Fair Wages and Productivity Act of 2025

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session 25 JUL -7 P12:02 SENATE S.B. No._ INTRODUCED BY SENATOR RISA HONTIVEROS AN ACT AMENDING REPUBLIC ACT NO. 6727, OTHERWISE KNOWN AS THE WAGE RATIONALIZATION ACT, FURTHER RATIONALIZING WAGE POLICY AND MECHANISMS FOR BETTER WORKER EARNINGS BASED ON MICRO, SMALL, AND MEDIUM ENTERPRISES (MSME) PRODUCTIVITY AND FOR OTHER PURPOSES EXPLANATORY NOTE The existing framework for minimum wage setting in the Philippines, as embodied in Republic Act No. 6727, has served as a mechanism for adjusting wages at the regional level. However, persistent challenges remain regarding the adequacy of mandated minimum wages in meeting the basic needs of workers and their families, often falling short of regional poverty lines. Critics argue that the composition and operational dynamics of the Regional Tripartite Wages and Productivity Boards (RTWBS) tend to yield conservative wage adjustments. The curent composition of the RTWPBs, primarily comprising representatives from the Department of Labor and Employment (DOLE), National Economic and Development Authority (NEDA), and Department of Trade and Industry (DTI), along with private sector representatives, often leads to wage orders that prioritize economic stability and business viability, sometimes at the expense of substantial wage increases. While these concerns are valid, the perception of a "conservative technocratic" influence can lead to a disconnect between mandated wages and the actual cost of living. Furthermore, the legitimate concern for the capacity of Micro, Small, and Medium Enterprises (MSMEs) to afford higher wages is a recurrent justification for modest adjustments. While exemptions exist for distressed enterprises and certain small establishments, these measures are reactive and do not address the fundamental issue of enhancing MSME productivity and their ability to provide competitive compensation. Economic analyses, such as those by Lanzona, highlight

the potential for minimum wage policies to inadvertently contribute to a "brain drain" from MSMEs to larger firms, thus exacerbating disparities and hindering overall economic dynamism. This proposed legislation seeks to address these critical issues by introducing reforms that aim to create a more balanced, responsive, and forward-looking wage setting mechanism. It recognizes that sustainable wage increases must be intrinsically linked to enhanced productivity and competitiveness of firms, particularly MSMEs, while simultaneously providing robust safety nets for vulnerable sectors. This Act proposes the following key amendments to Republic Act No. 6727: • Rebalancing Voting Power of Government Agencies: Section 5 of RA 6727 is amended to stipulate that the collective vote of the Regional Directors of DOLE, NEDA (or its successor agency, such as the proposed Department of Economic Development), and DT shall constitute one (1) vote within the Regional Boards. This structural change aims to ensure that while the expertise of these agencies is considered, their combined influence does not disproportionately dominate the wage determination process. It encourages internal consensus- building among these agencies, fostering a more unified government stance on wage policies. • Inclusion of Governors in RTWPBS: A significant innovation is the inclusion of two (2) Provincial Governors from the respective region, selected by the Regional Development Council (RDC), as voting members of the RTWPBs. Governors, as directly elected representatives and chief executives of their provinces, bring a critical local perspective, directly responsive to the socio- economic realities, employment dynamics, and development priorities at the grassroots level. Their inclusion ensures that regional wage decisions are more attuned to local conditions and broader regional development strategies, fostering a more holistic approach to wage policy. • Mandatory Regulatory Impact Assessment (RIA) for Wage Orders: The Act mandates the RTWPBs to conduct a comprehensive Regulatory Impact Assessment (RIA) for every proposed minimum wage adjustment. This RIA will specifically evaluate the potential economic and social effects on MSMEs, young workers, and women, who are often most vulnerable to adverse impacts of wage hikes. The RIA will serve as a crucial evidence-based tool to identify potential negative consequences, moving beyond anecdotal concerns to data- driven analysis. • Proactive Countervailing Safety Nets: Based on the findings of the RIA, the RTWBs are empowered and mandated to propose appropriate countervailing

