SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
Senate Bill No. 16 62 
) 
) 
) 
·13 
SEP 16 P 3 :09 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
Section 3, Art. IX-B of the 1987 Constitution states: 
"The Civil Service Commission, as the central personnel 
agency of the Government, shall establish a career service and 
adopt measures to promote morale, efficiency, integrity, 
responsiveness, progressiveness, and courlesy in the civil 
service. 
It shal/ strengthen the merit and rewards systems, 
integrate al/ human resources development program for al/ 
levels and ranks, and institutionalize a management climate 
conducive to public accountability. " X x x 
This bill seeks to strengthen the enforcement of this constitutional 
mandate by establishing a mechanism for reward and incentive pay for all 
officials and employees in the government. 
Through this bill low salaries of 
government employees would be augmented by means of a reward and 
incentive pay scheme. Under the proposed incentive pay scheme, a portion of 
the revenue collection in excess of the target for the year by a revenue-
generating government agency will be allocated or reserved for distribution to all 
government employees employed in revenue and non-revenue generating 
government instrumentalities. In all cases, the reward and incentive pay will be 
based on the performance and productivity standard set by the Civil Service 
Commission on Audit, and the Department of Finance, in coordination with the 
Departments, instrumentalities, agencies, boards or commissions concerned. 
To illustrate, if the Bureau of Customs exceeds its collection target for the 
year by P3.0 billion, forty percent (40%) of this amount or P1.2 billion will be set 
aside as a Special Fund. Of the latter amount fifty percent (50%) or P600 million 
will be distributed to all the Bureau's employees in a manner to be determined by 
the Department of Finance and the Bureau, in coordination with the Civil Service 
Commission on Audit, and the Department of Finance, in coordination with the 
Departments, instrumentalities, agencies, boards or commissions concerned. 
The proposed 
measure was 
previously filed 
in 
the 
House of 
Representatives by more than one hundred seventy (170) members led by 
Congressman Miguel Romero. 
This Bill was conceptualized during one of the executive training 
workshops for House Members conducted by the Dean Gaston Z. Ortigas of the 
Asian Institute of Management (AIM) in the previous years. 


Former Civil Service Chairman Patricia Sto. Tomas stated in an 
endorsement letter that "The proposed measure is a concrete translation of the 
rewards an incentives principle". 
Likewise, Former Labor Secretary Ruben D. Torres, through his Office 
stated that "This Bill an opportune answer to the need of a more responsive 
mechanism that would promote morale, efficiency, integrity, responsiveness, 
progressiveness and courtesy in the civil service. We fully support the idea to 
establish a mechanism for incentive pay for all employees and officials in the 
government-owned or controlled corporations with original charters based on 
productivity and performance. 
The approval of this bill is earnestly requested. 
OY EJERCITO ESTRADA 
Senator 


SIXTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
Senate Bill No. 16 {) 2 
) 
) 
) 
'13 
SEP 16 P 3 :09 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
INSTITUTING AN INCENTIVE PAY SYSTEM, BASED ON PRODUCTIVITY 
AND PERFORMANCE, FOR ALL OFFICIALS AND EMPLOYEES OF THE 
GOVERNMENT, AND FOR OTHER PURPOSES 
Be it enacted by the SeQate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Title. The Act shall known and referred to as "Kaunlaran 
ng Bayan". 
SEC. 2. 
Declaration of Poiicy. 
It is declared policy of the State to 
promote the morale, efficiency, integrity, responsiveness, progressiveness, and 
courtesy in the Civil Service. Towards this end, the State shall institute an 
incentive mechanism based on productivity and performance. 
SEC. 3. Incentive Pay Based on Productivity and Performance. The 
provision of any law to the contrary notwithstanding, an incentive pay system, 
based on productivity and performance, shall be instituted in the government 
service. The incentive pay system under this Act shall be disbursed annually 
based on the accepted standards of productiVity and performance as prescribed 
by the Civil Service Commission, Commission on Audit, Department of Finance, 
and the departments, instrumentalities, agencies, boards, and commissions 
concerned. 
The special fund for this pay scheme shall be derived from forty per 
centum (40%) of any sum beyond the amount or level of revenue target during 
the year by the government office which shall be prescribed by a committee 
composed of Secretary of Finance, the Secretary of Budget and Management, 
and the Director-General of the National Economic Development Authority: 
Provided, that Fifty per centum (50%) of the Special Fund shall be disbursed to 
the officials and employees of the government office which generated the said 
amount in a manner to be determined by the departments, instrumentalities, 
agencies, boards and commissions concerned, in accordance with the rules and 
regulations of the Civil Service Commission, the Commission on Audit, and the 
Department of Finance, taking into account the productivity and performance, as 
well as the salary level, of the said officials and employees, and the balance shall 
be entrusted to the Department of Budget and Management for eventual 
distribution to departments, instrumentalities, agencies, boards and commissions 


which are non-revenue generating in the same manner and considering the 
same factors: Provided, that the incentive pay shall be distributed in cash, within 
thirty (30) days after December 31 of each year" 
Provided, further, That this 
incentive pay scheme shall not apply to the President, Vice President, members 
of the Cabinet rank, and members of the Congress. 
SEC. 4. No Diminution of Benefits. The application of the reward and 
incentive pay under this Act shall be in addition to all benefits already enjoyed by 
officials and employees under other Laws. The pay contemplated herein shall 
not result in any diminution of the benefits of employee and officials upon 
effectivity of th is Act. 
SEC. 5. Rules and Regulations. The Department of Finance, the 
Department of Budget and Management, the Civil Service Commission and the 
Commission on Audit shall promulgate rules and regulations necessary to carry 
out the purpose of this Act. 
SEC. 6. 
Repealing Clause. The provIsIon of any law executive or 
administrative order, rules and regulations or parts thereof, inconsistent with this 
Act are hereby repealed or modified accordingly. 
SEC. 7.' Effectivity Clause. 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,