If there is one incentive that did not originate from law, government or employers even—it is work from home (WFH) or work from anywhere. It’s one of pandemic’s gifts: working mothers tend to their kids, even while on Zoom; guys take meetings while spinning, make presentations to a large group while dressed decently only from the waist up, or work dressed down (in PJs or house dress) all day long.
But the highest premium comes not from saving costs on transportation or fuel (which could be huge) but maybe from avoiding a life spent in traffic to and from the workplace. (WFH even beats a four-day work week because you can choose to go to and from the office during nonpeak hours.) You can be productive while in traffic nowadays, true. But working while traveling is not as safe, convenient and productive as working from home. Besides, when at home, you always have a bathroom.
Let’s get real, though. Working from home is not without its negative effects. We have not seen mental wellness issues more prevalent—and at what cost? Expect employers to lure people back to the workplace at least schematically, or as needed, because there are some things that are simply better done on site and face to face with your teams. You can’t build community, culture, leadership or self-esteem using a purely WFH scheme. On the other hand, no employer can be compelled by law to make their employees report to the office 100 percent—as if digital transformation is irrelevant, as if the pandemic never happened.
But what of enterprises registered with the Philippine Economic Zone Authority (Peza) whose employees are being asked to go back to the offices 100 percent because this is said to be tied up to their enjoyment of incentives? There is, after all, a specific provision in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) aw that requires registered activities to be exclusively conducted within the zone. There are also the retail and real estate businesses that are helped by business process outsourcing (BPO) and call center agents’ presence in the workplace.
Win-win possible
Let’s go straight to the heart of the matter: nowadays, employees’ preferences can dictate. If they will not be allowed to work from home by their current employer, they can find another job that allows them this gargantuan benefit of WFH that improves their quality of life. If the human resource of Peza-registered firms is threatened, they will be compelled to exit their Peza registrations. Then, they would not need to be bound to Peza buildings. After all, savings on lease and office space can offset fiscal incentives—maybe.
What is the impact on the economy of no-more-Peza status for BPOs and call centers when agents stay at home, and previously registered companies occupy cheaper smaller offices? What is the impact on foreign investors who constantly look at competitive edge, cost efficiencies and ease of doing business? If existing Peza enterprises are not allowed to transfer their registrations to the Board of Investments (BOI), then what is the effect of this accelerated incentives sunset for our once so-called sunrise industry, the sector that gave employment to so many, and carried the Philippine economy above water during our toughest times?
In my view, the government does not stand to lose if it allows Peza-registered companies partial WFH.
There is no dearth of legal bases:
Peza has allowed, even prior to the pandemic, 30 percent of Peza companies’ workforce to work from home under the Peza law, which contains the same requirement that business operations should be conducted within the designated zones. When legislators passed the CREATE law containing substantially the same requirement, they were aware of how the old law had been implemented and lent validity to the old implementing rules. This is a legal maxim called “legislative reenactment.”
Legally justifiable
There is further legal basis that allows Peza companies more WFH leeway. The Fiscal Incentives Review Board (FIRB) and the Bureau of Internal Revenue, in their value added tax zero rating rules, rightfully or wrongfully define “registered activity” to be limited to production of goods or rendering of services, or those that pertain to direct costs. If this policy is applied consistently, sales, human capital, accounting and finance, administrative, and the research and development parts of the business should not be considered part of “registered activity” and thus need not be conducted within the zone. (From the registered enterprises I talked to, this easily accounts for 30 percent of the workforce.)
I beg to differ that allowing Peza enterprise employees partial WFH is unfair to BOI-registered enterprises. Those under BOI can enjoy enhanced deductions under CREATE plus 100-percent WFH can be a huge advantage. When the incentives of any registered enterprise sunset in due course under the CREATE law, they all will be regular corporations.
It is legally justifiable therefore for a partial WFH for Peza enterprises at, say, a uniform 50 percent? The agents working from home can continue to help online business and micro, small and medium enterprises, and give the residential real estate business better market, while the 50 percent working at the office can help the retail and food businesses in the area and sustain commercial real estate, almost like before. It helps ease the traffic too. This agility will further spur growth in the zones and eventually bring back the volumes to commercial spaces. Shared risks, rewards, better quality of life. We will lose nothing, but maybe even gain more foreign investors.
The government already changed the rules in the middle of the game via CREATE and justified it as a change in fiscal policy. Is it too much to ask for a bit of leeway and call it caring-for-people policy? INQ
This article reflects the personal opinion of the author and not the official stand of the Management Association of the Philippines or MAP. The author is a member of the MAP board of governors. He is governor in charge of the MAP ESG Committee, and chair Emeritus and ESG Leader of Isla Lipana & Co./PwC Philippines. Feedback at map@map.org.ph and alex.cabrera@pwc.com.