safety nets and support mechanisms to the RDC and relevant national agencies. These safety nets, to be supported by the national budget, could include wage subsidies, targeted skills training programs, facilitated access to credit for MSMEs, and technical assistance. This provision shifts the paradigm from simply limiting wage increases to avoiding negative impacts, to proactively mitigating those impacts through government support. It acknowledges that fostering decent work and fair wages is a shared societal responsibility. • Development of Regional Productivity Roadmaps and Industrial Policy: This is a forward-looking provision that fundamentally links wage adjustments to long- term productivity and industrial development. Each RTWPB, in coordination with the RDC, is tasked with developing a regional roadmap for an industrial policy approach. This roadmap will focus on: • Enhancing Firm Capabilities: Helping MSMEs improve product/service quality, reliability, pricing, and scale of operations. • Market Participation: Enabling firms to participate in more demanding local and international markets. Innovation and Technology: Promoting the adoption of new technologies and innovative practices. This provision is rooted in the economic principle that labor is a derived demand. By enhancing the overall capability and competitiveness of firms, particularly MSMEs, the demand for skilled and productive labor will naturally increase, leading to higher compensation for workers. This approach ensures that wage increases are not merely mandated but are sustainable outcomes of a more robust and productive economy. The regional autonomy in developing these roadmaps acknowledges the diverse economic landscapes across the Philippines. The enactment of the "Fair Wages and Productivity Act of 2025" is expected to yield several positive outcomes: • More Responsive Wage Adjustments: The rebalanced composition of the RTWPBs and the inclusion of local government leaders will lead to wage orders that are more reflective of regional socio-economic realities and the needs of workers, while still considering the capacity of businesses. • Evidence-Based Policymaking: The mandatory RIA will ensure that wage decisions are informed by comprehensive analysis, allowing for targeted interventions to mitigate adverse effects. • Stronger Social Safety Nets: The institutionalization of countervailing safety nets, supported by the national budget, will protect vulnerable firms and workers from potential negative impacts of wage adjustments, fostering a more inclusive growth environment. • Sustainable Wage Growth through Productivity: The focus on regional

productivity roadmaps and industrial policy will shift the long-term approach to wage increases from mere mandates to organic growth driven by enhanced firm capabilities and competitiveness, leading to better-compensated workers in a thriving economy. • Reduced Brain Drain from MSMEs: By enhancing the capacity of MSMEs to be more productive and thus afford better wages, the proposed measures can help retain skilled workers within these crucial enterprises, fostering more balanced regional development. This Act represents a paradigm shift in minimum wage policy, moving beyond a purely wage-setting regulatory approach to an integrated strategy that combines fair wage setting with proactive economic development for MSMEs and social protection. In view of the foregoing, the passage of this bill is earnestly sought. Rentings- saraquel RISA HONTIVEROS Senator

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session JUL -7 Pi2:02 SENATE S.B. No._ 210 INTRODUCED BY SENATOR RISA HONTIVEROS AN ACT AMENDING REPUBLIC ACT NO. 6727, OTHERWISE KNOWN AS THE WAGE RATIONALIZATION ACT, FURTHER RATIONALIZING WAGE POLICY AND MECHANISMS FOR BETTER WORKER EARNINGS BASED ON MICRO, SMALL, AND MEDIUM ENTERPRISES (MSME) PRODUCTIVITY AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. This Act shall be known as the "Fair Wages and

Productivity Act of 2025."

Sec. 2. Declaration of Policy. It is hereby declared the policy of the State to

promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all. Towards this end, the State shall continue to rationalize the setting of minimum wages, ensuring not only the welfare of workers g and their families but also fostering productivity and competitiveness of enterprises, particularly Micro, Small, and Medium Enterprises (MSMEs), and developing long-term strategies for inclusive economic growth.

Sec. 3. Section 3 of Republic Act No. 6727 is hereby amended to read as

follows: "SEC. 3. Creation of 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.

The Commission shall be composed of the Secretary of Labor and Employment as ex- 2 officio Chairman, the Director-General of the National Economic and Development 3 Authority (NEDA) or its successor agency as ex-officio Vice-Chairman, and two (2) members each from the workers and employers sectors who shall be appointed by the President of the Philippines for a term of five (5) years without reappointment: Provided, That if a member of the Commission representing the workers or employers sectors fails to complete his term, the President shall appoint his successor for the unexpired portion of the term."

