6971, OTHERWISE KNOWN AS 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.
Twenty-seven years after the passage of R.A. No. 6971, only a few 
enterprises, or 20,299 enterprises, as of 2013, have established productivity 
incentives program despite the fiscal incentives because of inflexible 
requirements on productivity measurement and sharing schemes.
The ability of the Philippines to compete in the world market depends 
on the ability of its enterprises, especially the MSMEs, which comprise 99% of 
the economy, to produce quality goods and services in the most efficient and 
reliable manner. The Philippines must address the productivity challenges that 
impede the growth of MSMEs, not only to realize its full potential but, more 
importantly, expand its production frontier to accelerate and deepen 
integration into local and global value chains, and accordingly, create more 
employment opportunities for Filipino workers as well as improve workers’ 
income. The productivity incentive is a form of compensation, on top of the 
basic salaries and wages, given to workers based on improvements in 
productivity and performance.


The bill encourages the development and 
implementation of 
productivity and/or performance incentive scheme by: (1) easing the 
requirements for enterprise’s productivity improvement and performance 
incentive programs to qualify for the fiscal incentive (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); (2) providing government 
services and technical assistance; (3) allowing workers and management to 
develop their own productivity incentive program, including parameters for 
measuring productivity improvement, determining savings and profits arising 
from productivity improvement and sharing productivity gains; and (4) tasking 
the National Wages and Productivity Commission (NWPC) as the lead agency 
in providing technical and consulting assistance especially to MSMEs in 
implementing productivity improvement programs.
In the light of the foregoing, approval of this bill is earnestly sought.
SENATOR JOEL VILLANUEVA


SEVENTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
SENATE
S.B. No. 
i 4 2 7
)
f 0 >i! 
g^ennlc
of t'lf
*17 HAY-2 P2S2
RECtlVtU BV;
Introduced by Senator JOEL VILLANUEVA
AN ACT
ENHANCING WORKPLACE PRODUCTIVITY THROUGH 
PROMOTION OF PRODUCTIVITY INCENTIVES AND GAINSHARING, 
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:
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SEC. 1. Section 2 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990" is hereby AMENDED to read as follows:
Section 2. Declaration of Policy. It is the declared policy of the State to: [
b e tw e e n -w o rk e rs -a n d -e m p lo y e rs ^ -re c o g n iz in g -th e -F fg h t^ f- la bor to-its-Jost 
s hare m the—fruits—o f-p ro d u ctio n —anct-the—rig h t-o L -b u sin e ss—e n te rp rise s—to
the workers in
the-fruits-oftheir-laboFT]
a) ENCOURAGE 
HIGHER LEVELS OF PRODUCTIVITY IN ALL 
INDUSTRIES SO THAT PHILIPPINE PRODUCTS AND SERVICES 
CAN COMPETE IN THE GLOBAL ECONOMY;
b) MAINTAIN INDUSTRIAL PEACE AND HARMONY AND PROMOTE 
THE 
PRINCIPLE 
OF 
PARTNERSHIP 
AND 
SHARED 
RESPONSIBILITY IN THE RELATIONS BETWEEN WORKERS AND


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EMPLOYERS, RECOGNIZING THE RIGHT OF LABOR TO ITS JUST 
SHARE IN THE FRUITS OF PRODUCTION AND THE RIGHT OF 
BUSINESS 
ENTERPRISES TO 
REASONABLE 
RETURNS ON 
INVESTMENTS FOR EXPANSION AND GROWTH; AND
c) PROVIDE INCENTIVES TO BOTH LABOR AND CAPITAL FOR 
UNDERTAKING PRODUCTIVITY IMPROVEMENT PROGRAMS AND 
GAINSHARING.
SEC. 2. Section 3 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990” is hereby AMENDED to read as follows;
Section 3. Coverage. This Act shall apply to all business enterprises with or 
without existing and duly recognized [oMjertifiedJabor^FgafiizatieBSHoeludmg 
government-own and controlled-corporations performing proprietary-functions. 
] collective bargaining representatives. It shall cover all PRIVATE SECTOR 
employees and 
workers 
[tf^uding—casuak— regular;—sepervisery—arni
reanagerial-----empleyees] 
REGARDLESS 
OF 
THEIR 
POSITION,
DESIGNATION OR STATUS AND IRRESPECTIVE OF THE MANNER BY 
WHICH WAGES ARE PAID.
