The determination of whether employer-employee relation exists between the parties is very important.

For one, entitlement to labor standards benefits such as minimum wages, hours of work, overtime pay,
etc., or to social benefits under laws such as social security law, workmens compensation law, etc., or to
termination pay, or to unionism and other labor relations provisions under the Labor Code, are largely
dependent on the existence of employer-employee relationship between the parties.
Another thing is that the existence of employer-employee relationship between the parties will determine
whether the controversy should fall within the exclusive jurisdiction of labor agencies or not. If for
example the parties are not employer-employee of each other, respectively, but perhaps partners or
associates, then any dispute between them will be not be covered by the jurisdiction of labor agencies but
by regular courts.
Three test to determine employer-employee relationship
There are three test commonly used to determine the existence of employer-employee relationship, viz.:
1. Four-fold test
2. Economic reality test
3. Two-tiered test (or Multi-factor test)
Four-fold test elements
The usual test used to determine the existence of employer-employer relationship is the so-called four-
fold test. In applying this test, the following elements are generally considered:
1. Right to hire or to the selection and engagement of the employee.
2. Payment of wages and salaries for services.
3. Power of dismissal or the power to impose disciplinary actions.
4. Power to control the employee with respect to the means and methods by which the work is to be
accomplished. This is known as the right-of-control test.
Right of control test is considered as the most important element in determining the existence of
employment relation.
Of the above-mentioned elements, the right of control test is considered as the most important element in
determining the existence of employment relation. The control test initially found application in the case
of Viaa vs. Al-Lagadan and Piga, where the court held that there is an employer-employee relationship
when the person for whom the services are performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that end.
Control test thus refers to the employers power to control the employees conduct not only as to the
result of the work to be done but also with respect to the means and methods by which the work is to be
accomplished.
In applying this test, it is the existence of the right, and not the actual exercise thereof, that is important.
Economic reality test
In view of todays highly specialized workforce, the court are often faced with situations where the right-
of-control-test alone can no longer adequately determine the existence of employer-employer relationship.
Subsequently, another test has been devised to fill the gap, known as the economic reality test.
In Sevilla v. Court of Appeals, the Court observed the need to consider the existing economic conditions
prevailing between the parties, in addition to the standard of right-of-control, to give a clearer picture in
determining the existence of an employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.
Economic realities of the employment relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent contractor, corporate officer or some
other capacity.
 Under economic reality test, the benchmark in analyzing whether employment relation exists between the
parties is the economic dependence of the worker on his employer. That is, whether the worker is
dependent on the alleged employer for his continued employment in the latters line of business.
Applying this test, if the putative employee is economically dependent on putative employer for his
continued employment in the latters line of business, there is employer-employee relationship between
them. Otherwise, there is none.
Two-tiered test (or Multi-factor test)
The economic reality test is not meant to replace the right of control test. Rather, these two test are often
use in conjunction with each other to determine the existence of employment relation between the parties.
This is known as the two-tiered test, or multi-factor test. This two-tiered test involves the following tests:
The putative employers power to control the employee with respect to the means and methods by which
the work is to be accomplished; and The underlying economic realities of the activity or relationship.
References
1. Francisco vs. NLRC, G.R. No. 170087 August 31, 2006
2. Religious of the Virgin Mary vs. NLRC, G.R. No. 103606, October 13, 1999
3. Viaa vs. Al-Lagadan and Piga, 99 Phil. 408 (1956).
4. Sevilla v. Court of Appeals, G.R. Nos. L-41182-3, April 15, 1988.

Employer - Employee Relationship

By: LawInfo
What may determine whether or not a person is an employee?
Historically, especially in law, employer and employee were termed "master and servant. Whether an
employer-employee relationship exists under the law will usually depend upon the respective rights and
duties of the parties. In determining issues such as wrongful dismissal, vicarious liability and statutory
liability, among other things, a court will examine the evidence of the relationship in determining, in a
particular case, whether or not a person is an employee, regardless, often, of the intentions of the parties.
The rules of determining such status have evolved by judicial precedent in the common law through
history. The absence or presence of some of these factors may indicate a person is or is not an employee
in an area of law where changing times and circumstances may change such decisions.
One of the main tests has been that of the employer's right of control over the person being paid to
perform. Some questions a court might ask in determining whether or not a person is an employee are:
- Does the master (employer) have the right to select the servant (employee)?
- Is there payment of wages or other remuneration?
- Does the master have right to control the method of doing the work?
- Does the master have the right of suspension or dismissal?
- Is the person subject to company policy?
- Is the person subject to discipline?
- Who decides the hours of work?
- Who decides where the work is to be performed?
- Who decides to whom the person can or cannot sell goods?
- Does the worker have power, without authority, to hire others to perform the work?
What type of person may not be considered an employee?
An independent contractor, consultant or "entrepreneur". This is a situation where control, or lack of
control, by the person contracting the services being performed is not necessarily conclusive.
- Who owns the business of the services being provided?
- Who controls the chance for profit or the risk of loss?
- Who owns the tools or equipment being used? This alone may not be enough to qualify a person as an
independent contractor. The degree of investment by the person in such tools or equipment and their
amount or nature would be considered relevant.
- Does the person or organization paying for the services refrain from making deductions for income tax,
unemployment insurance, health tax or Canada Pension Plan? This is an indicator, but often does not
preclude the provider of services from being an employee.
- Does the person providing the services have the power to assign or delegate the services performed?
Some Distinctions:
A motion picture studio's actors, merchant ship's captain, a chauffeur or a newspaper's staff reporters may
all be employees under a contract for services. But an independent actor may or may not be considered an
employee; a ship's pilot who controls the handling of a ship in a harbour would not usually be an
employee of the shipowner and may be a completely independent contractor; a taxi-owner is an
independent contractor and there are many independent writers, columnists and correspondent's who
contribute articles to newspapers and are not employees, but there are many of those who may be
considered employees.
A franchisee. One person operated a store for another. He fixed his own hours of work, hired and
terminated his employees on his own authority, ran the risk of loss and was not supervised in the way he
discharged his duties - however, he was expected to devote all of his time and effort to this store and no
other business, sell only at prescribed prices, pay the proceeds to the other person and keep the store open
during prescribed hours. The court found that the person was an employee and the business was not his
own. This is very close to the operation of a business by a franchisee, who may be under a great deal of
control by the franchisor, but still has the greater interest in the profit and loss area of the business. In
Ontario very recently, one large franchisor has forced the closure of about 25% of its donut shops that
were not making enough profit. The power of this franchisor has wiped out all the assets of many
franchisees who may not have any redress.
A partner. If the "partners" share profits and losses, have a joint or common interest in the property used
to produce income and share management of the business it will be presumed a partnership, which
presumption may be challenged by other evidence which shows the true intention of the parties. For
example, although the driver of a taxi had the vehicle registered in his name, he was found to be the
employee of the person who managed the business, as this owner-driver was paid only a percentage of the
gross sales and had no interest in the general profits of the business.
Personal Corporation. A person who sets up a personal corporation usually does so for tax advantages,
so there is not usually an employee relationship between such person and the corporation, to consider
such things as required notice of termination and severance payment. A different view might be held if
such person did not have control over the corporation.
Director of a corporation. A director of a corporation may not be an employee of the corporation, but he
or she can be one, in addition to being a director, and the employee relationship would be considered a
separate matter from any position of directorship in the corporation.
Shareholder of a corporation. Simply owning the shares of a corporation does not create an employer -
employee relationship. However, many employees own shares in the employing corporation. The one
position is usually exclusive of the other for most, if not all, purposes.
Commission Sales Representatives. Courts have often (not always) found that commission sales people
are either employees or in an "intermediate class" and therefore entitled to notice of termination of their
services.
Family Members. Family members can be considered employees of one another. All factors would be
considered, such as the closeness of the relationship and the nature of the business and the duties and
obligations of those in it.
Clergy. Particularly when considering a question of dismissal, it has been held that many of the elements
of an employer - employee relationship exist between a church, congregation or synagogue and its priest,
minister or rabbi and a court may intervene, even if the clergy person is not considered an employee.
Military Personnel. Members of the Canadian Forces have no contractual relationship with the Crown,
but serve "at the pleasure of the Crown". Any claims or grievances a member of the forces may have
would be dealt with under the grievance procedures found in the National Defence Act.
Prisoners. It has been held that being a prisoner does not necessarily prevent a person from also being an
employee of a correctional institution. For example, medical practitioner or other professional person who
is serving a sentence may be employed to provide certain services in the prison. Other prisoners may be
given compensable work in the institution.
Note that even in many cases where the parties have not considered themselves in an employer -
employee relationship, a court may, at the instance of an aggrieved party, consider all the circumstances
and find that sufficient lack of control of an aggrieved party in a situation may entitle such party to relief
as an employee. In contract situations, as society is complex and changing, so is the application of the law
in this area. A person may require the advice of a knowledgeable specialist in employment law.
 Republic of the Philippines
DEPARTMENT OF LABOR AND EMPLOYMENT
Intramuros, Manila

DEPARTMENT ADVISORY No. 2

Series of 2004

Implementation of Compressed Workweek Schemes

I. Purpose and Coverage

This Advisory is being issued to guide employers and workers who may opt to adopt a
mutually acceptable compressed workweek (CWW) scheme suitable to the requirements of
the firm.

This Advisory may be used in all establishments except those in the construction industry,
in health services, in occupations requiring heavy manual labor, or in occupations or
workplaces in which workers are exposed to airborne contaminants, human carcinogens,
substances, chemicals or noise that exceed threshold limit values or tolerance levels for an
eight-hour workday as prescribed under existing Occupational Safety and Health Standards
(OSHS).

