More challenges in the labor sector

The Philippine labor front will continue to be one of the biggest challenges for the Duterte administration even with the passage of provisions that would strengthen the current Labor Code.

In a developing economy, employment – and security of tenure – is one ingredient for inclusive growth for millions in the workforce. For a worker to be able to transcend contractual status to one of permanent employment means getting out of a minimum wage income cycle, and starting to receive benefits that cover sickness, retirement and a wide range of other remunerations.

The issue of illegal contract employment should receive some badly needed clarifications with the passage of amendments in the law and the subsequent issuance of new implementing rules and regulations.

Currently, loopholes in the current labor law allow for labor contracting companies to supply client firms with workers for jobs that are considered in core positions.

In the same breath, some labor contracting companies are able to keep most of their workers as casuals, and in the process, limit their core employees to a handful in order to reduce costs associated with social benefits such as health and retirement.

Ending illegal contracting

While the Senate had unanimously passed a bill that aims to strengthen security of tenure and end illegal contracting of Filipino workers, this will have to be harmonized in the upcoming bicameral sessions with the House version, which reportedly has ideologically opposing provisions.

The bicameral sessions will have to be completed in less than a week by Monday, June 3, the last day of the 17th Congress, whereupon an approved proposed law by both the Senate and the House will be transmitted to the Office of the President to be signed or vetoed.

Otherwise, discussion on this priority bill will have to continue in late July or early August when the new Congress convenes, thus giving Congress more time for discussions to consolidate and refine the proposed law.

Nevertheless, there is light at the end of the tunnel as both houses of Congress tighten the noose to keeping labor-only contracting at bay through the provision of several key amendments.

First, job contractors will not be allowed to simply supply, recruit or place workers in another company through contracts, more so if the activity that is included in the contract company’s industry list is directly related to its core business and if the contract company will directly supervise the assigned worker.

Project and seasonal workers will also have the same rights as regular employees. This means they earn minimum wages and are entitled to social protection benefits. The client company and job contractor are both liable for any violations. Job contractors are also required to register with the Department of Labor.

Most importantly, an industry tripartite council will decide the jobs that can be outsourced, thereby giving more clarity and resolution to outstanding differences in interpretation of what contracts are legitimate and binding.

Higher labor cost

The passage of the proposed amendments to the Labor Code will very likely increase the country’s labor cost, one that has already been flagged by potential investors as a key issue in their decision to locate their business in a country.

Higher labor costs may make the Philippines uncompetitive as a manufacturing hub in the region, and therefore lead to losing an opportunity to hasten its economic growth. On the other hand, increasing the effective earnings of Filipinos could boost consumer spending, and translate to higher GDP.

If labor groups’ estimates are accurate, there are currently 15 million Filipinos mired in an unending contractual employment stature. Higher wages for them would mean better purchasing power that could ultimately benefit rather than harm the economy.

Employer groups in the country have been cautious about voicing out their concerns, partly to be seen as supportive of an extremely popular presidency that has promised to end illegal contracting not just when he was campaigning in 2016, but even to this day.

There is also a growing concern among employers of rising militancy, something that could seriously disrupt a relatively more mature relationship between management and labor.

Foreign labor

On a related topic, a bill introduced in the Senate forcing countries providing official development assistance (ODA) for projects in the Philippines to prioritize Filipinos for job positions may not be feasible.

ODAs usually carry with it stipulations on the project positions that should be filled in by the funding country, mostly as a way of ensuring that the project they are financing is carried out according to their specifications, and to protect the money that they are investing into the recipient country.

While it is argued that existing and future Filipinos will be paying for the ODAs, the lending country still has the final say in how and where their money will be spent, and this includes a bias to fielding in their choice of project staff.

On the other hand, the Bureau of Immigration and labor department should be more vigilant about ensuring that foreigners working in the country will pay taxes to our government.

How an estimated 12,000 illegal foreign workers, mostly in the Philippine offshore gaming operators (POGO) sector, are not registered with the concerned Philippine government agencies, and therefore avoided paying taxes amounting to several billions, is proof of negligence.

The Philippine Amusement and Gaming Corp. as well as other companies that harbor illegal foreign workers need to be conscientious about allowing such individuals to be taking on jobs or earning in the country while not contributing state taxes on their earnings.

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