Production Sharing Requirements and Distribution
- Individuals or entities owning or operating agricultural lands must distribute 3% of gross sales annually as compensation to farmworkers if gross sales exceed PHP 5 million.
- An additional 10% of net profit after tax must be distributed if profits are realized.
- A transitory period may be established to compensate managerial and supervisory personnel with at least 1% of gross sales.
Definitions
- Agriculture encompasses cultivation, livestock raising, and related farming activities.
- Agricultural land excludes mineral, forest, residential, commercial, industrial, or national park lands.
- Farmworkers include regular, seasonal, other farmworkers, and exclude managerial/supervisory.
- Regular annual compensation includes all cash earnings except production/profit sharing.
Employers Covered
- Enterprises owning or operating agricultural lands through various arrangements.
- Multinational corporations and commercial farms with gross sales exceeding PHP 5 million.
- Agricultural divisions of business entities also covered.
- Public lands under certain reservations used for agriculture are included.
Employees Covered
- All farmworkers except managerial and supervisory employees.
- Coverage extends regardless of service duration within the covered period.
Production/Profit Sharing Plan Features
- Employers must prepare and execute plans within 60 days from guideline effectivity.
- Pay 3% of annual gross sales and 10% of net profit after tax, over and above current compensation.
- Distribution schedules require partial payment based on unaudited statements early and balance after audit.
- Specific formulas for computation and pro-rata application during the first year.
Payment Procedures
- Payments must be in cash via separate payroll detailing employer’s financial data and individual shares.
Production Share for Managerial/Supervisory Group
- During transitory period, at least 1% of gross sales is allocated to managerial and supervisory staff per agreement approved by DAR.
Undistributed or Unclaimed Shares
- Such shares are deposited with Land Bank in Secretary of Agrarian Reform’s name for workers.
- If unclaimed after two years, funds are forfeited to the Agrarian Reform Fund.
Effect on Existing Plans
- Existing production/profit sharing plans are credited as compliance, subject to approval.
- Employers must cover any shortfall between existing and mandated shares.
- No reduction in worker benefits under existing laws and agreements is permitted.
Enforcement Powers
- Secretary of Agrarian Reform has authority to enforce compliance, require reports, inspect documents, and issue subpoenas.
- Violations subject to penalties under the law.
Dispute Settlement
- Production/profit sharing disputes are agrarian issues.
- Must be first voluntarily resolved, then through DAR Regional Office conciliation, and if unresolved, adjudicated by DAR Adjudication Board.
Reporting Requirements
- Covered employers must submit sworn reports on shares distributed within 30 days post-distribution.
- Reports include detailed data about the employer, sales, profits, shares, beneficiaries, and unclaimed shares.
Penalties
- Prohibited acts under this law are subject to penalties under Sections 73 and 74 of RA 6657.
Separability Clause
- Invalidity of any provision does not affect the other provisions.
Effectivity
- Guidelines take effect 10 days after publication in two national newspapers.
- Adopted on 30 September 1988; effective from 12 January 1989.