NINETEENTH CONGRESS OF THE 
REPUBUC OF THE PHILIPPINES 
First Regular Session
)
SENATE 
S. No. 2132
of til? ,%ra etai7
23 MAY-4 P6 33
RCCEIVEO BV:
Introduced by Senator Loren Legarda
AN ACT
PROMOTING INCLUSIVE AND SUSTAINABLE PRODUCTIVITY GROWTH, 
REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 6971, OTHERWISE 
KNOWN AS THE PRODUCTIVITY INCENTIVES ACT OF 1990
EXPLANATORY NOTE
Section 3 of Article XIII of the 1987 Philippine Constitution provides, in part, that 
the State shaU promote the principle of shared responsibility between workers and 
employers. Further, the State shall regulate the relations between workers and employers, 
recognizing the right of labor to its just share in the fruits of production.
With this in mind. Congress passed Republic Act No. 6971 or the Productivity 
Incentives Act of 1990 with the aim to encourage higher levels of productivity, maintain 
industrial peace and harmony and promote the principle of shared responsibility in the 
relations between workers and employers. However, it has been more than thirty (30) 
years since the passage of this law. Therefore, a more responsive law is needed to ensure 
that the law can adapt to the current situations prevailing in the labor and employment 
market.
This biU seeks to encourage higher levels of productivity in all industries by 
providing for: (i) productivity improvement program; (ii) productivity incentives 
committee; (iii) productivity incentives program; and (iv) tax deduction, among others.
In view of the foregoing, approval of this measure is earnestly sought.
EN LEGARDA


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'<^f^0iUcp of tl)i' ^r:i-eiar2>
NINETEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
)
First Regular Session 
)
SENATE
s. No. 2132
23 MAY-4 P6 33
RECEIVED Bv;
Introduced by Senator Loren B. Legarda
Act"
AN ACT
PROMOTING INCLUSIVE AND SUSTAINABLE PRODUCTIVITY GROWTH, 
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. Short Title. - This Act shall be known as the "Enterprise Productivity
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to:
(a) Encourage higher levels of productivity in aU industries to enable 
enterprises to compete globally;
(b) Promote gainful employment, improve working conditions, maintain 
industrial peace and harmony and promote the principle of partnership and 
shared responsibility in the relations between workers and employers so as 
to strengthen the cooperation between employees and 
management/employers, recognizing the right of labor to its just share in 
the fruits of production and the right of business enterprises to reasonable 
returns of investments and for expansion and growth; and
(c) Provide corresponding incentives to both labor and management for 
imdertaking productivity improvement programs and gainsharing to 
ensure just share by the workers in the fruits of their labor in relation to the 
profit yielded to the employer as a result of increased productivity and thus 
enhance the improvement of the quality of hfe of the employees.


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Sec. 3. Coverage, - This Act shall apply to all business enterprises with or
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without existing and duly recognized collective bargaining agreements. It shall cover
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all employees and workers regardless of their position, designation, or status, and the
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manner by which their wages are paid.
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Sec. 4. Definition of Terms. - As used in this Act:
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(a) Business enterprise refers to an entity duly incorporated, organized, or
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registered pursuant to the prevailing applicable laws, rules and regulations;
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(b) Productivity improvement program refers to a set of actions identifying and
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addressing productivity problem areas formulated by the productivity
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incentives committee using either a principle, tool, technique, method,
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practice, guideline, model or approach towards productivity improvement
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in people, inputs or technologies, products or services, policies, and process.
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It shall contain, among others, a productivity tool or technique, benchmarks
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and measurement of productivity, or efficiency improvements;
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(c) Productivity incentives committee refers to a body in a business enterprise
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composed of representatives of management/employers and employees
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created to formulate and implement the productivity incentives program,
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and to settle issues arising from the interpretation or implementation of the
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said program; and
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(d) Productivity incentives program refers to a formal agreement formulated by
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the productivity incentives committee, containing a productivity
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improvement program and provisions on its coverage, schemes on the
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sharing of the gains, or savings realized therefrom, and the forms, manner,
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and frequency of payment or distribution of such incentives.
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Sec. 5. Productivity Incentives Committee. - Business enterprises employing ten
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(10) or more persons shall establish a productivity incentives committee, hereinafter
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referred to as the Committee, composed of representatives of
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management/employers and employees.
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(a) In business enterprises with legitimate labor organization or workers'
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association, the employee representatives shall be those designated in the
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collective bargaining agreement or by the said organization or association.


