AN ACT TO ENCOURAGE PRODUCTIVITY AND MAINTAIN INDUSTRIAL PEACE BY PROVIDING INCENTIVES TO BOTH LABOR AND CAPITAL

Case Overview and Summary

Summary of Republic Act No. 6971 (Productivity Incentives Act of 1990)

Declaration of Policy (Section 2)
- Encourage higher productivity levels, maintain industrial peace and harmony
- Promote shared responsibility between workers and employers
- Recognize rights of labor to share in production fruits and business to reasonable returns
- Provide incentives to labor and capital for voluntary programs ensuring greater sharing of fruits of labor

Coverage (Section 3)
- Applies to all business enterprises with or without labor organizations
- Includes government-owned and controlled corporations performing proprietary functions
- Covers all employees and workers, including casual, regular, supervisory and managerial

Definitions (Section 4)
- "Business Enterprise" refers to industrial, agricultural, agro-industrial establishments engaged in production, manufacturing, processing, repacking, or assembly of goods, including service-oriented enterprises
- "Labor-Management Committee" refers to a negotiating body composed of labor and management representatives to establish a productivity incentives program and settle disputes
- "Productivity Incentives Program" refers to a formal agreement containing a process to promote gainful employment, improve working conditions and increase productivity, whereby employees are granted salary bonuses proportionate to productivity increases over the average for the preceding three (3) consecutive years

Labor-Management Committee (Section 5)
- Can be initiated by business enterprise or employees
- Composed of equal number of representatives from management and rank-and-file employees
- Both management and labor have equal voting rights
- National Wages and Productivity Commission can provide assistance and advice
- In enterprises with labor organizations, labor representatives designated by collective bargaining agent(s)
- In enterprises without labor organizations, labor representatives elected by majority of rank-and-file employees with at least six (6) months of continuous service

Productivity Incentives Program (Section 6)
- Shall contain provisions for manner of sharing and factors in determining productivity bonuses
- Productivity bonuses granted to labor shall not be less than half of the percentage increase in productivity
- Supplements existing collective bargaining agreements
- Can be integrated into collective bargaining agreement if employees join or form a union

Benefits and Tax Incentives (Section 7)
- Business enterprise adopting productivity incentives program is granted:
    - Special deduction from gross income equivalent to 50% of total productivity bonuses over and above allowable ordinary and necessary business deductions
    - Special deduction from gross income equivalent to 50% of total grants for manpower training and special studies over and above allowable ordinary and necessary business deductions
- Strike or lockout suspends program effectivity pending settlement, but business enterprise retains accrued tax incentives and workers retain accrued bonuses
- Bonuses shall be given to employees not later than every six (6) months over and above existing bonuses, and not deemed as salary increases
- Special deductions allowed starting next taxable year after Act's effectivity

Notification (Section 8)
- Business enterprise adopting productivity incentives program shall submit copies to National Wages and Productivity Commission and Bureau of Internal Revenue

Disputes and Grievances (Section 9)
- Labor-Management Committee shall meet to resolve disputes and may seek assistance from National Conciliation and Mediation Board
- Unresolved disputes within twenty (20) days shall be submitted for voluntary arbitration in line with Labor Code
- Program shall include name(s) of voluntary arbitrator or panel previously chosen and agreed upon by Labor-Management Committee

Rule Making Power (Section 10)
- Secretary of Labor and Employment and Secretary of Finance shall jointly promulgate and issue rules and regulations within six (6) months from Act's effectivity

Penalty (Section 11)
- Any person making fraudulent claim shall 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 P2,000.00 but not more than P6,000.00, or both
- For partnerships or corporations, penalty imposed on officer(s) or employee(s) who knowingly approved, authorized or ratified the fraudulent claim

Non-Diminution of Benefits (Section 12)
- Act shall not diminish or reduce any benefits and privileges enjoyed by workers under existing laws, decrees, executive orders, company policy or practice, or any agreement or contract between employer and employees

Separability Clause (Section 13)
- If any provision is held invalid, other provisions not affected shall continue to be valid and effective

Repealing Clause (Section 14)
- Any law, presidential decree, executive order, and letter of instruction, or any part thereof, inconsistent with this Act is repealed or amended accordingly

Effectivity Clause (Section 15)
- Act shall take effect fifteen (15) days after its publication in the Official Gazette or in at least two (2) national newspapers of general circulation