SEC. 3. Section 4 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990” is hereby AMENDED to read as follows:
SEC. 4. Definition of Terms. As used in this Act;
a) "Business Enterprise" refers to a PRIVATE industrial, SERVICE, 
agricultural, or agro-industrial establishment engaged in production, 
manufacturing, processing, repacking, or assembly of goodsf^ncluding 
service-oriented-enterprises,—duly-oertified as such- by appropriate 
government-agencies].
b) [^^Labor-Management— Committee^ 
“PRODUCTIVITY 
INCENTIVE 
COMMITTEE” refers to a [negotiating] body in a business enterprise 
composed of representatives of labor and management created to 
establish a productivity incentives program, and to settle disputes
INTERPRETATION OR IMPLEMENTATION OF THE PROGRAM.
c) "Productivity Incentive Program" refers to a formal agreement 
established by tde-labor-managemenL-eommittee A PRODUCTIVITY 
INCENTIVE 
COMMITTEE 
OR 
ANY 
EXISTING 
LABOR 
MANAGEMENT MECHANISM containing a process that will promote 
gainful employment, improve working conditions and result in 
increased productivity, including cost savings rwhereby-the-empk>yees
years AND/OR HIGHER PROFITS 
months-of-continuous servicer


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d) “GAINSHARING” 
REFERS 
TO 
A 
PRODUCTIVITY-BASED 
INCENTIVE 
PAY 
FORMULATED 
TO 
COMPLEMENT 
THE 
PRODUCTIVITY INCENTIVE PROGRAM WHERE EMPLOYERS AND 
WORKERS SHARE IN THE POSITIVE RESULTS OF BUSINESS 
OPERATIONS BROUGHT ABOUT BY PRODUCTIVITY AND/OR 
PERFORMANCE IMPROVEMENT. THE GAINSHARING SYSTEM 
MAY TAKE THE FORM OF PROFIT SHARING OR OTHER FORMS 
SUCH AS, BUT NOT LIMITED TO, PRODUCTIVITY BONUS, 
PERFORMANCE BONUS, AND PRODUCTION BONUS.
SEC. 4. Section 5 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990” is hereby AMENDED to read as follows;
Section 5. 
L-abor-Manaoement______ PRODUCTIVITY______ INCENTIVE
COMMITTEE, -{a)] A business enterprise or its employees, through their 
authorized 
representatives, may initiate the formation of a 
[labof- 
management ] PRODUCTIVITY INCENTIVE COMMITTEE that shall 
be 
composed of an equal number of representatives from tbe management 
and from the [rank-and-ftle] employees [^-Provided,-That], Both management 
and [labor] employees shall have equal voting rights in the committee.[i
ion- , the
assistance,—and-expert-advice-to- enable the-parties-by-conclude-productivity 
agreements]
IN CASE THERE IS AN EXISTING LABOR MANAGEMENT MECHANISM IN 
THE 
ENTERPRISE 
SIMILAR 
TO 
A 
PRODUCTIVITY 
INCENTIVE 
COMMITTEE, SUCH MECHANISM MAY SUFFICE: PROVIDED, THAT ITS 
COMPOSITION, VOTING RIGHTS, AND THE MANNER BY WHICH THE 
LABOR-MANAGEMENT MECHANISM IS CREATED IS IN ACCORDANCE 
WITH THE PROVISIONS OF THIS SECTION. 
THE PRODUCTIVITY 
INCENTIVE COMMITTEE SHALL ESTABLISH AND 
IMPLEMENT A 
PRODUCTIVITY INCENTIVE PROGRAM AND SETTLE ISSUES ARISING 
FROM IT IN ACCORDANCE WITH SECTION 9.
AT THE REQUEST OF ANY PARTY, THE NATIONAL WAGES AND 
PRODUCTIVITY COMMISSION (NWPC) OR THE REGIONAL TRIPARTITE 
WAGES AND PRODUCTIVITY BOARDS (RTWPBS) MAY PROVIDE THE 
NECESSARY STUDIES, TECHNICAL INFORMATION AND ASSISTANCE, 
AND EXPERT ADVICE TO ENABLE THE PARTIES TO DEVELOP ITS 
PRODUCTIVITY INCENTIVE PROGRAM.
COLLECTIVE 
the
[b)H In business 
enterprises 
with duly 
recognized 
BARGAINING REPRESENTATIVES, [er 
representatives 
of labor shall be those designated by the collective 
bargaining agent(s) of the bargaining unit(s).
{g>—] In business enterprises without duly recognized COLLECTIVE 
BARGAINING REPRESENTATIVES [er-certified-tabor organizations]-, the 
representatives of labor shall be elected by at least a majority of all rank-


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and-file employees who have rendered at least six (6) months of continuous 
service.
