Special Report: Striking a balance to end labor contractualization

MANILA, Philippines – Old habits die hard.

For a country like the Philippines, which has been used to the practice of contracting – sometimes legal, sometimes not – ridding itself of the decades-long habit is like committing suicide.

The issue on labor contracting made waves in recent months, with workers calling not only for the eradication of illegal practices such as “endo” and “5-5-5” but also the total abolition of contractualization in all forms.

Their push for a contract worker-free country was spurred by the promise made earlier by President Duterte that he would put an end to contractualization.

“Endo is a thing of the past. We no longer have unlawful contractual relationship or what we know as endo. The bigger issue now is whether we keep contractualization as a whole or not because  under the law, there is an allowed contractual scheme or legitmate contractualization,” Department of Labor and Employment (DOLE) Secretary Silvestre Bello III said.

Bello, a former justice secretary and solicitor general, vowed to come out with a compromise on labor contracting.

“The goal is no side will be aggrieved. We intend to come up with a formulation that will address all the concerns of labor and employers, all with the end of attaining industrial peace,” Bello said.

“We are not only bullish, we are very determined because otherwise, if you do not maintain industrial peace, employment opportunities and return on investments of employers will be affected,” he added.

Striking a balance among all parties involved, however, may be a tough task to undertake for the agency given the varying positions of laborers, employers and the government.

While workers claim their labor rights will suffer with the continued practice of contracting, businesses and employers, say they will not survive without it.

The DOLE is eyeing to put to rest all these arguments on contractualization before the year ends by coming out with a unified policy.

Bello said four options are currently under consideration for implementation by the DOLE.

These include the labor groups’ position to completely ban contractual arrangements, the Department of Trade and Industry (DTI)’s win-win solution, the Employers Confederation of the Philippines (ECOP)’s stand for the strict implementation of existing laws, and the proposal of the Federation of Filipino Chinese Chambers of Commerce and Industry Inc.’s proposal to regularize all employees provided there will be a 10-year no-strike policy.

“Of the four options, we like the position of DTI and then also of ECOP. Maybe we can just make some ratifications there and we will blend them. What is important is we satisfy both the concern of labor and then of management and employer,” Bello said.

ECOP, the umbrella organization of employers in the country, is pushing for stricter enforcement of rules prohibiting the endo scheme instead of abolishing contractualization, which it said makes important contributions to job creation.

The group said the policies and laws protecting the rights of workers in the Philippines are many and in place already, and it is just a matter of implementation to make it work.

“Those demand that there should be no more contracting, that’s not attainable. That will be a disaster. For us, just stick to the labor code and you will be okay. We are taking a position that we think will make industries stable, sustainable, and will create jobs. It is not realistic. There are just some work that is subject to contracting. You’re not going to hire people forever if you have contract for only two to three years or seasonal,” ECOP president Donald Dee said.

“We believe ours is the most fair. The others, there are some issues there that you cannot resolve,” Dee added.

The DTI, for its part, has come up with what it calls a win-win solution. Under this set-up, workers can be hired by service providers as regulars, receiving full benefits such as leave credits, 13th month pay, as well as retirement, social security and health insurance plans, among others.

Companies, meanwhile, will have the flexibility to either directly hire workers as regular employees or outsource them through service providers, in view of seasonal job functions.

“These are better versions of what’s provided under the law. In fact, we are strengthening further the tenure of the workers this time with the service providers. So in my simple logical thinking, I do not understand why the labor sector is rejecting this proposal when in fact we are strengthening their security of tenure,” Trade Secretary Ramon Lopez said.

Lopez is one with the business community in their position against total prohibition of contractualization in the country.  He warned that jobs would be lost and poverty incidences would rise should the legal practice of contracting be scrapped.

“Removing the option of contractualization will lead to the imminent reduction of employment, with some foreign investors even pulling out. So it is not just the missed opportunities wherein investors are supposed to come in and not continuing with their investment plans because we are changing the ballgame,” Lopez said.

“So that is what is scaring investors more than the President’s rhetorics. The rhetorics are not the issue, I think removing the option of contractualization is affecting them more,” he added.

Labor groups, however, feel none of the given proposals by business groups and DTI are unacceptable.

For them, only the abolition of contractualization – as earlier promised by Duterte – is the only decision that will make everything right.

“The only chance for Filipino workers to enjoy a life of dignity is to have secure and good paying jobs.  Contractualization is spoiling this dream.  And the government is unacceptably prolonging the misery,” labor coalition Nagkaisa said.

“The end endo promise, the way it was presented by the President during the election campaign, did not mean the end of one form of contractualization and the legalization of another type.  Legalizing sub-contracting and outsourcing work arrangement is a ploy to shield employers from assuming their inherent responsibility of providing direct and regular employment to their workers.  Regularization done in contractor agencies rather than in mother companies is a fraud,” the coalition of more than 40 different labor federations and centers, workers’ organizations, and marginalized informal sector workers added.

Prior to the entry of the Duterte administration, DOLE said there were about 1.3 million contractual workers in the country. Since then, the agency said over 30,000 workers were regularized in response to administration’s objective to slash and even wipe out illegitimate contractualization.

This was attested to by Philippine Chamber of Commerce and Industry president George Barcelon, who said there has been a significant development within their organization in the regularization of workers.

“There is an improvement but many are still waiting for the Department of Labor and Employment pronouncement for it to be clear,” Barcelon said.

The retail industry has been identified as the sector hiring the most number of contractual workers in the country. Leading this sector is the SM Group, the largest mall operator in the country.

The Sy-led conglomerate, however, has kept its hands clean from the illegal labor practice. SM, however, admits it takes in temporary or seasonal workers during special seasons such as Christmas and school opening.

SM Investments Corp. vice chairperson Tessie Sy-Coson said there is nothing wrong with contractualization as long as it is properly regulated.

“On contractualization, if it is regulated well, it is a good format for extra work and more employment,” Sy-Coson said.

“For us, short term employment has its legitimate purposes and we urge our members to use this privilege in accordance with the law. It’s all authorized by law but there are limits imposed on how we can use it. We just urge everybody to follow the law and in fact that is what the President wants us to do,” Philippine Retailers Association president Paul Santos said separately.

Santos said removing the option of contracting would deprive not just retailers but also employers across many industries of a legitimate means of conducting their businesses.

“To totally ban that will be totally impractical. It will just lead to higher costs all around. Costs that will eventually be borne by consumers. It will be unfair for businesses to be deprived of legitimate services of firms that can perform services better than they can,” he said.

DOLE is assuring all involved parties that it is committed in creating an environment that will enable businesses to grow, thrive, and expand in order for them to continue creating more decent jobs, decent pays, and employment opportunities for the Filipino people.

“I am personally assuring the business community that the DOLE will continue to pursue responsive, enabling, and equitable labor policies, labor laws, and labor regulations. However, our role as an institution goes beyond simply enforcing labor laws in a way that the rights of our workers cancel out the rights of the employees. We will always stand for balance in employee-employer relationship,” Bello said.