II. Policy

As a matter of policy, and talking into account the emergence of new technology and the
continuing restructuring and modernization of the work process, the Department of Labor
and Employment (DOLE) encourages employers and workers to enter into voluntary
agreements adopting CWW schemes based on the following objectives:

1. To promote business competitiveness and productivity, improve efficiency by lower

operating costs, and reduce work-related expenses of employees;

2. To give employers and workers flexibility in fixing hours of work compatible with business
requirements and the employees' need for a balanced work life; and

3. To ensure the safety and health of employees at the workplace at all times.

For purposes of administering existing laws and rules on work hours, overtime
compensation and other relevant labor standards, DOLE shall recognize only those CWW
schemes that have been entered into consistent with this Advisory.
II. Concept and Definition

The Labor Code provides that the normal work hours per day shall be eight hours. Work
may be performed beyond eight hours a day provided the employee is paid for the overtime
work. On the other hand, the normal number of workdays per week shall be six days, or a
total of forty-eight (48) hours based on the normal workday of eight hours. This is without
prejudice to firms whose normal workweek is five days, or a total of forty (40) hours based
on the normal workday of eight hours.

For purposes of this Advisory, a CWW scheme is an alternative arrangement whereby the
normal workweek is reduced to less than six days but the total number of normal work
hours per week shall remain at 48 hours. The normal workday is increased to more than
eight hours without corresponding overtime premium. This concept can be adjusted
accordingly in cases where the normal workweek of the firm is five days.

IV. Specific Guidelines

Conditions. DOLE shall recognize CWW schemes adopted in accordance with the following:

1. The CWW scheme is undertaken as a result of an express and voluntary agreement of

majority of the covered employees or their duly authorized representatives. This agreement
may be expressed through collective bargaining or other legitimate workplace mechanisms
of participation such as labor-management councils, employee assemblies or referenda.

2. In firms using substances, chemicals and processes or operating under conditions where
there are airborne contaminants, human carcinogens or noise prolonged exposure to which
may pose hazards to the employees' health and safety, there must be a certification from an
accredited health and safety organization or practitioner or from the firm's safety committee
that work beyond eight hours is within threshold limits or tolerable levels of exposure, as set
in the OSHS.

3. The employer shall notify DOLE, through the Regional Office having jurisdiction over the
workplace, of the adoption of th CWW scheme. The notice shall be in DOLE CWW Report
Form attached to this Advisory.

Effects. A CWW scheme which complies with the foregoing conditions shall have the
following effects:

1. Unless there is a more favorable practice existing in the firm, work beyond eight hours
will not be compensable by overtime premium provided the total number of hours worked
per day shall not exceed twelve (12) hours. In any case, any work performed beyond 12
hours a day or 48 hours a week shall be subject to overtime premium.
2. Consistent with Articles 85 of the Labor Code, employees under a CWW scheme are
entitled to meal periods of not less than sixty (60) minutes. Nothing herein shall impair the
right of employees to rest days as well as to holiday pay, rest day pay or leaves in
accordance with law or applicable collective bargaining agreement or company policy.

3. Adoption of the CWW scheme shall in no case result in diminution of existing benefits.
Reversion to the normal eight-hour workday shall not constitute a diminution of benefits.
The reversion shall be considered a legitimate exercise of management prerogative,
provided that the employer shall give the employees prior notice of such reversion within a
reasonable period of time.

Administration of CWW Scheme. The parties to the CWW scheme shall be primarily
responsible for its administration. In case of differences of interpretation, the following shall
be observed:

1. The differences shall be treated as grievances under the applicable grievance

mechanism of the firm.

2. If there is no grievance mechanism or if this mechanism is inadequate, the grievance

shall be refrred to the Regional Office which shall conduct a training and assistance visit
(TAV) pursuant to Section 3 of Department Order No. 57-04.

3. The purpose of the TAV is to ascertain, through the most practical and least litigious way
possible, whether or not the scheme is the result of a voluntary agreement or is supported
by the appropriate certification from an accredited safety and health organization or
practitioner. Where appropriate, the TAV may include the conduct, as may be appropriate,
of a referendum or work environment measurement (WEM) to determine actual work
conditions.
To facilitate the resolution of grievances, employers are required to keep and maintain, as
part of their records, teh documentary requirements proving that the CWW scheme was
voluntarily adopted and the certification that teh scheme is consistent with OSHS.

4. In the absence of proof of voluntary agreement or safety and health certification, the
employer shall pay the employees concerned any overtime pay that may be owing to them
as if the CWW scheme did not exist. If it turns out that work beyond eight hours is not
consistent with OSHS, the parties shall immediately revert to a normal eight-hour workday.

V. Publication and Posting

This advisory shall be published in two newspapers of general circulation and henceforth
shall be part of the labor education manuals to be developed by DOLE. Every firm adopting
a CWW scheme shall ensure that a copy of this advisory is posted in a conspicuous
location in the workplace.
EXECUTIVE ORDER NO. 203 June 30, 1987

PROVIDING A LIST OF REGULAR HOLIDAYS AND SPECIAL DAYS TO BE OBSERVED

THROUGHOUT THE PHILIPPINES AND FOR OTHER PURPOSES
WHEREAS, a Cabinet Assistance Secretariat Committee was constituted to review all existing
public holidays;
WHEREAS, there are too many holidays being observed which has caused confusion among
the public.
NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do hereby order:
Sec. 1. Unless otherwise modified by law, order or proclamation, the following regular holidays
and special days shall be observed in this country:
A. Regular Holidays
New Year's Day January
Maundy Thursday Movable date
Good Friday Movable date
Araw ng Kagitingan (Bataan and Corregidor April 9
Day)
Labor Day May 1
Independence Day June 12
National Heroes Day Last Sunday of August
Bonifacio Day November 30
Christmas Day December 25
Rizal Day December 30
B. Nationwide Special Days
All Saints Day November 1
Last Day of the Year December 31

Sec. 2. Henceforth, the terms "legal or regular holiday" and "special holiday", as used in laws,
orders, rules and regulations or other issuances shall now be referred to as "regular holiday"
and "special day", respectively.
Sec. 3. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with this
Executive Order are hereby repealed or modified accordingly.
Sec. 4. This Executive Order shall take effect immediately.
Done in the City of Manila, this 30th day of June, in the year of Our Lord, nineteen hundred and
eighty-seven.
 REPUBLIC ACT NO. 6971
AN ACT TO ENCOURAGE PRODUCTIVITY AND MAINTAIN INDUSTRIAL PEACE BY PROVIDING
INCENTIVES TO BOTH LABOR AND CAPITAL

Section 1. Short Title. This Act shall be known as the Productivity Incentives Act of 1990.

Section 2. Declaration of Policy. It is the declared policy of the State 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, 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 and to
expansion and growth, and accordingly to provide corresponding incentives to both labor and capital
for undertaking voluntary programs to ensure greater sharing by the workers in the fruits of their
labor.

Section 3. Coverage. This Act shall apply to all business enterprises with or without existing and duly
recognized or certified labor organizations, including government-owned and controlled corporations
performing proprietary functions. It shall cover all employees and workers including casual, regular,
supervisory and managerial employees.

Section 4. Definition of Terms. As used in this Act:a) Business Enterprise refers to industrial,
agricultural, or agro-industrial establishments engaged in the production manufacturing, processing,
repacking, or assembly of goods, including service-oriented enterprises, duly certified as such by
appropriate government agencies.b) Labor-Management Committee refers to a negotiating body in a
business enterprise composed of the representatives of labor and management created to establish a
productivity incentives program, and to settle disputes arising therefrom in accordance with Section 9
hereof.c) Productivity Incentives Program refers to a formal agreement established by the labor-
management committee containing a process that will promote gainful employment, improve working
conditions and result in increased productivity, including cost savings, whereby the employees are
granted salary bonuses proportionate to increases in current productivity over the average for the
preceding three (3) consecutive years. The agreement shall be ratified by at least a majority of the
employees who have rendered at least six (6) months of continuous service.

Section 5. Labor-Management Committee. a) A business enterprise or its employees, through their

authorized representatives, may initiate the formation of a labor-management committee that shall be
composed of an equal number of representatives from the management and from the rank-and-file
employees: provided, that both management and labor shall have equal voting rights: provided,
further, that at the request of any party to the negotiation, the National Wages and Productivity
Commission of the Department of Labor and Employment shall provide the necessary studies,
technical information and assistance, and expert advice to enable the parties to conclude productivity
agreements.b) In business enterprises with duly recognized or certified labor organizations, the
representatives of labor shall be those designated by the collective bargaining agent(s) of the
bargaining unit(s).c) 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. -a) The productivity incentives program shall contain
provisions for the manner of sharing and the factors in determining productivity
bonuses: provided,that the productivity bonuses granted to labor under this program shall not be less
than half of the percentage increase in the productivity of the business enterprise.b) Productivity
agreements reached by the parties as provided in this Act supplement existing collective bargaining
agreements.c) If, during the existence of the productivity incentives program or agreement, the
employees will join or form a union, such program or agreement may, in addition to the terms and
conditions agreed upon by labor and management, be integrated in the collective bargaining
agreement that may be entered into between them.

Section 7. Benefits and Tax Incentives. (a) Subject to the provisions of Section 6 hereof, a business
enterprise which adopts a productivity incentives program, duly and mutually agreed upon by parties
to the labor-management committee, shall be granted a special deduction from 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, as amended.b) Grants for manpower training and
special studies given to rank-and-file employees pursuant to a program prepared by the labor-
management committee for the development of skills identified as necessary by the appropriate
government agencies shall also entitle the business enterprise to a special deduction from gross
income equivalent to fifty per cent (50%) of the total grants over and above the allowable ordinary
and necessary business deductions for said grants under the National Internal Revenue Code, as
amended.c) Any strike or lockout arising from any violation of the productivity incentives program
shall suspend the effectivity thereof pending settlement of such strike or lockout: provided, that the
business enterprise shall not be deemed to have forfeited any tax incentives accrued prior to the date
of occurrence of such strike or lockout, and the workers shall not be required to reimburse the
productivity bonuses already granted to them under the productivity incentives program. Likewise,
bonuses which have already accrued before the strike or lockout shall be paid the workers within six
(6) months from their accrual.d) Bonuses provided for under the productivity incentives program shall
be given to the employees not later than every six (6) months from the start of such program over
and above existing bonuses granted by the business enterprise and by law: provided, that the said
bonuses shall not be deemed as salary increases due the employees and workers.e) The special
deductions from gross income provided for herein shall be allowed starting the next taxable year after
the effectivity of this Act.