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SEC. 5. Section 6 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990” is hereby AMENDED to read as follows:
Section 6. Productivity Incentives Program, fa)} 
The 
productivity
incentives program, DULY RATIFIED BY THE EMPLOYEES, shall 
provisions for the—manner
productivity—bonuses:—Provider^—That—the-produc4ivity- bonuses-granted-to 
labor—under-this—program-shall-no^be-less—than-half-of-the—percentage
OTHERS, COVERAGE 
THE PROGRAM;e^EASURES TO IMPROVE 
PRODUCTIVITY: 
PERFORMANCE 
INDICATORS 
AND 
TARGETS;
PRODUCTIVITY MEASUREMENT; FORM, AMOUNT AND FREQUENCY 
OF PAYMENT OF PRODUCTIVITY INCENTIVE/S, IN ACCORDANCE WITH 
THE TERMS AND CONDITIONS THAT MAY BE AGREED UPON BY BOTH 
LABOR AND MANAGEMENT.
{h)J Productivity agreements reached by the parties as provided in this Act 
ARE WITHOUT PREJUDICE TO ANY EXISTING COMPANY POLICY, 
PROGRAM, CONTRACT, AND/OR [shall-supplement existing ] collective 
bargaining agreements] (CBA) PROVIDING HIGHER PRODUCTIVITY 
INCENTIVES.
agreement
and-management, be integrated-in-the collective-bargaining-agreement that
SEC. 6. Section 7 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990" is hereby AMENDED to read as follows;
Section 7. Benefitsend Tax INCENTIVES.
a) Subject to the provisions of Section 6 [hereof], a business enterprise 
which adopts a productivity incentives program, duly and mutually 
agreed upon by parties to the [labor-management] Productivity 
Incentive Committee OR ANY LABOR MANAGEMENT MECHANISM, 
shall be granted a special deduction from 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 [manpewer] training and special studies given to rank-and- 
file employees pursuant to a program prepared by the [tabor by the 
labor-management-] PRODUCTIVITY INCENTIVE Committee UNDER 
THE PRODUCTIVITY INCENTIVE PROGRAM [for-the-development-ef 
skitls-ldentifled as necessary by the appropriate government-agencies]


rrr
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shall also entitle the business enterprise 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) [Aoy— strike— or— lockout— arising— from— any— violation— of— the 
productivity—incentives-program-shati—suspemAhe effectivity-thereof
-That—the
lockout,—and-the—workers-shall-not—be—required-to—reimburse—the 
productivity—bonuses—already—granted-to—them-under-the-incentive
thelr-acc-rual.] THE SPECIAL DEDUCTIONS FROM GROSS INCOME 
PROVIDED FOR HEREIN SHALL BE ALLOWED STARTING THE 
NEXT TAXABLE YEAR AFTER THE EFFECTIVITY OF THIS ACT.
be given-to-the-employees-nol later^than every stx-(6)-months-frorrr4he 
start-oFsuch-program-overr-and-above-existirrg-bonuses-granted-by4he
] PRIORITY TRAINING PROGRAMS AND SERVICES FROM DOLE 
AND OTHER GOVERNMENT AGENCIES SHALL BE GIVEN TO 
BUSINESS 
ESTABLISHMENTS 
ADOPTING 
PRODUCTIVITY 
INCENTIVE PROGRAMS.
e) Tbe—special— deductions—from—gross—income—provided-for—herein 
sbaH-be-allowed-startlng-the-next-taxabie-year-after-the-effectivity-of 
this— Act. 
MICRO, 
SMALL 
AND 
MEDIUM 
ENTERPRISES 
IMPLEMENTING PRODUCTIVITY INCENTIVES PROGRAM ARE 
ELIGIBLE 
TO 
JOIN 
THE 
PRODUCTIVITY 
OLYMPICS 
COMPETITION, WHERE REGIONAL AND NATIONAL WINNERS 
SHALL BE AWARDED CASH AND NON-CASH INCENTIVES, 
PURSUANT TO THE MECHANICS OF THE 
PRODUCTIVITY 
OLYMPICS OF THE NATIONAL WAGES AND PRODUCTIVITY 
COMMISSION.
SEC. 7. Section 8 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990" is hereby AMENDED to read as follows:
Section 8. Notification. 
A business enterprise which adopts a productivity 
incentive program shall submit copies of the same to the National Wages and 
Productivity-Commission APPROPRIATE REGIONAL TRIPARTITE WAGES 
AND PRODUCTIVITY BOARD (RTWPB) and to the Bureau of Internal 
Revenue for their information and records.