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(b) In business enterprises with Labor-Management Councils or Labor-
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Management Committee, it shall be a subcommittee thereof.
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(c) In business enterprises without legitimate labor organization or workers'
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association, the employee representatives shall be those designated by at
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least a majority of all rank-and-file employees.
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Sec. 6. Incentives Program. - The Committee shall develop the productivity
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incentives program. Whenever gains or savings are reaHzed from the implementation
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of the productivity improvement program, the management shall initiate the
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discussion on the sharing thereof.
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Productivity incentives program as provided in this Act shall be based on the
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implemented productivity improvement program, and without prejudice to any
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company policy, program, contract, or collective bargaining agreement providing for
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higher productivity incentives.
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Sec. 7. Tax Deductions. - Private establishments may avail of the following tax
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deductions:
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(a) Subject to the provisions of Section 6, a business enterprise that adopts a
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productivity incentives program duly and mutually agreed upon by the
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employers and employees' representatives, shall be granted a special
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deduction from gross income equivalent to fifty percent (50%) of the total
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productivity incentives given to employees under the productivity
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incentives program, over and above the deductions for total allowable
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ordinary, and necessary trade, business, or professional expenses under the
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National Internal Revenue Code of 1997, as amended, and other prevailing
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laws, rules and regulations.
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(b) A business enterprise shall be granted a special deduction from gross
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income equivalent to fifty percent (50%) of the total grants for training and
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special studies given to employees pursuant to the productivity incentives
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program prepared by the Committee, over and above the deductions for
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total allowable ordinary and necessary trade, business, or professional
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expenses under the National Internal Revenue Code of 1997, as amended,
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and other prevailing laws, rules and regulations.


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Provided, a business enterprise shall submit a copy of its productivity incentives
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progrcun and other required documents to the concerned revenue district office
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of the Bureau of Internal Revenue to avail of the corresponding benefits and
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tax deductions provided in this Act; Provided, further, a business enterprise shall
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be entitled to the aforementioned tax deductions starting the next taxable year
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following the effectivity of this Act.
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Sec. 8. Availment of Tax Deductions. - The Bureau of Internal Revenue shall
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establish a system for availing of tax deductions. It shall maintain and furnish the
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National Wages and Productivity Commission (NWPC) with an annual record of
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business enterprises that avail of tax deductions imder this Act for program
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monitoring.
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Sec. 9. Productivity Advisories. - The Regional Tripartite Wages and Productivity
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Board (RTWPB) shall issue advisories on productivity improvement programs and
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schemes, and relative thereto, shall provide training and technical assistance to
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enterprises.
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Sec. 10. Issues and Grievances. - Whenever issues, grievances, or other matters
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arise from the interpretation or implementation of the productivity incentives
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program, the Committee shall meet to resolve the same within fifteen (15) days from
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receipt of a formal complaint from any aggrieved party, subject to the following
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conditions:
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(a) Parties may agree on whether or not to suspend the implementation of the
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productivity incentives program, pending the resolution of the complaint;
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(b) Business enterprises shall not be deemed to have forfeited any tax
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incentives accrued prior to the said complaint, and the employees and
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workers shall not be required to reimburse the productivity incentives
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already granted;
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(c) Likewise, productivity incentives that have already accrued prior to the
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said complaint, shall be paid to the entitled employees and workers within
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six (6) months from the date of accrual of the same; and
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(d) Any complaint which remains unresolved within thirty (30) days from the
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time of receipt of complaint shall be referred by the Committee to voluntary


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arbitration pursuant to prevailing laws, rules, and regulations on the 
matter.
Sec. 11. Loan Availment - AU banking institutions shall provide a loan facility 
or extend a credit window to micro, small and medium enterprises (MSMEs) that 
implement a productivity improvement program, at an interest rate lower than the 
prevailing market rate.
Sec. 12. Submission of Productivity Incentives Program. - A business enterprise 
that implements a productivity incentives program shall submit a copy of the same to 
the RTWPB for their information, record, and appropriate technical assistance.
Sec. 13, National Innovation Council. - The National Innovation Council, created 
under Republic Act No. 11293, otherwise known as the "Philippine Innovation Act" 
shall have as one of its overriding goals the attainment of high and rising levels of 
productivity. Hence, its National Innovation Agenda and Strategy Document shall 
mainstream strategic actions in support of national development plans to improve the 
country's overall productivity performance.
Sec. 14. Technical Assistance. - Any member of the Committee may request 
technical assistance from the following agencies in developing and implementing 
productivity improvement progi*ams:
(a) The Department of Agriculture for agricultural extension or agricultural 
advisory services on current technologies and systems;
(b) The Department of Budget and Management (DBM) - Systems and 
Productivity Improvement Bureau for implementing a government quahty 
management program;
(c) The Department of Environment and Natural Resources shall encourage 
and promote the use of technology and science to create products and 
services that are environmentally-friendly;
(d) The Department of Trade and Industry (DTI) - Biureau of Small and Medium 
Enterprise Development shall extend assistance in the effective marketing 
of products and services of MSMEs;
(e) The DTI - Competitiveness Bureau shall promote and provide counseling 
services on business operations to enhance productivity growth and 
competitiveness of companies and enterprises;