Section 8. Notification. A business enterprise which adopts a productivity incentives program shall
submit copies of the same to the National Wages and Productivity Commission and to the Bureau of
Internal Revenue for their information and record.

Section 9. Disputes and Grievances. Whenever disputes, grievances, or other matters arise from the
interpretation or implementation of the productivity incentives program, the labor-management
committee shall meet to resolve the dispute, and may seek the assistance of the National Conciliation
and Mediation Board of the Department of Labor and Employment for such purpose. Any dispute which
remains unresolved within twenty (20) days from the time of its submission to the labor-management
committee shall be submitted for voluntary arbitration in line with the pertinent of the Labor Code, as
amended.

The productivity incentives program shall include the name(s) of the voluntary arbitrator or panel of
voluntary arbitrators previously chosen and agreed upon by the labor-management committee.

Section 10. Rule Making Power. The Secretary of Labor and Employment and the Secretary of
Finance, after due notice and hearing, 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
hereof.

Section 11. 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 two thousand
pesos (P2,000.00) but not more than six thousand pesos (P6,000.00), or both, at the discretion of the
Court, without prejudice to prosecution for any other acts punishable under existing laws.

In case of partnerships or corporations, the penalty shall be imposed upon the officer(s) or
employee(s) who knowingly approved, authorized or ratified the filing of the fraudulent claim, and
other persons responsible therefor.

Section 12. Non-Diminution of Benefits. Nothing in this Act shall be construed to diminish or reduced
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 13. Separability Clause. If any provision of this Act is held invalid, any other provision not so
affected shall continue to be valid and effective.

Section 14. Repealing Clause. Any law, presidential decree, executive order, and letter of
instruction, or any part thereof, which is inconsistent with any of the provisions of this Act is hereby
repealed or amended accordingly.

Section 15. Effectivity Clause. This 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.

Approved, November 22, 1990.

 Republic of the Philippines
Congress of the Philippines
Metro Manila
Eighth Congress

