REPUBLIC ACT NO.

6727
 
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.
 
Section 1. This Act shall be known as the "Wage Rationalization
Act."

Sec. 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. chanroblesvirtuallawlibrary

The State shall promote collective bargaining as the primary

mode of setting 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.
Sec. 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." 
chanroblesvirtuallawlibrary
"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 Secretariat 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 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 of 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 operate to 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."
chanroblesvirtuallawlibrary
 
"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.  chanroblesvirtuallawlibrary

"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 with
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 a 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.  
chanroblesvirtuallawlibrary
 
"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. chanroblesvirtuallawlibrary

 
"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."

Sec. 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. chanroblesvirtuallawlibrary

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 percent [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 arbitration branch of the National Labor Relations
Commission [NLRC] having jurisdiction over the workplace.
chanroblesvirtuallawlibrary

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 increases in the wage rates prescribed under this section.
 
Sec. 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
application 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.

Sec. 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. chanroblesvirtuallawlibrary

Sec. 7. Upon written petition 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 for payment of wages fixed by Presidential Decree No.
442, as amended, otherwise known as the Labor Code of the
Philippines.

Sec. 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.
 
Sec. 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 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.
chanroblesvirtuallawlibrary chanroblesvirtuallawlibrary

Sec. 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
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.

Sec. 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 offices 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. chanroblesvirtuallawlibrary

Sec. 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 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 on the entity's responsible
officers, including, but not limited to, the president, vice-
president, chief executive officer, general manager, managing
director or partner.
 
Sec. 13. The Secretary of Labor and Employment shall
promulgate the necessary rules and regulations to implement the
provisions of this Act.
 
Sec. 14. All 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 hereof 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 employers. chanroblesvirtuallawlibrary
 
Sec. 15. This Act takes 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.