Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress
First Regular Session

HOUSE BILL NO. 2439

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
PROVIDING PRODUCTIVITY IMPROVEMENT PROGRAMS
WITH FISCAL INCENTIVES

EXPLANATORY NOTE

Workers’ strong backs, and even strong creative minds hold the potential and
capability to make the economy stay afloat.

At present, workers and laborers desire for concrete policies that will address the best
interest, both from their side and their employer. It is important for the workers to ensure that
the excellent work they do for the progressive growth of the institution they work for, will
eventually become added fruits of their labor.

The passage of Republic Act No. 6971 twenty-nine years ago, known as the
“Productivity Incentives Act of 1990” promoted the productivity incentives program to ensure
that workers will have a greater share with the outstanding service they render. It is also enacted
to make it certain that business enterprises will uphold gainful employment, improve working
conditions and share the cost savings with the increased productivity of employees. However,
with more than 10 years of its implementation, only few business enterprises complied to its
provisions as it is hard to implement.

This Bill aims to grant an additional deduction from the gross income equivalent to
sixty-six percent (66%) 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. It also entitles 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. (see
table below)


Assuming Php 100.00 bonus achieves Php 100.00 net cost savings or Php 100.00 revenue
gain for same structure

Regular Additional

Deduction

0 100% 50% | 25%

Bonus Amount 100 100 100 100 | 100
Revenue Income/ 100 100 100 100 | 100
Cost Savings
Gross Revenues to 0 0 0 0 0
Firm
Additional Tax Shield 30 20 15 8
Cost to Government -30 -20 -15_ | -8

Assuming P100 bonus is just cost regardless of benefit

Additional
Regular Deduction
0 100% |ENGOYSN] 50% | 25%
Bonus Amount 100 100 100 100 100
No Revenue Income/ 0 0 0 0 0
Cost Savings
Gross Revenues to -100 -100 -100 -100 | -100
Firm
Share of Firm -70 40 50 55 63
Share of Government 30 60. 50 4S 38

This legislative initiative addresses the worker's rights to elevate, better their lives and
making it certain that businesses attain their vision with the harmonious relationship they
maintain with their employees. Granting Productivity Incentive Bonus is not solely for the
purpose of additional income but also an effective way to safeguard productivity of workers
that is, at the end of the day, beneficial to the business enterprise.

In view of the foregoing, the passage of this bill is earnestly sought

JOEY SARTE SALCEDA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress
First Regular Session

HOUSE BILL NO. 2439

Introduced by Representative JOEY SARTE SALCEDA

AN ACT
PROVIDING PRODUCTIVITY IMPROVEMENT PROGRAMS
WITH FISCAL INCENTIVES

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

SECTION 1. Declaration of Policy. — It is 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.

SEC. 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.

SEC. 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 refers to 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;

(c) 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

(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.

SEC. 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).

SEC. 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 expect advice to enable the
parties to comply with productivity agreements.

In business enterprises, without 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.

SEC. 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 company policy, contract or collective bargaining agreement (CBA)
providing higher productivity incentives.

SEC. 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 an additional deduction from the gross income equivalent to sixty-six percent (66%)
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 percenpt (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.


(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.

SEC. 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.

SEC. 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
accrues 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.

SEC. 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

SEC. 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


SEC. 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.

SEC. 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.

SEC. 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,