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Productivity Incentives Act of 1990: A law whose time has come One of the best ways for productivity, and eventually for the wages of Filipino
workers, to rise even without any legal or legislative prodding is for the government
Introduction to commit itself to create a better climate for business enterprises and workers.
"Better climate" includes among others having political stability, reduced red tape,
The perpetual increase in the cost of fuel, transportation, power and food has better infrastructure, stabilized Philippine currency, moderate interest rates,
brought a considerable pressure on the government, particularly the Regional "friendlier" foreign investment code as well as greater productivity incentives to
Tripartite Wages and Productivity Boards (RTWPBs), to raise the minimum wages of both labor and capital.
workers. But while the present economic conditions call for some wage
adjustments, we should not be under any illusion that a higher standard of living can With regard to the latter, the government has taken a bold step to provide impetus
be legislated into being. toward increasing the overall level of productivity in view of its below-par
performance over the recent years. President Aquino has signed into law Republic
Mandatory wage increases without corresponding increases in the productivity of Act 6971 or the Productivity Incentives Act of 1990 in November, purposely to
the workers will only result in higher inflation rate as firms would pass on the cost of encourage labor and management to aim for higher levels of productivity.
the wage increments to the cost of the product or the service being produced or
provided, thus, wiping out the value of wage increases almost as soon as they are As a backgrounder, organized labor was originally pressing for a package of non-
mandated. This is not the case, however, in a highly productive economy where wage benefits which would include increased tax exemptions for workers earning
wages automatically rise as new enterprises bid higher and higher for workers P7,000 and below monthly, increased funding for housing and livelihood programs,
tapped from a shrinking pool of excess labor. The need for a legislated wage more workers' representatives to government policy-making bodies, additional
increase, therefore, diminishes as wages rise automatically from the dictates of benefits from government financial institutions, a 10 percent profit sharing scheme
"enlightened self-interest."
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and productivity gainsharing. Some of these proposed benefits were not included in The Productivity Incentives Act is essentially voluntary in nature. Rightly so, for it is
the non-wage benefits package approved by the President on November 22, 1990. only here in the Philippines where productivity improvement has to be mandated.
Congress itself has shown that it is not yet ready to make any profit sharing scheme Sad to say, the vast majority of Filipinos do not know what productivity is, and
mandatory. hence, cannot appreciate its importance to business profitability, personal
enrichment, and eventually, to economic growth and development.
House Labor and Employment Committee chairman Alberto Veloso has said that
Congress approved the Productivity Incentives Act because the non-wage benefits it To lessen the impact of having productivity improvement legislated, the Rules
would provide to workers and the tax incentives to employers are non-inflationary. Implementing the Productivity Incentives Act allow flexibility for labor and
management to formulate their own productivity incentives agreements. Both
The true significance of the Act, however, lies in the extent of the changed parties will be able to develop a productivity incentives program that is tailor-fit to
institutional relationship between employers and employees. The substantial gains the nature and size of the operations, to the capital and labor requirement and to
in productivity and income may only be achieved in an atmosphere of industrial the profitability, stage of growth, and level of the firm.
peace and greater sharing in the fruits of labor.
The most important aspects of the Implementing Rules are discussed in detail
For so long a time, coercive measures have been heavily relied upon to foster below:
industrial peace. Companies were, for example, dictated upon by the government to
absorb new wage levels via legislation or arbitration. But almost everyone knows Formation of a labor-management committee
that if a company's competitive edge is eroded by a prohibitive labor cost, no
government or state can compel that company to continue doing business. When The Rules provide that a business enterprise and/or its employees may initiate the
the choice between continuing and ceasing operations hinges on economics, no formation of a Labor-Management Committee (LMC) to establish a productivity
political pressure can force an enteprise to remain in a business that is no longer incentives program within the enterprise. At the request of any party, the National
viable. Conciliation and Mediation Board (NCMB) or its appropriate regional branch or any
third person chosen and agreed upon by both parties may provide assistance to
It is in this light that the relevance of the Act can be appreciated, for it seeks to enable the parties to form an LMC.
encourage, not coerce, labor and management to aim for higher levels of
productivity in the workplace, maintain industrial peace and harmony and promote A business enterprise with an existing LMC may use such committee to establish a
the principle of shared responsibility in their relations with each other, through a productivity incentives program, provided again that the basic requirements of the
grant of incentives to business enterprises undertaking a productivity incentives program as stated in the Rules are met.
program.
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Establishment of a productivity incentives program Benefits and incentives for employers and workers
A productivity incentives program is a formal agreement created to promote gainful Although the establishment of a productivity incentives program is voluntary on the
employment, improve working conditions and improve productivity levels in a part of labor and management, there are certain "givens" which cannot be
business enterprise. It has two basic components, namely, productivity negotiated by either party because of the limitations imposed by the Act itself. One
improvement program and productivity gainsharing program. To be valid, it has to such given is the percentage share of workers in the productivity gains which shall
be ratified by a majority of the employees who have rendered at least six months of not be less than 50 percent. Another is the base period for determining productivity
continuous service. increase which shall be the preceding three consecutive years. This is not true,
however, for new enterprises that have been in operation for less than three years.
The Rules allow some amount of flexibility in the choice of a productivity In this case, their LMCs can agree on other base periods.
improvement program to be implemented, in the formula to measure productivity,
the factors to be considered in determining productivity bonuses and in the manner The productivity bonuses granted to the workers may be in cash or kind. Said
of sharing productivity gains. To make things easier for the parties concerned, bonuses shall be given not later than every six months from the start of the
considering the difficulty in measuring productivity, the Rules provide some productivity incentives program. Since there is a great probability that although
examples/illustrations of generally-accepted productivity measurement models. there is productivity increase the company is losing money, the Rules provide for the
deferment of the payment of bonuses up to a maximum of twelve months from the
To encourage business enterprises with existing gainsharing programs or schemes to date said bonuses are due.
avail of the benefits provided for in the Act, such schemes may be accredited or
converted into a productivity incentive program, provided that the requirements of
the productivity incentives program are met. Review of productivity incentives program