DAR ADMINISTRATIVE ORDER NO. 8, September 30, 1988
GUIDELINES AND PROCEDURES IMPLEMENTING PRODUCTION AND PROFIT SHARING UNDER REPUBLIC ACT NO. 6657
of 1988, which took effect on June 15, 1988, provides these two
sections on Production and Profit Sharing:
“Section 13. PRODUCTION SHARING PLAN — Any enterprise
adopting the scheme provided for in Section 32 hereof or operating under
a production venture, lease, management contract or other similar
arrangement and any farm covered by Sections 8 and 11 hereof is hereby
mandated to execute within ninety (90) days from the effectivity of this
Act a Production Sharing Plan, under guidelines prescribed by the
appropriate government agency.“Nothing herein shall be construed to sanction the diminution of
any benefits such as salaries, bonuses, leaves and working conditions
granted to the employee-beneficiaries under existing laws, agreements
and voluntary practice by the enterprise, nor shall the enterprise and
its employee-beneficiaries be prevented from entering into any agreement
with terms more favorable to the latter.”“Section 32. PRODUCTION SHARING — Pending final land
transfer, individuals and entities owning, or operating under lease or
management contract, agricultural lands are hereby mandated to execute a
production sharing plan with their farmworkers or farmworkers
organization, if any, whereby three percent (3%) of the gross sales from
the production of such lands are distributed within sixty (60) days of
the end of the fiscal year as compensation to regular and other
farmworkers in such lands over and above the compensation they currently
receive; provided, that these individuals or entities realize gross
sales in excess of five million pesos per annum unless the DAR, upon
proper application, determines a lower ceiling.“In the event that the individual or entity realizes a profit, an
additional ten percent (10%) of the net profit after tax shall be
distributed to said regular and other farmworkers within ninety (90)
days of the end of the fiscal year.“To forestall any disruption in the formal operation on lands to be
turned over to the farmworker-beneficiaries mentioned above, a
transitory period, the length of which shall be determined by the DAR,
shall be established.“During this transitory period, at least one percent (1%) of the
gross sales of the entity shall be distributed to the managerial,
supervisory and technical group in place at the time of effectivity of
this Act, as compensation for such transitory managerial and technical
functions as it will perform, pursuant to an agreement that the
farmworker-beneficiaries and the managerial, supervisory and technical
group may conclude, subject to the approval of the DAR.”
NOW, THEREFORE, to ensure an orderly and effective implementation of
the above provisions, the following Guidelines and Procedures are hereby
promulgated for the guidance of all concerned.
SECTION 1. Definition of Terms . — As used in these Guidelines and procedures, the following terms shall have the following respective meanings:
A. Agriculture, Agricultural Enterprise or Agricultural Activity
means the cultivation of the soil, planting of crops, growing of fruit
trees, raising of livestock, poultry or fish, including the harvesting
of such farm products, and other farm activities and practices performed
by a farmer in conjunction with such farming operations done by persons
whether natural or juridical.B. Agricultural Land refers to land devoted
to agricultural activity as defined above and not classified as mineral,
forest, residential, commercial, industrial or national park.C. Farmworker is a natural person who renders
service for value as an employee or laborer in an agricultural
enterprise or farm regardless of whether his compensation is paid on a
daily, weekly, monthly or pakyaw basis. The term includes an individual
whose work has ceased as a consequence of, or in connection with, a
pending agrarian dispute and who has not obtained a substantially
equivalent and regular farm employment.1. Regular Farm-worker is a natural person who is employed on a permanent basis by an agricultural enterprise or farm.
2. Seasonal Farm-worker is a natural person
who is employed on a recurrent, periodic or intermittent basis by an
agricultural enterprise or farm, whether as a permanent or a
non-permanent laborer, such as dumaan, sacada, and the like.3. Other Farmworker is a farmworker who does not fall under paragraphs C, C.1, and C.2.
Managerial or Supervisory Farmworker is a
natural person who is employed by an agricultural enterprise or farm
vested with powers or prerogatives: (1) to lay down and execute
management policies; (2) to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees; and/or (3) to effectively
recommend such managerial actions.E. Technical Farmworker is a natural person
employed by an agricultural enterprise or farm, who is highly educated
and trained and performs functions in scientific, engineering, medical,
teaching and other fields, but who is not vested with managerial or
supervisory functions. Example of such employees are: chemists,
agronomists, veterinarians, soil analysts and the like.F. Gross Sales means the total annual revenue
from the sale of all agricultural products, in their raw or original
state, derived from the land or farm owned, operated under lease,
management, production venture, grower or service contract, or other
similar arrangement by an agricultural enterprise. Simple post-harvest
operations ordinarily done within the farm to preserve or prepare
agricultural products for the market, such as drying, salting, smoking
or stripping, are considered agricultural activities. In cases where
retention right is allowed under Section 6 of R.A. 6657, the amount of
gross sales may be reduced by an amount equivalent to such proportion
that the retained area bears in relation to total land area.G. Regular Annual Compensation includes all
cash renumeration or earnings regularly paid to an employee by an
employer for services rendered within a year, such as salaries, wages,
13th month pay, bonus, allowances, commissions and paid leaves, and
other income of similar nature, whether mandated by law or provided by
collective bargaining agreement or established company practices, but
excludes payment arising from the Production/Profit Sharing provided
herein.
