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

SEVENTEENTH CONGRESS
Third Regular Session

8570

House Bill No.

Introduced by DIWA Party-list Representative Pepito M. Pico

EXPLANATORY NOTE

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

Article XIII, Section 3 (Social Justice and Human Rights) of the Constitution provides
that the State shall regulate the relations between workers and employers, recognizing the right
of labor to just share in the fruits of production and the right of enterprises to reasonable return
on investments and to expansion and growth.

R.A. No. 6971, in tum, states that it is the policy of the State to encourage higher levels
of productivity, maintain industrial peace, and promote the principle of shared responsibility
in employer-employee relationship. It provides fiscal incentives to establishments that
voluntarily undertake productivity improvement programs, and encourages sharing the gains
of improved productivity performance with workers.

While R.A. No. 6971 is seen as a good piece of social legislation which can effectively
contribute to the attainment of economic development for the country, it is widely ignored by
target sectors because of its seemingly unattractive provisions. It has been observed, for
instance, that since its effectivity in November 1990, only a handful of business enterprises
have adopted and implemented productivity improvement programs because of perceived
policy and operational difficulties.

The National Wages and Productivity Commission regularly conducts regional and
sectoral consultations and evaluations on wages and productivity. The result of the
consultations shows the need to liberalize the law to make it more attractive to its intended
beneficiaries and to attain its intended purpose.

Adoption of productivity programs will result not only in increased incomes for both
the workers and the establishments. It will likewise make the Filipino workforce more

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competitive in intemational trade, thereby contributing to poverty reduction through job
generation.

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

PERITO M. PICO
Representative, DIWA Party-list

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

SEVENTEENTH CONGRESS
Third Regular Session

House Bill No, 8970

Introduced by DIWA Party-list Representative Pepito M. Pico

AN ACT ESTABLISHING A PRODUCTIVITY IMPROVEMENT 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. Declaration of Policy. — It is the declared policy of the State to:

(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 principles of partnership
and shared responsibility in the relations between workers and 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

(©)Provide corresponding incentives to both labor and capital for undertaking voluntary
programs to improve productivity.

SECTION 2. Coverage. — This Act shall apply to all business enterprises with or
without existing and duly recognized collective bargaining representatives. It shall cover all
private sector employees and workers regardless of their position, designation or status and
irrespective of the manner by which their wages are paid.

SECTION 3. Definition of Terms. — As used in this Act:
(@) Business Enterprise refers to a private industrial, agricultural or agro-industrial

establishment engaged in the production, manufacturing, processing, repacking,
or assembly of goods. It also refers to a service-oriented enterprise;

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(b) Productivity Incentives 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 issues arising from the
interpretation or implementation of the said program;

(©) Productivity Incentives Program refers to a formal agreement voluntarily
established by a productivity incentives committee or to any existing labor
management mechanism containing a productivity incentives program that will
promote gainful employment, improve working relations and conditions, and result
in increased productivity and efficiency, including cost savings; and

(@) Gainsharing refers to a productivity-based incentives pay formulated to
complement the productivity incentives program where workers and employers
share in the positive results of business operations brought about by productivity
improvements, The gainsharing system may take the form of profit sharing or
other forms of gainsharing mechanisms such as productivity bonus, performance
bonus, production bonus, and other similar schemes.

SECTION 4. Advisory on Productivity Incentives Schemes. — The Regional
Tripartite Wages and Productivity Boards (RTWPBs) shall issue an advisory on productivity
incentive schemes based on the guidelines issued by the National Wages and Productivity
Commission (NWPC).

SECTION 5. Productivity Incentives Committee. — A business enterprise or its
employees, through their authorized representatives, may initiate the formation of a
productivity incentives committee that shall be composed of an equal number of
representatives from the workers and from the management. Both workers and management
shall have equal voting rights in the committee. In case there is an existing labor-
management mechanism in the enterprise similar to a productivity incentives committee, the
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 incentives committee shall establish and implement a
productivity incentives program and settle issues arising from it in accordance with Section 9
of this Act.

At the request of any party to the negotiation, the NWPC or the RTWPBs may provide
the necessary studies, technical information and assistance, and expert advice to enable the
parties to comply with productivity agreements.

In business enterprises with duly recognized collective bargaining representatives, the
representatives of labor shall be those designated by the collective bargaining agent(s) of the
bargaining units(s).

In business enterprises without duly recognized 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.

SECTION 6. Productivity Incentives Program. - The productivity incentives
program, duly ratified by the employees, shall contain, among others, provisions for
measuring productivity and efficiency improvements, sharing of productivity bonuses,
coverage, percentage sharing, forms of bonus payment, and manner and frequency of

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distribution, in accordance with the terms and conditions that may be agreed upon by both
labor and management.

Productivity agreements voluntarily reached by the parties as provided in this Act are
without prejudice to any company policy, contract or collective bargaining agreement (CBA)
providing higher productivity incentives.

SECTION 7. Incentives. —

(@) Subject to the provisions of Section 6 of this Act, a business enterprise which adopts
a productivity incentives program, duly and mutually agreed upon by parties to the
productivity incentives committee or any labor-management mechanism, 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 of 1997, 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 productivity
incentives committee under the productivity incentives program, 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 under the National Internal Revenue Code of
1997, as amended.

(c)The special deductions from gross income provided for herein shall be allowed
starting the next taxable year after the effectivity of this Act.

(Priority training programs and services from the Department of Labor and
Employment (DOLE) and other partner government agencies shall be given to
business establishments adopting productivity incentives programs.

SECTION 8. Notification. - A business enterprise which adopts a
productivity incentive program shall submit copies of the same to the appropriate
RTWPB and to the Bureau of Intemal Revenue (BIR) for their information and records.

SECTION 9. Issues and Grievances. — Whenever issues, grievances, or other
matters arise from the interpretation or implementation of the productivity incentives program,
the productivity incentives committee shall meet to resolve the issue within fifteen (15) days
from receipt of a formal complaint, The parties shall agree on whether or not to suspend
the implementation of the productivity incentives 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 bonuses already granted to them under the
productivity incentives program. Likewise, bonuses that have already accrued before the
issue or grievance 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 incentives committee shall be submitted for voluntary arbitration in line with the
pertinent provisions of the Labor Code, as amended.

SECTION 10. Non-diminution of Benefits. — Nothing in this Act shall be construed

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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.

SECTION 11. Implementing Rules and Regulations. - The Secretary of Labor
and Employment and the Secretary of Finance, in consultation with the NWPC, the National
Conciliation and Mediation Board (NCMB), the BIR, the Center for Industrial
Competitiveness (CIC), the 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.

The DOLE, the Department of Trade and Industry (DTI), and the designated national
productivity organization in the Philippines shall conduct an extensive public information
campaign to promote the adoption of productivity incentives programs at the workplace.

SECTION 12. Separability Clause. — If any provision of this Act is declared
unconstitutional, the same shall not affect the validity and effectivity of the other provisions
hereof.

SECTION 13. Repealing Clause. Republic Act No. 6971, otherwise known as the
“Productivity Incentives Act of 1990”, is hereby repealed. 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.

SECTION 14, Effectivity. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,

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