Sec. 4. Section 5 of Republic Act No. 6727 is hereby amended to read as

follows: "SEC. 5. 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. Each Regional Board shall be composed of: (a) The Regional Director of the Department of Labor and Employment as Chairman; (b) The Regional Directors of the National Economic and Development Authority or its successor agency, and the Department of Trade and Industry, as Vice-Chairmen. However, for purposes of voting on wage orders and productivity programs, the collective vote of the Regional Directors of the Department of Labor and Employment, the National Economic and Development Authority or its successor agency, and the Department of Trade and Industry shall collectively constitute one (1) vote, to be cast based on their internal consensus and prior deliberation on the proposed wage order or productivity program. (c) Two (2) members each from the workers and employers sectors who shall be appointed by the President of the Philippines, upon recommendation of the Secretary of Labor and Employment, for a term of five (5) years without reappointment: Provided, That if a member of the Regional Board representing the workers or employers sectors fails to complete his term, the President shall appoint his successor for the unexpired portion of the term. (d) Two (2) Provincial Governors from the region, selected by the Regional Development Councii, who shali serve for a term of 32 three (3) years concurrently with their terms as local chief executives, and who shall

each have one (1) vote."

Sec. 5. Section 6 of Republic Act No. 6727 is hereby amended by inserting new

paragraphs to read as follows: "SEC. 6. Powers and Functions of the 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 the guidelines issued by the Commission; c) To undertake researches and studies on wages and productivity; d) To review, assess, and approve applications for exemption from wage orders; e) To conduct public hearings and consultations, including joint consultations with labor and employer representatives, to ascertain the socio-economic conditions in the region and gather inputs on proposed wage adjustments; f) To conduct a comprehensive Regulatory Impact Assessment (RIA) on the potential economic and social effects of proposed minimum wage adjustments, particularly on Micro, Small, and Medium Enterprises (MSMEs), young workers, and women, identifying potential negative impacts on employment and business viability. The RIA shall serve as a basis for the identification and proposal of countervailing safety nets; 9) To propose to the Regional Development Council (RDC) and relevant national government agencies, with the support of the national budget, appropriate countervailing safety nets and support mechanisms to mitigate any identified negative effects of higher regional wages on vulnerable sectors, including but not limited to, wage subsidies, skills training programs, access to credit, and technical assistance for MSME productivity enhancement; h) To develop and implement, in coordination with the Regional Development Council (RDC) and relevant government agencies, a regional roadmap for an industrial policy approach aimed at raising the productivity and competitiveness of firms, especially MSMEs. This roadmap shall focus on: a. Enhancing the capability of firms to improve the quality of their products

and services; b. Improving the reliability, price, and scale of their deliveries; c. Facilitating their participation in more demanding local and international markets; and d. Promoting innovation and technological adoption. The regional roadmap shall be tailored to the specific economic landscape and development priorities of each region, with the ultimate goal of increasing the capacity of firms to provide higher compensation to workers through enhanced productivity and profitability. i) To exercise such other powers and functions as may be necessary to carry out their functions and to attain the purposes of this Act."

Sec. 6. Transitory Provisions. The selection of the two (2) Provincial

Governors to sit in the Regional Boards shall be completed by the respective Regional Development Councils within ninety (90) days from the effectivity of this Act.

Sec. 7. Implementing Rules and Regulations. The Secretary of Labor and

Employment, in consultation with the National Wages and Productivity Commission, the Department of Trade and Industry, the National Economic and Development Authority, and representatives from the workers and employers sectors, and the Regional Development Councils, shall promulgate the necessary rules and regulations for the effective implementation of this Act within one hundred eighty (180) days from its effectivity.

Sec. 8. Repealing Clause. All laws, presidential decrees, executive orders,

proclamations, rules, and regulations, or parts thereof, inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

Sec. 9. Separability Clause. If any provision of this Act is declared

unconstitutional, the same shall not affect the validity and effectivity of the other provisions hereof.

Sec. 10. Effectivity Clause. This Act shall take effect fifteen (15) days after

its complete publication in the Official Gazette or in at least two (2) newspapers of general circulation. Approved,