SECTION 2. Employers Covered. — Pending final
land or corporate stock transfer, the following employers are covered
by the mandated Production and Profit Sharing under RA. 6657:
A. Any enterprise owning or operating agricultural lands under
lease, management contract, production venture or other similar
arrangement;B. Multinational corporations engaged in agricultural activities;
C. Commercial farms devoted to commercial livestock, poultry and
swine raising, aquaculture including saltbeds, fishponds and prawn
ponds, fruit farms, orchards, vegetable and cut-flower farms, and cacao,
coffee and rubber plantations.
Provided, that the employer realizes gross sales in excess of Five
Million Pesos (P5M) per annum. Provided, however, that the Department of
Agrarian Reform (DAR), when necessary, may establish a ceiling lower
than P5 million per annum.
In the case of individuals or entities with business operations other
than agricultural, only the divisions, groups or units involved in
agricultural activities are included in the mandated Production/Profit
Sharing.
Public lands classified as inalienable and which are under
reservation in favor of the Bureau of Prisons but which are now utilized
for agriculture by corporations or entities in cooperation with local
entities under any system of land tenure, usage, cultivation, or
management shall be covered by the Production and Profit Shares provided
herein. Provided, however, that the Production and Profit Shares shall
inure or accrue to the benefit of the Bureau of Prisons.
SECTION 3. Employees Covered. — All
farmworkers of covered employers, whether classified as regular,
seasonal, technical or other farmworker, but excluding managerial and
supervisory employees, are included in the mandated Production and
Profit Sharing. Provided, that any farmworker who renders service,
regardless of duration, within a covered period shall be entitled to
this benefit. Provided, further, that in the absence of any Presidential
Agrarian Reform Council (PARC) determination of a specific award limit,
the farmer-beneficiary does not own more than three (3) hectares of
agricultural land.
SECTION 4. Features of the Mandated Production/Profit Sharing Plan
. — Covered employers shall prepare and execute a Production/Profit
Sharing Plan not later than sixty (60) days from the effectivity of
these Guidelines and Procedures which shall conform to the following
requirements:
A. The effectivity date of the Plan is June 15, 1988.
B. Covered employers are obligated to pay the following
Production and Profit Shares to be given over and above the compensation
their farm-workers currently receive and which shall be distributed
based on the following schedule:Amount of Production Share: Three (3.0%) of
Annual Gross Sales from June 15, 1988, until final land or corporate
stock transfer to the farmworker-beneficiaries is effected, provided
that the employer is not obligated to pay more than 100% of the regular
annual compensation of the farmworker-beneficiaries.Schedule of Distribution: Fifty (50%) of
estimated Production Share (base on unaudited financial statements)
shall be distributed within 60 days of the end of the accounting year,
with the balance (based on audited financial statements) payable not
more than 60 days thereafter.Amount of Profit Share: Ten (10%) of Net Profit
After Tax, provided that the employer is not obligated to pay more than
100% of the regular annual compensation of the farmworker-beneficiaries.
Provided, however, that in cases where retention right is allowed under
Section 6 of R.A. 6657, the amount equivalent to such proportion that
the retained area bears in relation to total land area. An illustrative
formula for the computation of total profit share and net profit after
tax is shown in Annex A.Schedule of Distribution: Fifty (50%) of
estimated Profit Share (based on unaudited financial statements) shall
be distributed within 90 days of the end of the accounting year, with
the balance (based on audited-financial statements) payable not more
than sixty (60) days thereafter.C. The formulas to be used in computing the Production and Profit Shares of individual workers are shown in Annex B.
D. The first year of implementation of the Plan shall start on
the accounting year (i.e. fiscal, crop or calendar year followed by a
covered employer) ending after June 15, 1988. During the first
accounting year period covered, the employer’s gross sales for a full
year period shall be considered to determine whether the employer has
realized annual gross sales of over FIVE MILLION (P5M) for purposes of
coverage under Production/Profit Sharing. However, the gross sales and
net profit after tax to be considered in computing covered workers’
Production and Profit Shares shall be based on a pro-rata formula as
shown in the illustrative examples under Annex C.
