Bane of contractualization | Inquirer Business
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Bane of contractualization

AHEAD of the official proclamation of Mayor Rodrigo Duterte as the country’s next President, some labor organizations are making noises about holding him to his promise during the presidential debates that he will put an end to contractualization.

In the context of local business, contractualization is the practice of hiring employees for incremental periods of not more than six months each to avoid their entitlement to the status of regular employment.


As a general rule, an employee who has worked for six months from the date of his employment shall be considered a regular employee of his employer and therefore entitled, aside from his wages, to all the rights and benefits that accrue to that status.

Contractual or “endo” (or end of contract) employees, whose employment often spans only five months, do not enjoy security of tenure and are at the mercy of their employer.


Thus, when age, disability or poor health catch up with them, they have no social security or retirement benefits to lean on for their sustenance. After giving the best years of their lives to their employers, they become destitute and virtual burdens to our society.



The employers who engage in this practice claim they hire contractual employees to meet the seasonal requirements of their business and that requiring them to be made regular will increase their operational costs and, in the process, adversely affect their revenue stream.

With the aid of lawyers, these employers have come up with ingenious ways to go around the law on regular employment by either outsourcing the jobs normally handled by regular employees, or classifying certain aspects of their business as “special projects” and hiring outsiders to manage them, or retiring regular employees then hiring them back to do the same work on contractual basis.

Whoever presumptive President-elect Duterte names as labor secretary to help him live up to his promise to make contractualization a thing of the past has to do a delicate balancing act.

He or she must make sure that in doing away with contractualization as demanded by the labor organizations, the interests and concerns of the business sector are also taken into consideration.


In the effort to prevent the exploitation of employees, the employers should not be unduly burdened with stringent regulations or threatened with sanctions that would discourage them from increasing their productivity or expanding their work complement.


There is no one-size-fits-all solution to the issue of contractualization.

The existing Labor Code provisions on project, seasonal and contractual employees have proven to be inadequate and wanting. Their loopholes have been cleverly exploited to make regular employment a practically unreachable goal for the employees they were meant to protect.

In addressing this problem, the incoming administration must acknowledge the fact that, for sound business reasons, some work positions need not be staffed all year round by regular employees, and that certain aspects of a business can be more efficiently handled by outside parties rather than regular employees.

Thus, it is not practical for businesses that have seasonal highs and lows, e.g., manufacturers of Christmas- or summer-related products, to keep in their regular payroll the extra hands they hired to meet the expected spike in the demand for their products on certain periods of the year.

Neither would it make good business sense, for example, for a construction company to continue to retain the services of its workers when there are no construction contracts in the pipeline.

In the same token, it cannot be denied that some business entities, like food and garment factories, continue to engage the services of contractual employees in spite of the fact the products they produce are in demand all year round.

For these companies, no legal or moral reasons can be invoked to justify flaunting the rules on regular employment.



The contractualization issue should not be looked at as a purely regulatory or enforcement matter.

While it is true that throwing the books at erring employers may curb the evils of contractualization, the employers’ voluntary compliance remains the most effective way to address the concerns of the affected employees.

The Department of Labor and Employment does not have the resources and manpower to monitor the businesses in the country that engage the services of contractual or “endo” employees.

It is essential that the incoming administration consult with or hear the views of the business entities that stand to be affected by Duterte’s plan to end contractualization.

Their concerns cannot be brusquely set aside without putting at risk the welfare of thousands of Filipinos who depend on the wages they receive from “contractualized” jobs.

Rather than come out with a general, systems-wide set of rules on contractualization, the new regulations should be specific or definite as to what businesses can be lawfully allowed to engage the services of contractual workers and the conditions under which they shall be permitted, and what businesses will be prohibited from doing it.

The identification of these businesses can be done in the manner the Board of Investments comes out with the country’s annual investment priorities plan, or the Office of the President announces the foreign investment negative list that enumerates the allowable foreign investments in specific domestic businesses.

This way, there will be no blind spots in the enforcement of the rules on contractualization and the affected sectors—labor and business—know the extent of their rights and responsibilities on this matter.

For comments, please send your e-mail to “[email protected]”.

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TAGS: Business, Contractualization, economy, Employment, Endo, Labor, News, Rodrigo Duterte
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