LAST 3RD presidential debate brought to the fore the emotive issue of contractualization. All five of the presidential candidates vowed to put an end to this practice calling it a violation of the Constitution and of workers’ rights. Two promised to push for a bill that would prohibit the practice popularly called “endo,” a shortened term for end of contract.
Vowing to end contractualization is good sound bite for the candidates. A candidate claimed that it is an “injustice that brings anxiety to the workers.” What better peace of mind indeed can you give to a worker than a regular status of employment? But can the world of work guaranty everyone to be given regular employment? Unfortunately, that’s not how the labor market in the world works. And there are cogent reasons why this is not practical.
Before we go into the reasons, let’s look at the law. Since Marcos years when the Labor Code was promulgated, Art. 106 has been the source of this controversy. It allows contracting or subcontracting of labor. To avoid abuse, it allows the Secretary of Labor to “by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers under the Code.”
It’s clear that the present law empowers the DOLE Secretary to prohibit labor contracting or subcontracting but she and her predecessors never dared to wield this power because of its disastrous effects on the economy. The vows, therefore, of the presidential candidates to ban contractualization appear redundant and unnecessary in light of the present law.
Art. 106 has been the subject of several implementing issuances from the Department of Labor since Marcos days till the present to restrict this practice of subcontracting. The last one was D.O. 18-A issued in 2011 requiring labor service contractor to have a capital of at least P3million and registered with the DOLE for a fee of P25,000 valid for 3 years.
The D.O. expressly requires all contractual employees to be paid at least the minimum wage, and all legally mandated benefits such as service incentive leave, rest days, overtime pay, holiday pay, 13th month pay, and separation pay. The only benefits that they don’t enjoy are those given to regular employees of the company they are assigned.
They are also covered by the SSS, Philhealth, Pag-ibig aside from enjoying the right to self organization and security of tenure.
Security of tenure here means they cannot be dismissed without just cause and due process. I almost fell off my seat when one presidential candidate said that contractuals are not being paid OT and other benefits under the law. Either he/she was ignorant of D.O. 18-A, or, was trying to pander to the emotions of the labor sector.
D.O. 18-A, to the credit of Secretary Rosalinda Baldoz, eliminates the fly-by-night service contractors who, unlicensed andexploitative, underpay and rob their employees of their rights under the law. The pernicious practice of “5-5” or “endo” is passé. If it still happens now, it’s already a problem of enforcement.
Meantime, statistics show that 600,000 workers in 2014 were hired as contractuals. This did not include the seasonal, probationary, casual and apprentices which, if included, could total to 850,000. The projection of the so-called non-standard form of employees for this year is 1 million. If contractualization is banned, are we ready to throw these people jobless into the streets and join the ranks of the millions of unemployed?
Reasons for Contractualization
Call them tempo, reliever, substitute, inorganic project employee as in the case of the construction industry, seasonal, sacada as in the case of the sugar industry, disposable, fixed contract, contingent, or the oxymoronic temporary permanent, but contractuals are a necessity. These are the reasons why.
1. The ease of letting go when the season or the need for them is over. Given the rigid conditions of laying off regular personnel, in a business operations where the need for labor fluctuates, contractual employees are preferred;
2. Global competition demands that companies must stick to its core business and outsource its non-core functions from labor service contractors who can do them better at least cost;
3. Subcontracting is a world-wide phenomenon. In the U. S., the use of the contract workers dubbed as “ephemeral workforce” has jumped to 50%. UK has also set records in the contingently employed. In continental Europe where onerous labor laws make it difficult and costly to fire anyone, thus, discouraging from taking on permanent hires, temporary work statistics is even widely practiced.
4. The ASEAN statistics, except for Singapore, are even more revealing. Look at the percentage of contractual employees in the workforce.
Indonesia – 65% (or over 1 in 2) employed in formal enterprises as of 2010
Malaysia – 1 in 4 in informal employment
Philippines – 1 in 3 in formal enterprises (2010)
Thailand- 63% (or over 1 in 2) in informal enterprises (2012)
Vietnam: over 1 in 3 labor contracts have between 1 and 3 years term
(Source: Ms. Leian Marasigan of U.P. School of Industrial Relations (U.P SOLAIR) presentation at PALSCON national conference in 2015)
The study says that together with Indonesia and Vietnam, the Philippines ranks as having a “highly regulated” framework in the hiring of contractual employees. In light of the ASEAN integration, are we going to be left in the dustbin of history in employment generation in the ASEAN region? Yes, if the President-elect would not eat his/her words and face the stark reality that outsourcing is a world-wide phenomenon. Otherwise, we might as well abolish BPO that employs million Filipinos because it is outsourcing in reverse.
(The author is Chairman of Change Management International, a management consultancy firm; currently, Vice-President of ECOP; professional lecturer on Human Resource Management, Labor Relations, Corporate Governance and member of the Tripartite Industrial Peace Council (TIPC), and member of the Tripartite Executive Committee (TEC) and Commissioner of Tripartite Voluntary Arbitration Advisory Council (TVAAC). He is co-author of the book, “Personnel Management in the 21st Century and author of the book, “Human Resource Management – From the Practitioner’s Point of View.” His email address is: nolipayos@gmail.com)