Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session
3952

House Bill No.

Introduced by Representative Juan Miguel Macapagal Arroyo

AN ACT ESTABLISHING A PRODUCTIVITY IMPROVEMENT PROGRAM,
REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 6971, OTHERWISE
KNOWN AS THE “PRODUCTIVITY INCENTIVES ACT OF 1990"

EXPLANATORY NOTE

Presently, labor and management relations are characterized as
confrontational when discussing and settling basic and significant issues
affecting wages, benefits and conditions of work. As a result, the productivity

expected both from labor and management suffers thereby lessening their ability
to compete and survive as one entity.

Itis idealas itis realistic that the success of any business enterprise largely

depends on the atmosphere and cooperation of labor with management and vice
versa

This bill, granting productivity incentives to laborers in the private sector, is
a recognition of their indispensable contribution to the success of the business
enterprise. It likewise seeks to promote and provide measures for the mutual
benefit and industrial harmony between laborand management.

Through this legislative initiative, the worker's rights to uplift and improve
their lives as well as the management's rights to a reasonable return on their
investments are satisfied through their cooperative endeavors.

The granting of Productivity Incentive Bonus for labor will not only serve as
additional income but will work as an incentive for greater productivity. This
increased productivity will definitely benefit the business enterprise

It is in this light that the approval of this measure is eamestly requested.
Z
P
Of ARROYO
nd District Pampanga

Mf,

Representative \A


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill Nod 952

Introduced by Representative Juan Miguel Macapagal Arroyo

AN ACT ESTABLISHING A PRODUCTIVITY IMPROVEMENT
PROGRAM, REPEALING FOR THE PURPOSE REPUBLICACT
NO. 6971, OTHERWISE KNOWN AS THE "PRODUCTIVITY
INCENTIVES ACT OF 1990”

Be it enacted by the Senate and the House of Representatives of the Philippines
in Congress assembled:

Section 1. Declaration of Policy - Itis 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

(c) 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:

a. 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


refersto a service-oriented enterprise;

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 costsavings; and

d. Gainsharing refers to a productivity-based incentive 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 Sharing Scheme. - 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 implementa
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 unit (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 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 policy, contract or collective bargaining
agreement (CBA) providing higher productivity incentives.

Section 7. Incentives. - (a) 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 in accordance with 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.

(d) 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 Internal 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
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.