Republic Act No. 6727 June 9, 1989

AN ACT TO RATIONALIZE WAGE POLICY DETERMINATION BY ESTABLISHING THE
MECHANISM AND PROPER STANDARDS THEREFOR, AMENDING FOR THE PURPOSE
ARTICLE 99 OF, AND INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126 AND 127
INTO, PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE
LABOR CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE
INCENTIVES FOR INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER
PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled::
Section 1. This Act shall be known as the "Wage Rationalization Act."
Section 2. It is hereby declared the policy of the State to rationalize the fixing of minimum
wages and to promote productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of labor to its just
share in the fruits of production; to enhance employment generation in the countryside through
industry dispersal; and to allow business and industry reasonable returns on investment,
expansion and growth.
The State shall promote collective bargaining as the primary mode of settling wages and other
terms and conditions of employment; and whenever necessary, the minimum wage rates shall
be adjusted in a fair and equitable manner, considering existing regional disparities in the cost
of living and other socio-economic factors and the national economic and social development
plans.
Section 3. In line with the declared policy under this Act, Article 99 of Presidential Decree No.
442, as amended, is hereby amended and Articles 120, 121, 122, 123, 124, 126 and 127 are
hereby incorporated into Presidential Decree No. 442, as amended, to read as follows:
"Art. 99. Regional Minimum Wages. The minimum wage rates for agricultural and
non-agricultural employees and workers in each and every region of the country shall be
those prescribed by the Regional Tripartite Wages and Productivity Boards."
"Art. 120. Creation of the National Wages and Productivity Commission. There is
hereby created a National Wages and Productivity Commission, hereinafter referred to
as the Commission, which shall be attached to the Department of Labor and
Employment (DOLE) for policy and program coordination."
"Art. 121. Powers and Functions of the Commission. The Commission shall have the
following powers and functions:
"(a) To act as the national consultative and advisory body to the President of the
Philippines and Congress on matters relating to wages, incomes and
productivity;
"(b) To formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels;
"(c) To prescribe rules and guidelines for the determination of appropriate
minimum wage and productivity measures at the regional, provincial or industry
levels;
"(d) To review regional wage levels set by the Regional Tripartite Wages and
Productivity Boards to determine if these are in accordance with prescribed
guidelines and national development plans;
 "(e) To undertake studies, researches and surveys necessary for the attainment
of its functions and objectives, and to collect and compile data and periodically
disseminate information on wages and productivity and other related information,
including, but not limited to, employment, cost-of-living, labor costs, investments
and returns;
"(f) To review plans and programs of the Regional Tripartite Wages and
Productivity Boards to determine whether these are consistent with national
development plans;
"(g) To exercise technical and administrative supervision over the Regional
Tripartite Wages and Productivity Boards;
"(h) To call, from time to time, a national tripartite conference of representatives
of government, workers and employers for the consideration of measures to
promote wage rationalization and productivity; and
"(i) To exercise such powers and functions as may be necessary to implement
this Act.
"The Commission shall be composed of the Secretary of Labor and Employment as ex-
officio chairman, the Director-General of the National Economic and Development
Authority (NEDA) as ex-officio vice-chairman, and two (2) members each from workers
and employers sectors who shall be appointed by the President of the Philippines upon
recommendation of the Secretary of Labor and Employment to be made on the basis of
the list of nominees submitted by the workers and employers sectors, respectively, and
who shall serve for a term of five (5) years. The Executive Director of the Commission
shall also be a member of the Commission.
"The Commission shall be assisted by a Secretariat to be headed by an Executive
Director and two (2) Deputy Directors, who shall be appointed by the President of the
Philippines, upon the recommendation of the Secretary of Labor and Employment.
"The Executive Director shall have the same rank, salary, benefits and other
emoluments as that of a Department Assistant Secretary, while the Deputy Directors
shall have the same rank, salary, benefits and other emoluments as that of a Bureau
Director. The members of the Commission representing labor and management shall
have the same rank, emoluments, allowances and other benefits as those prescribed by
law for labor and management representatives in the Employees' Compensation
Commission.
"Art. 122. Creation of Regional Tripartite Wages and Productivity Boards. There is
hereby created Regional Tripartite Wages and Productivity Boards, hereinafter referred
to as Regional Boards, in all regions, including autonomous regions as may be
established by law. The Commission shall determine the offices/headquarters of the
respective Regional Boards.
"The Regional Boards shall have the following powers and functions in their respective
territorial jurisdiction:
"(a) To develop plans, programs and projects relative to wages, incomes and
productivity improvement for their respective regions;
"(b) To determine and fix minimum wage rates applicable in their region,
provinces or industries therein and to issue the corresponding wage orders,
subject to guidelines issued by the Commission;
"(c) To undertake studies, researches and surveys necessary for the attainment
of their functions, objectives and programs, and to collect and compile data on
wages, incomes, productivity and other related information and periodically
disseminate the same;
"(d) To coordinate with the other Regional Boards as may be necessary to attain
the policy and intention of this Code;
 "(e) To receive, process and act on applications for exemption from prescribed
wage rates as may be provided by law or any Wage Order; and
"(f) To exercise such other powers and functions as may be necessary to carry
out their mandate under this Code.
Implementation of the plans, programs and projects of the Regional Boards referred to in
the second paragraph, letter (a) of this Article, shall be through the respective regional
offices of the Department of Labor and Employment within their territorial jurisdiction;
Provided, however, That the Regional Boards shall have technical supervision over the
regional office of the Department of Labor and Employment with respect to the
implementation of said plans, programs and projects.
"Each Regional Board shall be composed of the Regional Director of the Department of
Labor and Employment as chairman, the Regional Directors of the National Economic
and Development Authority and the Department of Trade and Industry as vice-chairmen
and two (2) members each from workers and employers sectors who shall be appointed
by the President of the Philippines, upon the recommendation of the Secretary of Labor
and Employment, to be made on the basis of the list of nominees submitted by the
workers and employers sectors, respectively, and who shall serve for a term of five (5)
years.
"Each Regional Board to be headed by its chairman shall be assisted by a Secretariat.
"Art. 123. Wage Order. Whenever conditions in the region so warrant, the Regional
Board shall investigate and study all pertinent facts; and based on the standards and
criteria herein prescribed, shall proceed to determine whether a Wage Order should be
issued. Any such Wage Order shall take effect after fifteen (15) days from its complete
publication in at least one (1) newspaper of general circulation in the region.
"In the performance of its wage determining functions, the Regional Board shall conduct
public hearings/consultations, giving notices to employees' and employers' groups,
provincial, city and municipal officials and other interested parties.
"Any party aggrieved by the Wage Order issued by the Regional Board may appeal such
order to the Commission within ten (10) calendar days from the publication of such
order. It shall be mandatory for the Commission to decide such appeal within sixty (60)
calendar days from the filing thereof.
"The filing of the appeal does not stay the order unless the person appealing such order
shall file with the Commission an undertaking with a surety or sureties satisfactory to the
Commission for the payment to the employees affected by the order of the
corresponding increase, in the event such order is affirmed."
"Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages
to be established by the Regional Board shall be as nearly adequate as is economically
feasible to maintain the minimum standards of living necessary for the health, efficiency
and general well-being of the employees within the framework of the national economic
and social development program. In the determination of such regional minimum wages,
the Regional Board shall, among other relevant factors, consider the following:
"(a) The demand for living wages;
"(b) Wage adjustment vis-a-vis the consumer price index;
"(c) The cost of living and changes or increases therein;
"(d) The needs of workers and their families;
"(e) The need to induce industries to invest in the countryside;
"(f) Improvements in standards of living;
"(g) The prevailing wage levels;
"(h) Fair return of the capital invested and capacity to pay of employers;
"(i) Effects on employment generation and family income; and
 "(j) The equitable distribution of income and wealth along the imperatives of
economic and social development.
"The wages prescribed in accordance with the provisions of this Title shall be the
standard prevailing minimum wages in every region. These wages shall include wages
varying within industries, provinces or localities if in the judgment of the Regional Board
conditions make such local differentiation proper and necessary to effectuate the
purpose of this Title.
"Any person, company, corporation, partnership or any other entity engaged in business
shall file and register annually with the appropriate Regional Board, Commission and the
National Statistics Office an itemized listing of their labor component, specifying the
names of their workers and employees below the managerial level, including learners,
apprentices and disabled/handicapped workers who were hired under the terms
prescribed in the employment contracts, and their corresponding salaries and wages.
"Where the application of any prescribed wage increase by virtue of law or Wage order
issued by any Regional Board results in distortions of the wage structure within an
establishment, the employer and the union shall negotiate to correct the distortions. Any
dispute arising from wage distortions shall be resolved through the grievance procedure
under their collective bargaining agreement and, if it remains unresolved, through
voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute
shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten
(10) calendar days from the time said dispute was referred to voluntary arbitration.
"In cases where there are no collective agreements or recognized labor unions, the
employers and workers shall endeavor to correct such distortions. Any dispute arising
therefrom shall be settled through the National Conciliation and Mediation Board and, if it
remains unresolved after ten (10) calendar days of conciliation, shall be referred to the
appropriate branch of the National Labor Relations Commission (NLRC). It shall be
mandatory for the NLRC to conduct continuous hearings and decide the dispute within
twenty (20) calendar days from the time said dispute is submitted for compulsory
arbitration.
"The pendency of a dispute arising from a wage distortion shall not in any way delay the
applicability of any increase in prescribed wage rates pursuant to the provisions of law or
Wage Order.
