Profit sharing mulled as alternative to wage hike legislation

Alex Buenaventura, One Network Bank president, said legislating wage increases could be disadvantageous.

He said profit-sharing will make every employee more productive. He said higher productivity coupled with a reduction in cost would mean higher income and a higher share of the profits.

Buenaventura said a law on profit-sharing could compel employers to be more transparent in their book of accounts amid the practice of firms maintaining several books.

He said the increase of productivity among firms that practice profit-sharing around the Philippines is an indication that the scheme is doable.

ONB practices profit-sharing using 10 percent of its net income after tax. He said that because of their profit-sharing scheme, their employees received 15 percent more than their salary in 2005. In 2006, it was even higher at 26 percent.

He said the bank increases the wages of employees every year just to cover inflation.
He said the higher the income of the company, the higher is the share of the employees to the profits. He said this would encourage the employees to be more conscious of the firm's performance.

Buenaventura said productivity is the core of the matter. He said he saw high productivity in firms that used profit sharing.

He cited that companies now use productivity or performance as the basis for compensation. "The more productive you are, the higher you earn," he said.

He said it will augur well with militants who had been pushing for legislated wage increases. "I think it is consistent with their advocacy," he said.

Buenaventura said even small and medium enterprises, which protested the legislated wage hike, could try sharing profit to employees.

The legislated increase in wages was widely criticized by small and medium enterprises here. Of the 400 members of the Davao City Chamber of Commerce and Industry, about 98 percent are small and medium enterprises who claim they could not afford additional wage adjustments. SMEs, the chamber said, employ majority of the region's employees.

Officials of the chamber told reporters in the press conference that legislating the wage increases affects their competitiveness. They said it would backfire and may result in retrenchments.

Buenaventura said wages should be low in the country to attract investors.

The House of Representatives mulled on freezing the approval of the bill, already endorsed by a Senate committee on labor.

Chamber trustee John Gaisano said it is true that the minimum wage rate in neighboring Thailand is lower. "But many of the companies there do not follow that because they are paying even higher," he said.

Buenaventura said if wages are low, it becomes attractive to investors.

The chamber has opposed the legislated wage hike saying it undermines the right of management and labor to negotiate and agree on the reasonable wage adjustment. "It goes against the spirit and intent of the Wage Rationalization Act," the chamber's position paper said.

Congress passed Republic Act 6727 or the Wage Rationalization Act in 1989 providing for the regionalization of wage determining boards known as the Regional Tri-partite Wages and Productivity Board (RTWPB).

Mayor Rodrigo Duterte, echoing the chamber's position, said it best left to the regional wage boards to decide on salary adjustments.