Balancing business and promise to labor

“Endo” (end of contract), or the scheme of employers ending workers' contracts every five months which was conceived to avoid regularization as mandated by labor laws for workers employed for six months, can shape up to be a thorny issue for the Duterte administration.

With Labor Day fast approaching, recent efforts by the Department of Labor and Employment (DOLE) to end “endo” or illegal contractualization has not gained acceptance among labor groups that had been involved in more than nine months of dialogues.

Unfulfilled promise

Despite the release of Department Order (DO) 174, or the Rules Implementing Articles 106-109 of the Labor Code that allows employers to forge an agreement with contractors to do jobs that are not core to the business operations, “endo” really has not been fully eliminated.

Clearly, this does not fulfill what the President had promised when he was campaigning and when he assumed office.

DO 174 supercedes Department Order 18 (DO 18), which spelled out the original rules of labor contracting. DO 174 now categorically prohibits the continuous hiring by a manning agency of a worker under a repeated contract of short duration.

However, it is still legal for manpower supply companies to enter into labor contracting agencies with bigger companies as long as the workers they send are employed full-time with them and enjoying the required benefits stipulated by law.

Tougher for manning firms

To ensure that manning agencies have the resources to keep full-time workers that can be seconded to their client-companies, the DOLE raised the capital of these agencies to P5 million from P300,000; shortened the validity of the certificate of registration of contractors to two years from three; and increased the registration fee to P100,000 from P25,000.

This effectively increases the cost of operations of manpower agencies, although this would eventually be covered by higher billing rates for the big companies that have entered into the “temporary” manpower contracting agreements.

For the big companies that go to lengths to avoid hiring full-time employees for posts that are core job positions, there will be an added cost with the higher billings of manpower agencies – but it is something that they would rather do than add more numbers to their complement of regular employees.

Labor groups are infuriated that it is the manpower agencies, and not the bigger companies that hire the “temporary” workers, that need to comply with employment laws. In effect, illegal contract work (or loosely referred to as contractualization) continues to exist.

It will be tough for all the manpower agencies to comply with the financial requirements stipulated by the tougher DO 174, and this is why DOLE has asked for more people in all its regional offices who will monitor compliance to the new ruling.

Lip-service

While various employers’ groups and big companies have publicly expressed support to DO 174, this is seen as token lip service to a government that enjoys immense popular support.

Just like in the construction industry, many are projecting to increase their “temporary” labor costs by 15 to 30 percent with tougher implementation of the new DOLE order. Workers may not be getting the bells and whistles that accompany job regularization, but the substantial take-home pay will keep them quiet for a while.

Rest assured that businesses in future will come up with more creative ways to keep its human resource costs from rising further, but avoiding any unnecessary confrontation with the government, especially with the President.

Sustainable reforms

We’ve mentioned in past columns that the real problem lies in the inappropriate labor laws that the country has, where our current labor statutes are more in step with developed economies rather than with the realities of a developing country.

If we were to strictly follow current labor laws, it would be the death of many businesses, particularly those belonging to the MSME (micro, small and medium enterprise) levels. This would also affect the investment potential of businesses that rely heavily on manpower costs, like construction firms.

Flexible labor laws

As a developing economy, the Philippines needs flexible labor laws that do not trample on the dignity of labor, but will allow businesses to grow stronger and therefore give back better benefits to its employees. It may sound trite, but a win-win solution to this issue needs to be forged.

Duterte may leverage on his popularity with Filipinos, but this may not always be sustainable. Sparks of protest, no matter how small, can start a fire. The sooner that government lays out a workable plan of action to address this recurring problem, the better.

DOLE is hinting at the need to introduce reforms in the Labor Code, and bringing it up to the realities of today’s world. This is particularly true for the practice of labor contracting, which is accepted in many countries, even developing ones.

Just as employers have the duty to care and protect their employees, workers need to give their fair share to their employers. We can’t condone companies that scrimp on or oppress their employees for the sake of better profits, but neither should employees threaten to disrupt industrial peace for unreasonable demands.

Look at the forest not just trees

Several bills that propose security of tenure for workers have been filed in both the Senate and the House of Representatives, but such recourse must look at the forest and not just the trees.

We should strive for an enlightened labor-management relationship that is in keeping with the country’s aspiration to provide more and decent jobs for its current citizens, and to prepare the country’s future population through a stronger economy.

Businesses need to be nurtured for this reason, but again, without trampling on the dignity of people. If we need to open our labor laws to further scrutiny – and perhaps, to an overall restructuring, the government should start now.

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Should you wish to share any insights, write me at Link Edge, 25^th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.