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(f) The Department of Science and Technology shall provide and promote
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technology acquisition and use to improve the operational growth of
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companies and enterprises;
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(g) The Department of Tourism shall promote and encourage tourism quality
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standards accreditation, and the development of the tourism value chain;
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(h) The Development Academy of the Philippines (DAP) shall conduct free
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enterprise-appropriate training that will provide the necessary productivity
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tools and advice on the technologies to enhance enterprise operations and
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achieve their productivity goals;
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(i) The NWPC and RTWPB shall provide training and technical assistance on
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productivity improvement and performance incentives schemes to
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companies and enterprises;
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(j) The Teclmical Education and Skills Development Authority shall provide
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and promote skills training, assessment, and certification; and
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(k) The University of the Philippines - Institute for Small Scale Industries shall
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offer teclmical assistance to small scale industries.
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Provided, that any member of the Committee may also seek assistance from
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other government agencies or private institutions in the development and
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implementation of their productivity improvement and gainsharing programs.
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Sec. 15. Accreditation of Productivity Experts. - The NWPC shall establish an
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accreditation system for productivity experts who shall provide productivity-related
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services to enterprises. The NWPC may charge an accreditation fee of not more than
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Five Thousand Pesos (P5,000.00), which amount may be adjusted by the NWPC as it
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may deem necessary. The NWPC shall be allowed to utilize fifty percent (50%) of the
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collected accreditation fees for the administration and management of the
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accreditation system.
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An initial seed fund of Fifty Million Pesos (P50,000,000.00) shall be drawn from
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the innovation fund under R.A. No. 11293, or the "Philippine Innovation Act."
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Sec. 16. Assistance to Micro Enterprises. - The NWPC shall develop guidelines in
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the engagement of productivity experts who shall provide technical assistance to
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micro enterprises. Relative to this, accredited productivity experts shall be entitled to
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receive an honorarium pursuant to DBM's rules and regulations.


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The DAP shall regularly conduct trainings, free of charge, to enhance the 
capabilities of the pool of productivity experts on advanced productivity technologies 
and systems.
Sec. 17. Strengthening Workplace Bipartite Mechanism. - The Department of Labor 
and Employment (DOLE) shall formulate a program, in consultation with employer 
and labor groups, to strengthen the bipartite mechanism especially in the area of 
bargaining on productivity schemes and standards.
Sec. 18. Penalty. - Any person who shall make any fraudulent claim under this 
Act, regardless of whether or not a tax benefit has been granted, shall, upon 
conviction, be punished with imprisonment of not less than six (6) months but not 
more than one (1) year, or a fine of not less than Twenty Thousand Pesos (P20,000.00) 
but not more than Fifty Thousand Pesos (P50,000.00), or both, at the discretion of the 
Court, without prejudice to prosecution for any other acts punishable under existing 
laws.
In the case of partnerships or corporations, the penalty shall be imposed upon 
the officers, employees, and other persons responsible who knowingly approved, 
authorized, or ratified the filing of a fraudulent claim.
Sec. 19. Non-Diminution of Benefits. - Nothing m this Act shall be construed to 
diminish or reduce any benefits and other privileges enjoyed by workers under 
existing laws, decrees, executive orders, company policy or practice, or any agreement 
or contract between employers and their employees.
Sec. 20. Monitoring of Compliance of Private Enterprises. - The Secretary of Labor 
and Employment shall, xmder Ai’ticle 128 of P.D. 442, as amended, otherwise known 
as the "Labor Code of the Philippines," ensure the compliance of private enterprises 
with the provisions of this Act.
Sec. 21. Public Sector. — The Civil Service Commission and the DBM may 
establish a similar system in the pubHc sector.
Sec. 22. Implementing Rules and Regulations. - Within one hundred eighty (180) 
days from the effectivity of this Act, the NWPC and the DOLE shall, in consultation 
with other government agencies, and concerned stakeholders, issue the rules and 
regulations necessary to effectively implement the provisions of this Act.


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Sec. 23. Separability Clause, - Should any provision of this Act be declared 
unconstitutional the remainder thereof not otherwise affected shall remain in full 
force and effect.
Sec. 24. Repealing Clause. - Republic Act No. 6971, otherwise known as the 
"Productivity Incentives Act of 1990," is hereby repealed. AU laws, presidential 
decrees, executive orders, proclamations, or administrative regulations that are 
inconsistent with the provisions of this Act are hereby repealed, amended, or modified 
accordingly.
Sec. 25. Efjectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in a newspaper of general circulation in the 
Philippines.
Approved,
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