"As used herein, a wage distortion shall mean a situation where an increase in
prescribed wage rates results in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and among employee groups in
an establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of differentiation.
"All workers paid by result, including those who are paid on piecework, takay, pakyaw or
task basis, shall receive not less than the prescribed wage rates per eight (8) hours work
a day, or a proportion thereof for working less than eight (8) hours.
"All recognized learnership and apprenticeship agreements shall be considered
automatically modified insofar as their wage clauses are concerned to reflect the
prescribed wage rates."
"Art. 126. Prohibition Against Injunction. No preliminary or permanent injunction or
temporary restraining order may be issued by any court, tribunal or other entity against
any proceedings before the Commission or the Regional Boards."
"Art. 127. Non-diminution of Benefits. No Wage Order issued by any Regional Board
shall provide for wage rates lower than the statutory minimum wage rates prescribed by
Congress."
Section 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates of all workers
and employees in the private sector, whether agricultural or non-agricultural, shall be increased
by twenty-five pesos (P25.00) per day, except that workers and employees in plantation
agricultural enterprises outside of the National Capital Region (NCR) with an annual gross sales
of less than five million pesos (P5,000,000.00) in the preceding year shall be paid an increase of
twenty pesos (P20.00), and except further that workers and employees of cottage/handicraft
industries, non-plantation agricultural enterprises, retail/service establishments regularly
employing not more than ten (10) workers, and business enterprises with a capitalization of not
more than five hundred thousand pesos (P500,000.00) and employing not more than twenty
(20) employees, which are located or operating outside the NCR, shall be paid only an increase
of fifteen pesos (P15.00): Provided, That those already receiving above the minimum wage
rates up to one hundred pesos (P100.00) shall also receive an increase of twenty-five pesos
(P25.00) per day, except that the workers and employees mentioned in the first exception
clause of this Section shall also be paid only an increase of twenty pesos (P20.00), and except
further that those employees enumerated in the second exception clause of this Section shall
also be paid an increase of fifteen pesos (P15.00): Provided, further, That the appropriate
Regional Board is hereby authorized to grant additional increases to the workers and
employees mentioned in the exception clauses of this Section if, on the basis of its
determination pursuant to Article 124 of the Labor Code such increases are necessary.
(b) The increase of twenty-five pesos (P25.00) prescribed under this Section shall apply to all
workers and employees entitled to the same in private educational institutions as soon as they
have increased or are granted authority to increase their tuition fees during school year 1989-
1990. Otherwise, such increase shall be so applicable not later than the opening of the next
school year beginning 1990.
(c) Exempted from the provisions of this Act are household or domestic helpers and persons
employed in the personal service of another, including family drivers.
Retail/service establishments regularly employing not more than ten (10) workers may be
exempted from the applicability of this Act upon application with and as determined by the
appropriate Regional Board in accordance with the applicable rules and regulations issued by
the Commission. Whenever an application for exemption has been duly filed with the
appropriate Regional Board, action on any complaint for alleged non-compliance with this Act
shall be deferred pending resolution of the application for exemption by the appropriate
Regional Board.
In the event that applications for exemptions are not granted, employees shall receive the
appropriate compensation due them as provided for by this Act plus interest of one per cent
(1%) per month retroactive to the effectivity of this Act.
(d) If expressly provided for and agreed upon in the collective bargaining agreements, all
increases in the daily basic wage rates granted by the employers three (3) months before the
effectivity of this Act shall be credited as compliance with the increases in the wage rates
prescribed herein, provided that, where such increases are less than the prescribed increases in
the wage rates under this Act, the employer shall pay the difference. Such increases shall not
include anniversary wage increases, merit wage increases and those resulting from the
regularization or promotion of employees.
Where the application of the increases in the wage rates under this Section results in distortions
as defined under existing laws in the wage structure within an establishment and gives rise to a
dispute therein, such dispute shall first be settled voluntarily between the parties and in the
event of a deadlock, the same shall be finally resolved through compulsory arbitration by the
regional branches of the National Labor Relations Commission (NLRC) having jurisdiction over
the workplace.
It shall be mandatory for the NLRC to conduct continuous hearings and decide any dispute
arising under this Section within twenty (20) calendar days from the time said dispute is formally
submitted to it for arbitration. The pendency of a dispute arising from a wage distortion shall not
in any way delay the applicability of the increase in the wage rates prescribed under this
Section.
Section 5. Within a period of four (4) years from the effectivity of this Act and without prejudice
to collective bargaining negotiations or agreements or other employment contracts between
employers and workers, new business enterprises that may be established outside the NCR
and export processing zones whose operation or investments need initial assistance as may be
determined by the Department of Labor and Employment in consultation with the Department of
Trade and Industry or the Department of Agriculture, as the case may be, shall be exempt from
the applicability of this Act for not more than three (3) years from the start of their operations:
Provided, That such new business enterprises established in Region III (Central Luzon) and
Region IV (Southern Tagalog) shall be exempt from such increases only for two (2) years from
the start of their operations, except those established in the Provinces of Palawan, Oriental
Mindoro, Occidental Mindoro, Marinduque, Romblon, Quezon and Aurora, which shall enjoy
such exemption for not more than three (3) years from the start of their operations.
Section 6. In the case of contracts for construction projects and for security, janitorial and
similar services, the prescribed increases in the wage rates of the workers shall be borne by the
principals or clients of the construction/service contractors and the contract shall be deemed
amended accordingly. In the event, however, that the principal or client fails to pay the
prescribed wage rates, the construction/service contractor shall be jointly and severally liable
with his principal or client.
Section 7. Upon written permission of the majority of the employees or workers concerned, all
private establishments, companies, businesses, and other entities with twenty five (25) or more
employees and located within one (1) kilometer radius to a commercial, savings or rural bank
shall pay the wages and other benefits of their employees through any of said banks and within
the period of payment of wages fixed by Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines.
Section 8. Whenever applicable and upon request of a concerned worker or union, the bank
shall issue a certification of the record of payment of wages of a particular worker or workers for
a particular payroll period.
Section 9. The Department of Labor and Employment shall conduct inspections as often as
possible within its manpower constraint of the payroll and other financial records kept by the
company or business to determine whether the workers are paid the prescribed minimum wage
rates and other benefits granted by law or any Wage Order. In unionized companies, the
Department of Labor and Employment inspectors shall always be accompanied by the president
or any responsible officer of the recognized bargaining unit or of any interested union in the
conduct of the inspection. In non-unionized companies, establishments or businesses, the
inspection should be carried out in the presence of a worker representing the workers in the
said company. The workers' representative shall have the right to submit his own findings to the
Department of Labor and Employment and to testify on the same if he cannot concur with the
findings of the labor inspector.
Section 10. The funds necessary to carry out the provisions of this Act shall be taken from the
Compensation and Organizational Adjustment Fund, the Contingent Fund, and other savings
under the Republic Act No. 6688, otherwise known as the General Appropriations Act of 1989,
or from any unappropriated funds of the National Treasury: Provided, That the funding
requirements necessary to implement this Act shall be included in the annual General
Appropriations Act for the succeeding years.
Section 11. The National Wages Council created under Executive Order No. 614 and the
National Productivity Commission created under Executive Order No. 615 are hereby abolished.
All properties, records, equipment, buildings, facilities, and other assets, liabilities and
appropriations of and belonging to the abovementioned offices, as well as other matters
pending therein, shall be transferred to the Commission. All personnel of the above abolished
offices shall continue to function in a holdover capacity and shall be preferentially considered for
appointments to or placement in the Commission.
Any official or employee separated from the service as a result of the abolition of office pursuant
to this Act shall be entitled to appropriate separation pay and retirement and other benefits
accruing to them under existing laws. In lieu, thereof, at the option of the employee, he shall be
preferentially considered for employment in the government or in any of its subdivisions,
instrumentalities, or agencies, including government-owned or controlled corporations and their
subsidiaries.
Section 12. Any person, corporation, trust, firm, partnership, association or entity which refuses
or fails to pay any of the prescribed increases or adjustments in the wage rates made in
accordance with this Act shall be punished by a fine not exceeding twenty five thousand pesos
(P25,000.00) and/or imprisonment of not less than one (1) year nor more than two (2) years:
Provided, That any person convicted under this Act shall not be entitled to the benefits provided
for under the Probations Law.
If the violation is committed by a corporation, trust or firm, partnership, association or any other
entity, the penalty of imprisonment shall be imposed on the entity's responsible officers,
including, but not limited to, the president, vice-president, chief executive officer, general
manager, managing director or partner.
Section 13. The Secretary of Labor and Employment shall promulgate the necessary rules and
regulations to implement the provisions of this Act.
Section 14. Al laws, orders, issuances, rules and regulations or parts thereof inconsistent with
the provisions of this Act are hereby repealed, amended or modified accordingly. If any
provision or part of this Act, or the application thereof to any person or circumstance, is held
invalid or unconstitutional, the remainder of this Act or the application of such provision or part
thereof to other persons or circumstances shall not be affected thereby.
Nothing in this Act shall be construed to reduce any existing wage rates, allowances and
benefits of any form under existing laws, decrees, issuances, executive orders, and/or under
any contract or agreement between the workers and the employers.
Section 15. This Act take effect fifteen (15) days after its complete publication in the Official
Gazette or in at least two (2) national newspapers of general circulation, whichever comes
earlier.
Approved: June 9, 1989

