Risks of job outsourcing

Barring any changes in the recent decision of the Supreme Court, PLDT Inc., the country’s largest telecommunications company, would be obliged to give regular employment status to more than 7,000 workers of its service contractors.

Those workers are formally on record as employees of service contractors tasked to install, repair and maintain PLDT’s voice and digital connections to customers.

This work arrangement is called “job outsourcing” or the practice of a business to engage the services of a third party to perform some of its tasks or activities.

It gained acceptance in the 1990s as a viable business strategy to cut operating costs that is compliant with existing labor regulations.

Indeed, why maintain a permanent staff to do, for example, employment or personnel processing, preparation of books of account or payment of creditors, if those tasks can be more efficiently handled by a third party that has the expertise and facilities for those activities?

READ: SC: Workers servicing PLDT lines must be regularized

That delegation translates to assured high quality of work, lower overhead on wages and zero employee discipline issues. If that party fails to meet the company’s expectations, its contract can be quickly terminated in favor of another contractor.

In other words, there would be no worries about complaints of underpayment or nonpayment of salaries, illegal disciplinary action or unfair labor practices.

The court had ruled that since the service contractors’ workers perform tasks that are necessary and directly related to PLDT’s business, they should be treated as regular employees.

That status carries with it the right to be fairly compensated for their work and be entitled to wellness (or sick) and vacation leaves, medical assistance and other benefits that PLDT’s rank-and-file employees enjoy under their collective bargaining agreement with the company.

The court did not give merit to PLDT’s argument that those workers were project or seasonal workers and therefore should not be considered its regular employees.

The work being performed by those workers were once handled by PLDT’s regular employees. In an effort to reduce the costs on compensation and other employment benefits, those services were outsourced to service contracting companies owned or managed by its retired supervisors.

With former supervisors overseeing the work, PLDT is, more or less, assured that the workers would do their work along the lines that their bosses had earlier gained expertise on.

For the retirees, that arrangement is heaven-sent because it helps them cushion the financial problems that often accompany retirement and, most importantly, make them busy and remain productive.

READ: Permissible job outsourcing

The court’s description of the workers’ work as “necessary and directly related” to PLDT’s business to justify their enjoyment of regular employment status may have opened a can of worms.

It set a benchmark that businesses that avail of job outsourcing should take serious note of to see if maintaining that arrangement may give rise to issues about the employment status of service contractors’ workers.

Some of the companies that are known to avail of job contracting for the installation, repair and maintenance of their facilities are those engaged in the business of electric transmission, cable television and water distribution.

Based on the criteria laid down by the court, the workers of the service contractors of the companies mentioned above can demand that they, too, deserve to be considered as regular employees of those companies.

Except for the nature of the materials they install, repair and maintain, their work is necessary and directly related to the business of the companies they are serving. Since they’re “apples to apples,” to use a standard business phrase, they have the right to benefit from the intended results and consequences of the court’s decision.

That ruling has turned on its head the business strategy that underlie job outsourcing which many businesses in the country have for years relied upon to meet their operational requirements at reduced costs. INQ

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