SECTION 5. Manner of Payment . — The
Production/Profit Shares of the workers shall be paid in cash. Such
additional compensation shall be in separate payrolls which shall
contain information on: the employer’s gross sales and net profit; the
total amount for distribution as workers’ Production /Profit Shares,
each worker’s number of paid days for the year; and each worker’s
Production/Profit Share.
SECTION 6. Production Share for Managerial and Supervisory Group
. — To forestall any possible disruption in the normal operation of
lands to be turned over to the farm worker-beneficiaries, a transitory
period, the length or which shall be determined by the DAR, may be
established.
During the transitory period, at least one percent (1%) of the gross
sales of the entity concerned shall be distributed to the managerial and
supervisory group in place at the time, as additional compensation for
such transitory managerial and supervisory functions as it will perform,
pursuant to an agreement that the farmworker-beneficiaries and the
managerial and supervisory group may conclude, subject to the approval
of the DAR.
SECTION 7. Undistributed/Unclaimed Production/Profit Shares
. — Unless otherwise provided by existing law, agreement or plan, all
undistributed or unclaimed Production/Profit Shares shall be deposited
by the employer with the nearest Land Bank of the Philippines Branch in
the name of the Secretary of Agrarian Reform for payment to the workers
to whom they are due. The employer shall immediately report such
deposits to the nearest DAR office and send notices to the
worker-beneficiaries. If the money remains undistributed or unclaimed
after two years from date of deposit, the same shall be considered
forfeited and shall be turned over to the Agrarian Reform Fund.
SECTION 8. Effect on Existing Production/Profit Sharing Plans
. — Any existing Production/Profit Sharing granted by the employer
before the promulgation of Executive Order 229 and R.A. 6657 shall be
credited, unless otherwise provided by agreement, as compliance with the
mandated Production/Profit Sharing Plan prescribed herein, subject to
prior approval by the DAR, Provided, that where the benefit under the
existing Production/Profit Sharing Plan is less than the applicable
amount required in these Guidelines and Procedures, the employer shall
pay the difference.
Nothing herein shall be construed to sanction the diminution of any
benefits such as salaries, bonuses, leaves and working conditions
granted to the worker-beneficiaries under existing laws, decrees,
issuances, executive orders, and/or under any contract or agreement
between workers and employers, nor shall the enterprise and its
worker-beneficiaries be prevented from entering into any agreement with
terms more favorable to the latter.
SECTION 9. Enforcement — The Secretary of
Agrarian Reform or his authorized representatives shall have the power
to order and administer compliance with the Production/Profit Sharing
provisions and to require submission of reports, compel the production
of books and documents, compel answers to interrogatories, issue
subpoena and subpoena duces tecum, and enforce its writs through
Sheriffs or other duly deputized officers. Violation of any provision of
these Guidelines and Procedures shall be subject to penalty as provided
under Section 12 hereof.
SECTION 10. Settlement of Disputes . — Issues
involving Production/Profit Sharing shall be considered as Agrarian
Reform issues. Disputes arising from Production/Profit Sharing shall
first be settled voluntarily between the parties. In the event of a
deadlock, such dispute shall be submitted for conciliation to the
appropriate DAR Regional Office. In case the dispute is not resolved at
the regional level, it shall be forwarded for adjudication to the DAR
Adjudication Board.
SECTION 11. Reporting Requirements . — All
covered employers shall submit a report on the Production/Profit Shares
distributed, including the special payrolls, under oath signed by the
employer or his duly authorized representatives, not later than 30 days
after completion of distribution of the workers’ shares. Two copies of
the report shall be submitted to the appropriate DAR Regional Office.
The report shall conform substantially to the following form:
Report on Compliance with Production/Profit Sharing
1. Name of Establishment/Employer
2. Address
3. Principal Commodity Produced
4. Total Employment
5. Total Gross Sales/Net Profit After Tax
6. Amount of Production/Profit Shares Distributed
7. Number of Workers Benefitted
8. Average Amount Received per Worker
9. Dates of Distribution of Production/Profit Shares
10. Total Undistributed/Unclaimed Production/Profit Shares
11. No. of Workers with Undistributed/Unclaimed Production/Profit Shares
SECTION 12. Penalties . — The provisions of
Sections 73 and 74 of RA. 6657, with regard to Prohibited Acts and
Omissions, and Penalties, respectively, shall apply to any person or
entity found to be violating any provision of these Guidelines and
Procedures.
SECTION 13. Separability Clause . — If, for any
reason, any section or provision hereof is declared null and void, no
other section, provision, or part thereof shall be affected and the same
shall remain in full force and effect.
SECTION 14. Effectivity Clause . — These
Guidelines and Procedures shall take effect ten (10) days after
publication in two (2) national newspapers of general circulation.
Adopted: 30 Sept. 1988
(Sgd.) PHILIP ELLA JUICO
Secretary
Effective: 12 January 1989