RULES IMPLEMENTING REPUBLIC ACT NO. 6727

Pursuant to the authority granted to the Secretary of Labor and Employment under Section 13
of Republic Act No. 6727, otherwise known as the Wage Rationalization Act, the following rules
are hereby issued for guidance and compliance by all concerned:
Definition of Terms. As used in this Rules
a) "Act" means Republic Act No. 6727;
b) "Commission" means the National Wages and Productivity Commission;
c) "Board" means the Regional Tripartite Wages and Productivity Board;
d) "Agriculture" refers to farming in all its branches and among others, includes the
cultivation and tillage of the soil, production, cultivation, growing and harvesting of any
agricultural or horticultural commodities, dairying, raising of livestock or poultry, the
culture of fish and other aquatic products in farms or ponds, and any activities performed
by a farmer or on a farm as an incident to or in conjunction with such farming operations,
but does not include the manufacturing and/or processing of sugar, coconut, abaca,
tobacco, pineapple, aquatic or other farm products;
e) "Plantation Agricultural Enterprise" is one engaged in agriculture with an area of more
than 24 hectares in a locality or which employs at least 20 workers. Any other
agricultural enterprise shall be considered as "Non-Plantation Agricultural Enterprise";
 f) "Retail Establishment" is one principally engaged in the sale of goods to end-users for
personal or household use;
g) "Service Establishment" is one principally engaged in the sale of service to individuals
for their own or household use and is generally recognized as such;
h) "Cottage/Handicraft Establishment" is one engaged in an economic endeavor in which
the products are primarily done in the home or such other places for profit which requires
manual dexterity and craftmanship and whose capitalization does not exceed P500,000,
regardless of previous registration with the defunct NACIDA;
i) "National Capital Region" covers the cities of Kalookan, Manila, Pasay and Quezon
and the municipalities of Las Pias, Makati, Malabon, Mandaluyong, Marikina,
Muntinlupa, Navotas, Paraaque, Pasig, Pateros, San Juan, Taguig and Valenzuela;
j) "Region III" covers the provinces of Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac,
and Zambales and the cities of Angeles, Cabanatuan, Olongapo, Palayan and San Jose;
k) "Region IV" covers the provinces of Aurora, Batangas, Cavite, Laguna, Marinduque,
Occidental Mindoro, Oriental Mindoro, Palawan, Quezon, Rizal and Romblon and the
cities of Batangas, Cavite, Lipa, Lucena, Puerto Princesa, San Pablo, Tagaytay and
Trece Martires;
l) "Department" refers to the Department of Labor and Employment;
m) "Secretary" means the Secretary of Labor and Employment;
n) "Basic Wage" means all remuneration or earnings paid by an employer to a worker for
services rendered on normal working days and hours but does not include cost-of-living
allowances, profit sharing payments, premium payments, 13th month pay or other
monetary benefits which are not considered as part of or integrated into the regular
salary of the workers on the date the Act became effective;
o) "Statutory Minimum Wage" is the lowest wage rate fixed by law that an employer can
pay his workers;
p) "Wage Distortion" means a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation;
q) "Capitalization" means paid-up capital, in the case of a corporation, and total invested
capital, in the case of a partnership or single proprietorship.
CHAPTER I
Wage Increase
SECTION 1. Coverage. The wage increase prescribed under the Act shall apply to all
workers and employees in the private sector regardless of their position, designation or status,
and irrespective of the method by which their wages are paid, except;
a) Household or domestic helpers, including family drivers and workers in the personal
service of another;
b) Workers and employees in retail/service establishments regularly employing not more
than 10 workers, when exempted from compliance with the Act, for a period fixed by the
Commission/Boards in accordance with Section 4 (c) of the Act and Section 15, Chapter
1 of this Rules;
c) Workers and employees in new business enterprises outside the National Capital
Region and export processing zones for a period of not more than two or three years, as
the case may be, from the start of operations when exempted in accordance with
Section 5 of the Act and Section 15, Chapter 1 of this Rules;
d) Workers and employees receiving a basic wage of more than P100.00 per day.
Section 2. Effectivity. The Act takes effect on July 1, 1989, 15 days following its complete
publication in two newspapers of general circulation on June 15, 1989 pursuant to Section 15
thereof.
Section 3. Amount of Minimum Wage Increase. Effective July 1, 1989, the daily statutory
minimum wage rates of covered workers and employees shall be increased as follows:
a) P25.00 for those in the National Capital Region;
b) P25.00 for those outside the National Capital Region, except for the following:
P20.00 for those in plantation agricultural enterprises with an annual gross
sales of less than P5 million in the fiscal year immediately preceding the
effectivity of the Act;
P15.00 for those in the following enterprises:
1. Non-plantation agriculture
2. Cottage/handicraft
3. Retail/Service regularly employing not more than 10 workers.
4. Business enterprises with a capitalization of not more than P500,000
and employing not more than 20 workers.
Section 4. When Wage Increase Due Other Workers.
a) All workers and employees who, prior to July 1, 1989, were already receiving a basic
wage above the statutory minimum wage rates provided under Republic Act 6640 but
not over P100.00 per day shall receive a wage increase equivalent to that provided in
the preceding Section.
b) Those receiving not more than the following monthly wage rates prior to July 1, 1989
shall be deemed covered by the preceding subsection:
(i) P3,257.50 where the workers and employees work everyday, including
premium payments for Sundays or rest days, special days and regular holidays.
(ii) P3,041.67 where the workers and employees do not work but considered
paid on rest days, special days and regular holidays.
(iii) P2,616.67 where the workers and employees do not work and are not
considered paid on Sundays or rest days.
(iv) P2,183.33 where the workers and employees do not work and are not
considered paid on Saturdays and Sundays or rest days.
c) Workers and employees who, prior to July 1, 1989, were receiving a basic wage of
more than P100.00 per day or its monthly equivalent, are not by law entitled to the wage
increase provided under the Act. They may, however, receive wage increases through
the correction of wage distortions in accordance with Section 16, Chapter 1 of this Rules.
Section 5. Daily Statutory Minimum Wage Rates. The daily statutory minimum wage rates
of workers and employees shall be as follows:
Under RA 6640 Under RA 6727
Sector/Industry (Effective (Effective
Dec. 14, 1987) July 1, 1989 )
A. NATIONAL CAPITAL REGION
Non-Agriculture P64.00 P89.00
Agriculture
Plantation 54.00 79.00
Non-Plantation 43.50 68.50
Cottage/Handicraft
Employing more than 30 workers 52.00 77.00
Employing not more than 30 workers 50.00 75.00
Private hospitals
With bed capacity of more than 100 64.00 89.00
With bed capacity or 100 or less 60.00 85.00
Retail/Service
Employing more than 15 workers 64.00 89.00
Employing 11 to 15 workers 60.00 85.00
Employing not more than 10 workers 43.00 68.00
B. OUTSIDE NATIONAL CAPITAL REGION
Non-agriculture 64.00 89.00
Agriculture
Plantation with annual
gross sales of P5M or more 54.00 79.00
Plantation with annual gross
sales less than P5M 54.00 74.00
Non-Plantation 43.50 58.50
Cottage/Handicraft
Employing more than 30 workers 52.00 67.00
Employing not more than 30 workers 50.00 65.00
Private Hospitals 60.00 85.00
Retail/Service
Cities w/ population of more than 150,000
Employing more than 15 workers 64.00 89.00
Employing 11 to 15 workers 60.00 85.00
Employing not more than 10 workers 43.00 58.00
Municipalities and Cities with
population not more than 150,000
Employing more than 10 workers 60.00 85.00
Employing not more than 10 workers 43.00 58.00
Sugar Mills 66.00 91.00
Agriculture
Plantation with annual gross
sales of P5M or more 48.50 73.50
Plantation with annual gross
sales of less than P5M 48.50 68.50
Non-plantation 43.50 58.50
Business Enterprises with Capitalization
of not more than P500,000 and employing
not more than 20 workers
Non-Agriculture 64.00 79.00
Agriculture Plantation
Products Other than Sugar 54.00 69.00
Sugar 48.50 63.50
Private Hospitals 60.00 75.00
Retail/Service
Cities w/ population of more than P150,000
Employing more than 15 workers 64.00 79.00
Employing 11 to 15 workers 60.00 75.00
Municipalities and Cities w/ population
of not more than 150,000
Employing more than 10 workers 60.00 75.00
Section 6. Suggested Formula in Determining the Equivalent Monthly Statutory Minimum
Wage Rates. Without prejudice to existing company practices, agreements or policies, the
following formula may be used as guides in determining the equivalent monthly statutory
minimum wage rates:
 a) For those who are required to work everyday including Sundays or rest days, special
days and regular holidays:
Equivalent Applicable daily wage rate
Monthly = (ADR) x 390.90 days

