What is production and profit sharing?
This is a mandate under Section 16 of EO 229 and Sections 13 and 32 of RA 6657 which requires individuals or entities owning or operating under lease or management contract, agricultural lands to execute production and profit sharing plan with their farmworkers or farmworkers' organiz ation, pending final distribution of the land or implementation of the stock distribution scheme.
What are the existing Administrative Orders governing production and profit sharing?
a. Administrative Order No. 08, Series of 1988, "Guidelines and Procedures Implementing Production and Profit Sharing Under RA 6657"
b. Administrative Order No. 09, Series of 1988, "Guidelines and Procedures Implementing Production Sharing Under EO 229"
It will be observed that EO 229 mandated only production sharing while RA 6657 included profit sharing on top of the production sharing.
Who are required to execute production and profit sharing plan?
The following employers are required to execute Production and Profit Sharing Plan with their farmworkers if their annual gross sales exceed Five Million Pesos (P5M):
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; and
c. Commercial farms devoted to aquaculture including salt beds, fishponds and prawn ponds, fruit farms, orchards, vegetable and cut flower farms, and cacao, coffee and rubber plantation.
Why are these employers required to execute production and profit sharing plan with their farmworkers?
Section 2 of RA 6657 declared that agrarian reform program is founded on the right of the farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till, or in the case of other farmworkers, to receive a just share of the fruits thereof.
This mandated production and profit sharing plan is in pursuit of this avowed principle of agrarian reform. While awaiting for final land or stock distribution until the end of the deferment period in the case of commercial farms, or full control of the land in the case of lease back arrangements, farmworkers can realiz e an improvement in their farm income.
Who are the employees covered?
All farmworkers of covered employers, regardless of duration, who are directly working on the land of the corporation or other entities, whether classified as regular, seasonal, technical or other farmworkers are covered in the mandated Production and Profit Sharing Plan. They should not, however, own more than three (3) hectares of agricultural land.
14.2 DAR's AUTHORITY
What is the power given to the DAR in the implementation of production and profit sharing plan under the CARP?
The DAR through its Secretary or authoriz ed representatives has the following powers: 1. To order and administer compliance with the Production Sharing provisions of EO 229 and Production/Profit Sharing provisions of RA 6657;
2. To require covered employers to submit report on the distributed production/profit shares; 3. To compel the production of books and documents of covered employers;
4. To compel answers to questions needing clarifications to shed light on problems encountered in the implementation;
5. To issue subpoena; and
6. To enforce its writs through sheriffs or other duly deputiz ed officers. 14.3 MAIN FEATURES
What are the main features of the mandated plan?
EO 229
Under EO 229 and its implementing guideline, AO No. 09, Series of 1988, covered employers who realiz e a gross sales in excess of five million pesos per annum, shall prepare and execute a Production Sharing Plan whereby at least 2.5 percent of the gross sales from the production/cultivation of the agricultural lands are distributed as compensation to their farmworkers over and above the compensation they currently receive. The employers are not, however, compelled to pay more than one hundred percent of the regular annual compensation of the farmworkers.
Regular annual compensation includes all cash remunerations 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 and Profit Sharing provided under EO 229 and RA 6657. The Plan should cover the period from 29 August 1987 (date of effectivity of EO 229) and 14 June 1988 (date prior to the effectivity of RA 6657).
Fifty percent (50%) of the Production Share should have been paid not later than 12 February 1989 and the balance on or before 2 April 1989.
RA 6657
They are required to pay the following Production and Profit Shares to be given over and above the compensation currently received by their farmworkers, which shall be distributed based on the following schedules:
Amount of Production Share:
Three percent (3.0%) of Annual Gross Sales from 15 June 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 one hundred percent (100%) of the regular annual compensation of the farmworker- beneficiaries.
* Fifty percent (50%) of the estimated Production Share (based on unaudited financial statements) shall be distributed within sixty (60) days at the end of the accounting year, with the balance (based on audited financial statement) payable not more than sixty (60) days thereafter.
Amount of Profit Share:
Ten Percent (10%) of net profit after tax, provided that in cases where the retention right is allowed, the amount to be distributed shall be reduced by an amount equivalent to the proportion of the retained area to the total land area.
* Fifty (50%) of estimated Profit Share (based on unaudited financial statements) shall be distributed within 90 days at the end of the accounting year, with the balance based on audited financial statements payable not more than 60 days thereafter.
For lands to be turned over to the farmworker- beneficiaries, a transitory period whose length shall be determined by DAR, shall be established. During this period,
farmworkers will be trained to manage the enterprise. The managerial and supervisory group in place during this transitory period shall receive at least one percent (1%) of the gross sales of the entity based on the agreement concluded by the farmworker- beneficiaries and this group, subject to the approval of DAR.
What is the effect on existing production/profit sharing granted by employer prior to the promulgation of EO 229 and RA 6657?
It shall be credited as compliance with the mandated production and profit sharing plan. Provided, however, that where the benefit under the existing Production and Profit Sharing Plan is less than the applicable amount required in Administrative Order Nos. 08 and 09, Series of 1988, the employer shall pay the difference.
What is the DAR's policy on undistributed and unclaimed production and profit sharing?
All undistributed or unclaimed Production and 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 sends notices to the farmworker- beneficiaries. If the money remains undistributed or unclaimed after two years from the date of deposit, the same shall be considered forfeited and shall be turned over to the Agrarian Reform Fund pursuant to Administrative Order, No. 08, Series of 1988.
All covered employers are required to submit a report on the Production and Profit Shares distributed, including the special payrolls, under oath signed by the employer or his duly authoriz ed representative, not later than 30 days after completion of the distribution of the workers' shares.
14.4 ROLE OF THE MARO
Can the MARO compel covered employers to execute production and profit sharing plan?
Yes, as long as they realiz e gross sales in excess of five million pesos and a net profit after the tax.
In case a covered employer who was granted a deferment refuse to execute a production and profit sharing plan, what sanction can the MARO enforce?
A report should immediately be submitted by the MARO to the PARO. Non- compliance with the provisions on production and profit sharing is a violation covered by the provisions on Prohibited Acts and Omissions, and Penalties (Sections 73 and 74 of RA 6657, respectively).
Violation of the provisions on production and profit sharing is punishable by imprisonment of not less than one month to not more than three years or a fine of not less than one thousand pesos (P1,000.00) and not more than fifteen thousand pesos (P15,000.00), or both, at the discretion of the court.
The MARO may also initiate the cancellation of the Order of Deferment issued by the DAR Regional Director and subject his land to compulsory acquisition. What should the MARO do in case of disputes arising from production and profit sharing?
The MARO, together with the BARC should mediate and conciliate. They should convince both parties to settle the dispute voluntarily. In case there is no success in settling the dispute, this shall be forwarded to the PARO and if still unsolved, it shall be submitted to the PARAD for adjudication.
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