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SEC. 8. Section 9 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990” is hereby AMENDED to read as follows:
Section 9. Disputes ISSUES and Grievances. Whenever disputes ISSUES, 
grievances, or other matters arise from the interpretation or implementation 
of 
the 
productivity 
incentives 
program, 
the [iaber—rnanagement] 
PRODUCTIVITY 
INCENTIVE 
COMMITTEE shall meet to resolve the 
dispute, ISSUE within fifteen (15) days from receipt of a formal complaint.
dispute~whtch remains-unresoived-within-twenty^20)^ays—from the time-of 
its-submission -to—the labor-management-cemmittee-shali-be-submitted-foF 
voiuetary-arbitration-in-iine-with-the-pertinent-provisions-Gf-tbe-tabos-GodeT 
as amended.] THE PARTIES SHALL AGREE ON WHETHER OR NOT TO 
SUSPEND THE IMPLEMENTATION OF THE PRODUCTIVITY INCENTIVE 
PROGRAM PENDING THE RESOLUTION OF THE ISSUE. 
PROVIDED, 
THAT THE BUSINESS ENTERPRISE SHALL NOT BE DEEMED TO HAVE 
FORFEITED ANY TAX INCENTIVES ACCRUED PRIOR TO THE DATE OF 
OCCURRENCE OF SUCH ISSUE OR GRIEVANCE, AND THE WORKERS 
SHALL NOT BE REQUIRED TO REIMBURSE THE PRODUCTIVITY 
INCENTIVES ALREADY GRANTED TO THEM UNDER THE INCENTIVE 
PROGRAM. LIKEWISE, BONUSES THAT HAVE ALREADY ACCRUED 
BEFORE THE ISSUE OR GRIEVANCE OCCURRED SHALL BE PAID TO 
THE WORKERS WITHIN SIX (6) MONTHS FROM THEIR ACCRUAL. ANY 
ISSUE WHICH REMAINS UNRESOLVED WITHIN THIRTY (30) DAYS 
FROM THE TIME OF ITS SUBMISSION TO THE PRODUCTIVITY 
INCENTIVE COMMITTEE SHALL BE SUBMITTED FOR VOLUNTARY 
ARBITRATION PURSUANT TO THE PERTINENT PROVISIONS OF THE 
LABOR CODE OF THE PHILIPPINES, AS AMENDED.
ef—the
SEC. 9. Section 10 of Republic Act No. 6971, otherwise known as the “Productivity 
Incentives Act of 1990" is hereby REPEALED.
SEC. 10. Rule—Makinq—Power. The Secretary of Labot^nd—Employment
-notice-and-hearingr-shall-iointly
SEC. 10. A new Section 10 of Republic Act No. 6971, otherwise known as the 
“Productivity Incentives Act of 1990" is hereby PROVIDED to read as follows:
Section 10. 
ROLE OF NWPC. - THE NWPC SHALL BE THE LEAD 
GOVERNMENT AGENCY RESPONSIBLE FOR PROVIDING TECHNICAL 
AND CONSULTING ASSISTANCE ESPECIALLY TO MICRO, SMALL AND 
MEDIUM ENTERPRISES (MSMEs) IN IMPLEMENTING PRODUCTIVITY 
IMPROVEMENT PROGRAMS. 
THE NWPC SHALL DEVELOP AND
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ADMINISTER AN ACCREDITATION PROGRAM TO TAP AND ORGANIZE A 
POOL OF LOCAL PRODUCTIVITY AND QUALITY PRACTITIONERS AND 
EXPERTS, 
WHO 
CAN 
ASSIST 
IN 
PROMOTING 
PRODUCTIVITY 
IMPROVEMENT AND GAINSHARING AMONG ESTABLISHMENTS IN THE 
PRIVATE SECTOR.
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SEC. 11. Implementing Rules and Regulations. - The Secretary of Labor and 
Employment and the Secretary of Finance, in consultation with the NWPC, National 
Conciliation and Mediation Board (NCMB), Bureau of Internal Revenue (BIR), Center 
for Industrial Competitiveness (CIC), Technical Education and Skills Development 
Authority (TESDA) labor organizations and employer organizations 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 of this Act.
SEC. 12. Non-Diminution of Benefits. - Nothing in this Act shall be construed to 
diminish or reduce any benefit 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. 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 amended. All laws, decrees, executive 
orders, issuances, 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 a newspaper of general circulation.
Approved,