Rate (EMR) 12
Where 390.90 days =
302 days Ordinary working days
20 days 10 regular holidays x 200%
66.30 days 51 rest days x 130%
2.60 days 2 special days x 130%
390.90 days Total equivalent number of days.
Note: For workers whose rest days fall on Sundays, the number of rest days in a year is
reduced from 52 to 51 days, the last Sunday of August being a regular holiday under Executive
Order No. 203. For purposes of computation, said holiday, although still a rest day for them, is
included in the ten regular holidays. For workers whose rest days do not fall on Sundays, the
number of rest days is 52 days, as there are 52 weeks in a year.
Nothing herein shall be construed as authorizing the reduction of benefits granted under existing
agreements or employer practices/policies.
Section 7. Basis of Minimum Wage Rates. The statutory minimum wage rates prescribed
under the Act shall be for the normal working hours, which shall not exceed eight hours of work
a day.
Section 8. Credible Wage Increase.
a) No wage increase shall be credited as compliance with the increases prescribed
under the Act unless expressly provided under collective bargaining agreements, and,
such wage increase was granted not earlier than April 1, 1989 but not later than July 1,
1989. Where the wage increase granted is less than the prescribed increase under the
Act, the employer shall pay the difference.
b) Anniversary wage increase provided in collective agreements, merit wage increase,
and those resulting from the regularization or promotion of employees shall not be
credited as compliance thereto.
Section 9. Workers Paid by Results.
a) All workers paid by results, including those who are paid on piecework, takay,
pakyaw, or task basis, shall receive not less than the applicable statutory minimum wage
rates prescribed under the Act for the normal working hours which shall not exceed eight
hours work a day, or a proportion thereof for work of less than the normal working hours.
The adjusted minimum wage rates for workers paid by results shall be computed in
accordance with the following steps:
1) Amount of increase in AMW* Previous AMW x 100 = % increase;
2) Existing rate/piece x % increase = increase in rate/piece;
3) Existing rate/piece + increase in rate/piece = Adjusted rate/piece.
*Where AMW is the applicable minimum wage rate.
b) The wage rates of workers who are paid by results shall continue to be established in
accordance with Article 101 of the Labor Code, as amended and its implementing
regulations.
Section 10. Wages of Special Groups of Workers. Wages of apprentices, learners and
handicapped workers shall in no case be less than 75 percent of the applicable statutory
minimum wage rates.
All recognized learnership and apprenticeship agreements entered into before July 1, 1989 shall
be considered as automatically modified insofar as their wage clauses are concerned to reflect
the increases prescribed under the Act.
Section 11. Application to Contractors. In the case of contracts for construction projects
and for security, janitorial and similar services, the prescribed wage increases shall be borne by
the principals or clients of the construction/service contractors and the contract shall be deemed
amended accordingly. In the event, however, that the principal or client fails to pay the
prescribed wage rates, the construction/service contractor shall be jointly and severally liable
with his principal or client.
Section 12. Application to Private Educational Institutions. Private educational
institutions which increased tuition fees beginning school year 1989-1990 shall comply with the
P250.00 per day wage increase prescribed under the Act effective as follows:
a) In cases where the tuition fee increase was effected before the effectivity of the Act,
the wage increase shall take effect on July 1, 1989.
b) In cases where the tuition fee increase was effected on or after the effectivity of the
Act, the wage increase shall take effect not later than the date the school actually
increased tuition fees but in the latter case, such wage increase may not be made
retroactive to July 1, 1989.
Beginning school year 1990-1991, all schools shall implement the wage increase regardless of
whether or not they have actually increased tuition fees.
Section 13. Mobile and Branch Workers. The statutory minimum wage rates of workers,
who by the nature of their work have to travel, shall be those applicable in the domicile or head
office of the employer.
The minimum wage rates of workers working in branches or agencies of establishments in or
outside the National Capital Region shall be those applicable in the place where they are
stationed.
Section 14. Transfer of Personnel. The transfer of personnel to areas outside the National
Capital Region shall not be a valid ground for the reduction workers transferred to the National
Capital Region shall be entitled to the minimum wage rate applicable therein.
Section 15. Exemptions.
a) The following establishments may be exempted from compliance with the wage
increase prescribed under the Act:
1) Retail/Service establishments regularly employing not more than 10 workers
upon application with and as determined by the appropriate Board in accordance
with applicable guidelines to be issued by the Commission.
2) New business enterprises that may be established outside the National Capital
Region and export processing zones from July 1, 1989 to June 30, 1993, whose
operation or investments need initial assistance may be exempted for not more
than three years from the start of operations, subject to guidelines to be issued
by the Secretary in consultation with the Department of Trade and Industry and
the Department of Agriculture.
New business enterprises in Region III (Central Luzon) and Region IV (Southern
Tagalog) may be exempted for two years only from start of operations, except those that
may be established in the provinces of Palawan, Oriental Mindoro, Occidental Mindoro,
Marinduque, Romblon, Quezon and Aurora, which may also be exempted for not more
than three years from the start of operations.
b) Whenever an application for exemption has been duly filed with the appropriate office
in the Department/Board, action by the Regional Office of the Department on any
complaint for alleged non-compliance with the Act shall be deferred pending resolution
of the application for exemption.
c) In the event that the application for exemption is not granted, the workers and
employees shall receive the appropriate compensation due them as provided for under
the Act plus interest of one percent per month retroactive to July 1, 1989 or the start of
operations whichever is applicable.
Section 16. Effects on Existing Wage Structure. Where the application of the wage
increase prescribed herein results in distortions in the wage structure within an establishment
which gives rise to a dispute therein, such dispute shall first be settled voluntarily between the
parties. In the event of a deadlock, such dispute shall be finally resolved through compulsory
arbitration by the regional arbitration branch of the National Labor Relations Commission
(NLRC) having jurisdiction over the workplace.
The NLRC shall conduct continuous hearings and decide any dispute arising from wage
distortions within twenty calendar days from the time said dispute is formally submitted to it for
arbitration.
The pendency of a dispute arising from a wage distortion shall not in any way delay the
applicability of the increases in the wage rates prescribed under the Act.
Any issue involving wage distortion shall not be a ground for a strike/lockout.
Section 17. Complaints for Non-Compliance. Complaints for non-compliance with the
wage increases prescribed under the Act shall be filed with the Regional Offices of the
Department having jurisdiction over the workplace and shall be the subject of enforcement
proceedings under Articles 128 and 129 of the Labor Code, as amended.
Section 18. Conduct of Inspection by the Department. The Department shall conduct
inspections of establishments, as often as necessary, to determine whether the workers are
paid the prescribed wage rates and other benefits granted by law or any Wage Order. In the
conduct of inspection in unionized companies, Department inspectors shall always be
accompanied by the president or other responsible officer of the recognized bargaining unit or of
any interested union. In the case of non-unionized establishments, a worker representing the
workers in the said company shall accompany the inspector.
The workers' representative shall have the right to submit his own findings to the Department
and to testify on the same if he does not concur with the findings of the labor inspector.
Section 19. Payment of Wages. Upon written petition of the majority of the workers and
employees concerned, all private establishments, companies, businesses and other entities with
at least twenty-five workers and located within one kilometer radius to a commercial, savings or
rural bank, shall pay the wages and other benefits of their workers through any of said banks
within the period and in the manner and form prescribed under the Labor Code as amended.
Section 20. Duty of Bank. Whenever applicable and upon request of a concerned worker or
union, the bank through which wages and other benefits are paid shall issue a certification of
the record of payment of said wages and benefits of a particular worker or workers for a
particular payroll period.
CHAPTER II
The National Wages and Productivity Commission and Regional Tripartite Wages and
Productivity Boards
SECTION 1. Commission. The National Wages and Productivity Commission created under
the Act shall hold office in the National Capital Region. The Commission shall be attached to the
Department for policy and program coordination.
Section 2. Powers and Functions of the Commission. The Commission shall have the
following powers and functions:
a) To act as the national consultative and advisory body to the President of the
Philippines and Congress on matters relating to wages, incomes and productivity;
b) To formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels;
c) To prescribe rules and guidelines for the determination of appropriate minimum wage
and productivity measures at the regional, provincial or industry levels;
d) To review regional wage levels set by the Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance with prescribed guidelines and national
development plans;
 e) To undertake studies, researches and surveys necessary for the attainment of its
functions and objectives, and to collect and complete data and periodically disseminate
information on wages and productivity and other related information, including, but not
limited to, employment, cost-of-living, labor costs, investments and returns;
f) To review plans and programs of the Regional Tripartite Wages and Productivity
Boards to determine whether these are consistent with national development plans;
g) To exercise technical and administrative supervision over the Regional Tripartite
Wages and Productivity Boards;
h) To call, from time to time, a national tripartite conference of representatives of
government, workers and employers for the consideration of measures to promote wage
rationalization and productivity; and
i) To exercise such powers and functions as may be necessary to implement this Act.
Section 3. Composition of the Commission. The Commission shall be composed of the
Secretary as ex-officio Chairman, the Director General of the National Economic and
Development Authority (NEDA) as ex-officio Vice-Chairman and two members each from
workers and employers sectors who shall be appointed by the President for a term of five years
upon recommendation of the Secretary. The recommendees shall be selected from the list of
nominees submitted by the workers and employers sectors. The Executive Director of the
Commission Secretariat shall also be a member of the Commission.
The members of the Commission representing labor and management shall have the same
rank, emoluments, allowances and other benefits as those prescribed by law for labor and
management representatives in the Employees Compensation Commission.
Section 4. Commission Secretariat. The Commission shall be assisted by a Secretariat to
be headed by an Executive Director and two Deputy Directors, who shall be appointed by the
President upon recommendation of the Secretary.
The Executive Director shall have the rank of a Department Assistant Secretary, while the
Deputy Directors that of a Bureau Director shall receive the corresponding salary, benefits and
other emoluments of the positions.
Section 5. Regional Tripartite Wages and Productivity Boards. The Regional Wages and
Productivity Boards created under the Act in all regions, including autonomous regions as may
be established by law, shall hold offices in areas where the Regional Offices of the Department
are located.
Section 6. Powers and Functions of the Boards. The Boards shall have the following
powers and functions:
a) To develop plans, programs and projects relative to wages, incomes and productivity
improvements for their respective regions;
b) To determine and fix minimum wage rates applicable in their region, provinces or
industries therein and to issue the corresponding wage orders, subject to guidelines
issued by the Commission;
c) To undertake studies, researches, and surveys necessary for the attainment of their
functions, objectives and programs, and to collect and compile data on wages, incomes,
productivity and other related information and periodically disseminate the same;
d) To coordinate with the other Boards as may be necessary to attain the policy and
intention of the Labor Code;
e) To receive, process and act on applications for exemption from prescribed wage rates
as may be provided by law or any Wage Order; and
f) To exercise such other powers and functions as may be necessary to carry out their
mandate under the Labor Code.
Implementation of the plans, programs and projects of the Boards shall be through the
respective Regional Offices of the Department, provided, however, that the Boards shall have
technical supervision over the Regional Office of the Department with respect to the
implementation of these plans, programs and projects.
Section 7. Composition of the Boards. Each Board shall be composed of the Regional
Director of the Department as Chairman, the Regional Directors of the National Economic and
Development Authority (NEDA) and Department of Trade and Industry (DTI) as Vice-Chairmen
and two members each of workers and employers sectors who shall be appointed by the
President for a term of five years upon the recommendation of the Secretary. The
recommendees shall be selected from the lists of nominees submitted by the workers and
employers sectors.
Each Board shall be assisted by a Secretariat.
Section 8. Authority to Organize and Appoint Personnel. The Chairman of the
Commission shall organize such units and appoint the necessary personnel of the Commission
and Board Secretariats, subject to pertinent laws, rules and regulations.
CHAPTER III
Minimum Wage Determination
SECTION 1. Regional Minimum Wages. The minimum wage rates for agricultural and non-
agricultural workers and employees in every region shall be those prescribed by the Boards
which shall in no case be lower than the statutory minimum wage rates. These wage rates may
include wages by industry, province or locality as may be deemed necessary by the Boards.
Section 2. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages to
be established by the Boards shall be as nearly adequate as is economically feasible to
maintain the minimum standards of living necessary for the health, efficiency and general well-
being of the workers within the framework of the national, economic, and social development
programs. In the determination of regional minimum wages, the Boards, shall, among other
relevant factors, consider the following:
a) The demand for living wages;
b) Wage adjustment vis-a-vis the consumer price index;
c) The cost of living and changes or increases therein;
d) The needs of workers and their families;
e) The need to induce industries to invest in the countryside;
f) Improvements in standards of living;
g) The prevailing wage levels;
h) Fair return of the capital invested and capacity to pay of employers;
i) Effects on employment generation and family income; and
j) The equitable distribution of income and wealth along the imperatives of economic and
social development.
Section 3. Wage Order. Whenever conditions in the region so warrant, the Board shall
investigate and study all pertinent facts; and, based on standards and criteria prescribed herein,
shall determine whether a Wage Order should be issued.
In the performance of its wage determining functions, the Board shall conduct public hearings
and consultations giving notices to employees' and employers' groups, provincial, city and
municipal officials and other interested parties.
Section 4. Effectivity of Wage Order. Any Wage Order issued by the Boards shall take
effect 15 days after its complete publication in at least one newspaper of general circulation in
the region.
Section 5. Appeal to the Commission. Any party aggrieved by the Wage Order issued by
the Board may file an appeal with the Commission within ten calendar days from the publication
of the Order. The Commission shall decide the appeal within sixty calendar days from the date
of filing.
Section 6. Effect of Appeal. The filing of the appeal shall not suspend the effectivity of the
Wage Order unless the person appealing such order files with the Commission an undertaking
with a surety or sureties in such amount as may be fixed by the Commission.
Section 7. Wage Distortions. Where the application of any wage increase resulting from a
Wage Order issued by any Board results in distortions in the wage structure within an
establishment, the employer and the union shall negotiate to correct the distortions using the
grievance procedure under the collective bargaining agreement. If it remains unresolved, it shall
be decided through voluntary arbitration within ten calendar days from the time the dispute was
referred for voluntary arbitration, unless otherwise agreed by the parties in writing.
Where there are no collective agreements or recognized labor unions, the employer and
workers shall endeavor to correct the wage distortion. Any dispute arising therefrom shall be
settled through the National Conciliation and Mediation Board and if it remains unresolved after
ten calendar days of conciliation, it shall be referred to the appropriate branch of the National
Labor Relations Commission (NLRC). The NLRC shall conduct continuous hearings and decide
the dispute within twenty calendar days from the time said dispute is submitted for compulsory
arbitration.
The pendency of a dispute arising from a wage distortion shall not in any way delay the
applicability of any wage increase prescribed pursuant to the provisions of law or Wage Order.
Section 8. Non-Diminution of Benefits. Nothing in the Act and in this Rules shall be
construed to reduce any existing wage rates, allowances and benefits of any form under
existing laws, decrees, issuances, executive orders and/or under any contract or agreement
between the workers and employers.
Section 9. Prohibition Against Injunction. No preliminary or permanent injunction or
temporary restraining order may be issued by any court, tribunal or other entity against any
proceedings before the Commission or Boards.
Section 10. Penal Provisions. Any person, corporation, trust, firm, partnership, association
or entity which refuses or fails to pay any of the prescribed increases or adjustments in the
wage rates, made in accordance with the Act shall be punished by a fine not exceeding P25,000
and/or imprisonment of not less than one year nor more than two years: Provided, that any
person convicted under the Act shall not be entitled to the benefits provided for under the
Probation Law.
If the violation is committed by a corporation, trust or firm, partnership, association or any other
entity, the penalty of imprisonment shall be imposed upon the entity's responsible officers,
including, but not limited to, the president, vice-president, chief executive officer, general
manager, managing director or partner.
Section 11. Registration/Reporting Requirement. Any person, company, corporation,
partnership or any other entity engaged in business shall submit annually a verified itemized
listing of their labor component to the appropriate Board and the National Statistics Office not
later than January 31 of each year, starting on January 31, 1990 in accordance with the form to
be prescribed by the Commission. The listing shall specify the names, salaries and wages of
their workers and employees below the managerial level including learners, apprentices and
disabled/handicapped workers.
CHAPTER IV
Transitory Provisions
SECTION 1. Abolition of the National Wages Council and the National Productivity
Commission. The National Wages Council created under Executive Order No. 614 and the
National Productivity Commission created under Executive Order No. 615 are abolished. All
properties, records, equipment, buildings, facilities, and other assets, liabilities and
appropriations of and belonging to the abovementioned offices, as well as other matters
pending therein, shall be transferred to the Commission. All personnel of the above-abolished
offices shall continue to function in a hold-over capacity and shall be preferentially considered
for appointments to or placements in the Commission/ Boards.
Any official or employee separated from the service as a result of the abolition of offices
pursuant to the Act shall be entitled to appropriate separation pay of one month salary for every
year of service and/or retirement and other benefits accruing to them under existing laws. In lieu
thereof, at the option of the employee, he shall be preferentially considered for employment in
the government or in any of its subdivisions, instrumentalities, or agencies, including
government-owned or controlled corporations and their subsidiaries.
Section 2. Interim Processing of Applications for Exemption and Submission of
Reports. Pending the operationalization of the Commission and Boards, the National Wages
Council shall, in the interim, receive and process applications for exemption subject to
guidelines to be issued by the Secretary in accordance with Section 11 of the Act.
Reports of establishments on their labor component, including wages and salaries of their
workers prescribed under the Act, shall be submitted to the National Wages Council through the
Regional Offices of the Department.
Section 3. Funding Requirement. The funds necessary to carry out the provisions of the
Act shall be taken from the Compensation and Organizational Adjustment Fund, the Contingent
Fund, and other savings under Republic Act No. 6688, otherwise known as the General
Appropriations Act of 1989, or from any unappropriated funds of the National Treasury;
Provided that the funding requirements necessary to implement the Act shall be included in the
Annual General Appropriations Act for the succeeding years.
Section 4. Repealing Clause. All laws, orders, issuances, rules and regulations or parts
thereof inconsistent with the provisions of the Act and this Rules are hereby repealed, amended
or modified accordingly. If any provision or part of the Act and this Rules, or the application
thereof to any person or circumstance shall not be affected thereby.
Section 5. Effectivity. This Rules shall take effect on July 1, 1989.
Done in the City of Manila, Republic of the Philippines this 7th day of July 1989.
Approved: June 9, 1989
 REPUBLIC ACT NO. 8188

AN ACT INCREASING THE PENALTY AND INCREASING DOUBLE

INDEMNITY FOR VIOLATION OF THE PRESCRIBED INCREASES OR
ADJUSTMENT IN THE WAGE RATES, AMENDING FOR THE PURPOSE
SECTION TWELVE OF REPUBLIC ACT NUMBERED SIXTY-SEVEN
HUNDRED TWENTY-SEVEN, OTHERWISE KNOWN AS THE WAGE
RATIONALIZATION ACT
Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Section 12 of Republic Act Numbered Sixty-seven hundred

twenty-seven is hereby amended to read to as follows:
SECTION 2. All laws, presidential decrees, executive orders, rules and
regulations or parts thereof inconsistent with the provisions of this Act are
hereby repealed or modified accordingly.

SECTION 3. This Act shall take effect fifteen (15) days after its complete
publication in a newspaper of general circulation.

Approved:

(SGD.) NEPTALI A. GONZALES

President of the Senate

(SGD.) JOSE DE VENECIA, JR.

Speaker of the House of Representatives
This Act, which is a consolidation of Senate Bill No. 407 and House Bill
No. 5808 was finally passed by the Senate and the House of
Representatives on June 7, 1996.

(SGD.) HEZEL P. GACUTAN

Secretary of the Senate

(SGD.) CAMILO L. SABIO

Secretary General
House of Representatives

Approved: June 11, 1996

(SGD.) FIDEL V. RAMOS
President of the Philippines
 Republic of the Philippines
Congress of the Philippines
Metro Manila
Twelfth Congress
Second Regular Session

Begun and held in Metro Manila, on Monday, the twenty-second day of July, two thousand two.
Republic Act No. 9178 November 13, 2002
AN ACT TO PROMOTE THE ESTABLISHMENT OF BARANGAY MICRO BUSINESS
ENTERPRISES (BMBEs), PROVIDING INCENTIVES AND BENEFITS THEREFOR, AND FOR
OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled.
PRELIMINARY PROVISIONS
Section 1. Short Title This Act shall be known as the "Barangay Micro Business Enterprises
(BMBE's) Act of 2002."
Section 2. Declaration of Policy It is hereby declared to be the policy of the State to hasten
the country's economic development by encouraging the formation and growth of barangay
micro business enterprises which effectively serve as seedbeds of Filipino entrepreneurial
talents, and intergranting those in the informal sector with the mainstream economy, through the
rationalization of bureaucratic restrictions, the active granting of incentives and benefits to
generate much-needed employment and alleviate poverty.
Section 3. Definition of Terms As used in this Act, the following terms shall mean:
(a) "Barangay Micro Business Enterprise," hereinafter referred to as BMBE, refers to any
business entity or enterprise engaged in the production, processing or manufacturing of
products or commodities, including agro-processing, trading and services, whose total
assets including those arising from loans but exclusive of the land on which the
particular business entity's office, plant and equipment are situated, shall not be more
than Three Million Pesos (P3,000,000.00) The Above definition shall be subjected to
review and upward adjustment by the SMED Council, as mandated under Republic Act
No. 6977, as amended by Republic Act No. 8289.
For the purpose of this Act, "service" shall exclude those rendered by any one, who is
duly licensed government after having passed a government licensure examination, in
connection with the exercise of one's profession.
(b) "Certificate of Authority" is the certificate issued granting the authority to the
registered BMBE to operate and be entitled to the benefits and privileges accorded
thereto.
(c) "Assets" refers to all kinds of properties, real or personal, owned by the BMBE and
used for the conduct of its business as defined by the SMED Council: Provided, That for
the purpose of exemption from taxes and fees under this Act, this term shall mean all
kinds of properties, real or personal, owned and/or used by the BMBE for the conduct of
its business as defined by the SMED Council.
(d) "Registration" refers to the inclusion of BMBE in the BMBE Registry of a city or
municipality.
(e) "Financing" refers to all borrowings of the BMBE from all sources after registration.
REGISTRATION AND OPERATION OF BMBE
Section 4. Registration and Fees - The Office of the Treasurer of each city or municipality shall
register the BMBE's and issue a Certificate of Authority to enable the BMBE to avail of the
benefits under this Act. Any such applications shall be processed within fifteen (15) working
days upon submission of complete documents. Otherwise, the BMBEs shall be deemed
registered. The Municipal or City Mayor may appoint a BMBE Registration Officer who shall be
under the Office of the Treasurer. Local government units (LGU's) are encouraged to establish
a One-Stop-business Registration Center to handle the efficient registration and processing of
permits/licenses of BMBEs. Likewise, LGUs shall make a periodic evaluation of the BMBE's
financial status for monitoring and reporting purposes.
The LGUs shall issue the Certificate of Authority promptly and free of charge. However, to
defray the administrative costs of registering and monitoring the BMBEs, the LGUs may charge
a fee renewal.
The Certificate of Authority shall be effective for a period of two (2) years, renewable for a
period of two (2) years for every renewal.
As much as possible, BMBEs shall be subject to minimal bureaucratic requirements and
reasonable fees and charges.
Section 5. Who are Eligible to Register Any person, natural or juridical, or cooperative, or
association, having the qualifications as defined in Section 3(a) hereof may apply for registration
as BMBE.
Section 6. Transfer of Ownership - The BMBE shall report to the city or municipality of any
changer in the status of its ownership structure, and shall surrender the original copy of the
BMBE Certificate of Authority for notation of the transfer.
INCENTIVES AND BENEFITS
Section 7. Exemption from Taxes and Fees All BMBEs shall be exempt from tax for income
arising from the operations of the enterprise.
The LGUs are encouraged either to reduce the amount of local taxes, fees and charges
imposed or to exempt BMBEs from local taxes, fees and charges.
Section 8. Exemption from the Coverage of the Minimum Wage Law The BMBEs shall be
exempt from the coverage of the Minimum Wage Law: Provided, That all employees covered
under this Act shall be entitled to the same benefits given to any regular employee such as
social security and healthcare benefits.
Section 9. Credit Delivery upon the approval of this Act, the land Bank of the Philippines
(LBP), the Development Bank of the Philippines (DBP), the Small Business Guarantee and
Finance Corporation (SBGFC), and the People's Credit and Finance Corporation (PCFC) shall
set up a special credit window that will service the financing needs of BMBEs registered under
this Act consistent with the Banko Sentral ng Pilipinas (BSP) policies; rules and regulations. The
Government Service Insurance System (GSIS) and Social Security System (SSS) shall likewise
set up a special credit window that will serve the financing needs of their respective members
who wish to establish a BMBE. The concerned financial institutions (FIs) encouraged to
wholesale the funds to accredited private financial institutions including community-based
organizations such as credit, cooperatives, non-government organizations (NGOs) and people's
organizations, which will in turn, directly provide credit support to BMBEs.
All loans from whatever sources granted to BMBEs under this Act shall be considered as part of
alternative compliance to Presidential Decree no, 717,, otherwise known as the Agri-Agra Law,
or to Republic Act. No. 6977, known as the Magna Carta for Small and Medium Enterprises, as
amended. For purposes of compliance with presidential Decree no. 717 and Republic Act No.
6977, as amended, loans granted to BMBEs under this Act shall be computed at twice the
amount of the face value of the loans.
To minimize the risks in lending to the BMBEs, the SBGFC and the Quedan and Rural Credit
Guarantee Corporation (QUEDANCOR) under the Department of Agriculture, in case of
agribusiness activities, shall set up a special guarantee window to provide the necessary credit
guarantee to BMBEs unde rtheir respective guarantee programs.
The LBP, DBP. PCFC, SBGFC, SSS, GSIS, and QUEDANCOR shall annually report to the
appropriate Committee of Both Houses of Congress on the status of the implementation of this
provision.
The BSP shall formulate the rules for the implementation of this provision and shall likewise
establish incentive programs to encourage and improve credit delivery to the BMBEs.
Section 10. Technology Transfer, Production and Management Training, and marketing
Assistance A BMBE Development Fund shall be set up with an endowment of Three Hundred
Million pesos (P300,000,000.00) from the Philippine Amusement and Gaming Corporation
(PAGCOR) and shall be administered by the SMED Council.
The Department of Trade and Industry (DTI), the Department of Science and Technology
(DOST), the university of the Philippines Institute for Small Scale Industries (UP ISSI),
Cooperative Development Authority (CDA), Technical Education and Skills Development
Authority (TESDA), and Technology and Livelihood Resource Center (TLRC) may avail of the
said Fund for technology transfer, production and management training and marketing
assistance to BMBEs.
The DTI, in coordination with the private sector and non-government organization (NGOs), shall
explore the possibilities of linking or matching-up BMBEs with small, medium and large
enterprises and likewise establish incentives therefor.
The DTI, in behalf of the DOST, UP ISSI, CDA. TESDA and TLRC shall be required to furnish
the appropriate Committees of both Houses of Congress a yearly report on the development
and accomplishments of their projects and programs in relation to technology transfer,
production and management training and marketing assistance extended to BMBEs.
Section 11. Trade and Investment Promotions The data gathered from business registration
shall be made accessible to and shall be utilized by private sector organizations and non-
government organizations for purposes of business matching, trade and investment promotion.
INFORMATION DISSEMINATION
Section 12. Information Dissemination - The Philippine Information Agency (PIA), in
accordance with the Department of Labor and Employment (DOLE), the DILG and the DTI, shall
ensure the proper and adequate information dissemination of the contents and benefits of this
Act to the general public especially to its intended beneficiaries specifically in the barangay
level.
PENALTY
Section 13. Penalty - Any person who shall willfully violates any provision of this Act or who
shall in any manner commit any act to defeat any provisions of this Act shall, upon conviction,
be punished by a fine of not less than twenty-five Thousand Pesos (P25,000.00) but not more
than Fifty Thousand Pesos (P50,000.00) and suffer imprisonment of not less than six (6)
months but not more than two (2) years.
In case of non-compliance with the provisions of Section 9 of this Act, the BSP shall impose
administrative sanctions and other penalties on the concerned government financial institutions,
including a fine of not less than Five Hundred Thousand Pesos (P500,000.00)
MISCELLANEOUS PROVISIONS
Section 14. Annual Report The DILG, DTI, and BSP shall submit an annual report to the
Congress on the status of the implementation of this Act.
Section 15. Implementing Rules and Regulations The Secretary of the Department of Trade
and Industry, in consultation with the Secretaries of the DILG, DOF, and the BSP Governor shall
formulate the necessary ruled and regulations to implement the provisions of this Act within
ninety (90) days after its approval. The rules and regulations issued pursuant to this section
shall take effect fifteen (15) days after its publication in a newspaper of general circulation.
Section 16. Separably Clause - If any provision or part hereof, is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall remain
valid and subsisting.
Section 17. Repealing Clause Existing laws, presidential decrees, executive orders,
proclamations or administrative regulations that are inconsistent with the provisions of this Act
are hereby amended, modified, superseded or repealed accordingly.
Section 18. Effectivity This Act shall take effect fifteen (15) days after its publication in
the Office Gazette or in at least two (2) newspaper of general circulation.

Approved,
FRANKLIN DRILON JOSE DE VENECIA JR.
President of the Senate Speaker of the House of
Representatives
This Act, which is a consolidation of Senate Bill No. 1855 and House Bill No. 4871 was finally
passed by the Senate and the House of Representatives on October 24, 2002 and October 23,
2002, respectively.
OSCAR G. YABES ROBERTO P. NAZARENO
Secretary of Senate Secretary General
House of Represenatives
Approved: November 13, 2002
GLORIA MACAPAGAL-ARROYO
President of the Philippines