Why contractualization should stop

Workers say the fight against contractualization encountered both victories and
attacks in 2013

In the labor coalition Nagkaisas dialogue with President Aquino prior to this May Day,
the number one topic was to ensure security of tenure of workers by eliminating
contractualization scheme and deter extra-judicial killings of union organizers and
journalists.

Upon reviewing the struggle against contractualization in 2013, one encounters both
victories and attacks. For example, this May Day will be the first that the Philippine
Airlines Employee Association (PALEA) will celebrate as reinstated employees.
The PALEA settlement signals that Filipino labor united under the Nagkaisa!
Coalition banner may have staunched the tide of contractualization in traditional
industrial sectors.

Unions under attack

On the other hand, the Digitel Employees Union (DEU) struggle continues, with
the NLRC 2nd Division ruling last month against the union, effectively sanctioning the
way in which DIGITEL let go of all its workers to replace them with contractuals.

Furthermore, at Galeo Equipment and Mining Company, a contractor at the Carmen

Copper Corporations mine in Toledo City, a Temporary Restraining Order was raised
effectively disenfranchising half of the more than 500 workers from voting in the
recent certificate elections.

The dispute arose while the elections were in process, based on claims by the Asiapro
manpower cooperative that the Galeo workers are their members and thus exempt
from unionization.

However the Department of Labor and Employment (DOLE) had already ruled that
their union elections can continue despite Asiapros opposition.

BPO illegal closures

A troubling spate of illegal BPO closures stands as a warning to a current generation

of young workers, ringing warning bells that should raise the hackles of young BPO
contractuals.

First, Direct Access folded up last July 2012, leaving over 600 employees in severe
financial duress, including extremes that resulted in the malnourishment and
hospitalization of one former employee. In response, Direct Access workers formed
the workers association called the Inter Call Center Association for Workers (ICCAW).

ICCAW fought to regain unpaid wages, commissions, overtime pay and separation
benefits, and eventually won, all the while pushing for reforms in the so-called "BPO
Sweatshops".

Then, on the heels of this closure, the workers of the bankrupt Cordia-
Philippines discovered that their former employer had P1.6 million in assets left in the
bank and was operating another company in Mandaue City called Geils
Communications. This prompted the former workers to file a case with the NLRB.
No compensation

Based on these illegal closures, ICCAW pushed for DOLE to compel call center
companies to post cash bonds equivalent to the salaries and benefits of its total
workforce for a one-month period. Yet despite the simplicity of this proposal, DOLE
has yet to implement it.

Then, in December 2013, the Cebu-based Leadamorphosis folded up, leaving over
100 workers without their last months pay. Leadamorphosis handles voice and non-
voice marketing for US brands, including General Electric.

The American CEO, Paul Flannery, flew the coop and did not show when DOLE
attempted to arrange a teleconference with the disenfranchised workers. The
workers, several of whom are ICCAW members, received no compensation, and held
vigils in front of the shuttered offices so that the owners could not remove the
equipment remaining inside.

BPO self-regulation

According to Department of Labor and Employment (DOLE) Secretary Rosalinda

Dimapilis-Baldoz, "the Philippines is moving inexorably towards the development of a
culture of voluntary compliance with labor standards and occupational health and
safety that will raise the bar of competitiveness of the Philippine economy."

Last March, President Aquino approved the Act Strengthening Tripartism which will
supposedly improve the resolution of labor disputes though negotiations that pre-
empt lawsuits.

DOLE thereafter proclaimed success, stating that "the voluntary codes of good
practices adopted by various regional industries have minimized government
intervention and fostered harmonious labor-management relations in the affairs of
private sector businesses."

ACHIEVED GOAL. PALEA expresses gratitude towards those who helped during their
ordeal.

Worker organizations

Is self-regulation a realistic idea towards managing BPO labor rights? No!

Tripartism can scarcely function as promised if the employer goes missing, as did the
American CEO Flannery. Leadamorphosis, part of a spate of recent illegal closures in
the BPO sector, has proven this idea to be an incomplete solution.

Contractualization attacks on the industrial sector also prove that all too often,
industry prefers End-of-Contract (ENDO) employees to unionized workers.
The young BPO workers must awaken to the reality that their rights will not be
protected if they do not organize.

ICCAW presents one option towards organizing that accommodates the precarious
nature of ENDO labor. While advances must be made, ultimately resulting in the
unionization of the BPO sector, for the time being, workers must rely upon
associations to educate themselves of their rights, to seek redress for their
grievances, and orient themselves politically.

It also presents the option of international solidarity, such as joint actions and
solidarity letters to the American vendors who manufacture and peddle the products
serviced by Filipino call centers.

As Nagkaisa! rallies this May day at Mendiola, we must be reminded of the labor
movement that exists, both in the Philippines and internationally, and work to direct
this energy in the workplace as well as politically towards the emancipation of labor.
Rappler.com

Daniel Rudin is an independent documentary filmmaker and video artist. He worked

with Rappler as a Luce Scholar.

Contractualization is the practice of hiring workers for a period of about five months before they
are relieved of their job assignments, only to be replaced by another employee who is willing to go
through the same process. This manner of employment strips the worker of his right to security of
tenure and other benefits enjoyed by a regularly employed individual. It is for this reason that
Filipinos are clamoring to put an end to this labor practice (deemed unlawful by many).

On the contrary, contractualization has, to a certain extent, contributed to making our country
attractive to investors because they know they can get relatively cheap labor costs here. Pinoy
workers, on the other hand, agree to be employed on contractual basis instead of not being
employed at all. Often, individuals who have limited educational attainment and work experiences
are drawn into this cycle (although contractualization is also practiced even in government
agencies and offices) as it gives them an opportunity to earn a living in spite of not having ample
academic training and the necessary skills and work experiences.

In view of the above, we endeavored to research on the most probable advantages and
disadvantages of putting an end to contractual employment in the country. Who will truly benefit
from this move? Who will suffer the consequences?

Pros:
1. Employees enjoy security of tenure and can look forward to a considerable retirement
package after years of serving their employer.
2. Companies investments on training and developing its people are maximized as they
capitalize on employees loyalty and retention.
3. Issues on security of trade information and business insights can be better addressed as
there would be lesser staff turn-over.
Cons:
1. If a company could not afford to replace its contractual workforce with regular employees,
it will be left with no choice but to pass the workload to its regular employees.
Overworked employees, albeit paid the necessary overtime fees, may soon become
lethargic and unproductive.
2. Unemployment rates may skyrocket as job application requirements become more
stringent and discriminating. Employers will most certainly require that applicants
possess skills and talents worthy of the regular compensation they are mandated to
provide.

Last Monday, the President issued a tall order for business firms, corporations, and agencies to
cease placing its workers under contractual status, unless they are prepared to battle it out with
him and lose their money and their pants.

Contractualizationn: Pros and cons

By Emmanuel J. Lopez (philstar.com) | Updated May 27, 2016 - 4:49pm

"The termination of endo(end of contract) as a campaign promise of incoming president Rodrigo

Duterte will create various repercussions to the Philippine economy." STAR/File

One of the ticklish issues that will confront the Duterte administration when its term finally
commences at midday of June 30, 2016 is the continued existence or demise of
job contractualization. Despite several attempts to weed out this very contentious labor scheme, it
has remained in effect until now.
The capitalist nature of the outgoing regime has not given emphasis on this supposed anti-poor
policy of employment for reasons that may be both beneficial and otherwise to labor matters and
stakeholders. But then we also have to acknowledge that many investors deem it wise to put their
money in the Philippines because of the relatively cheaper labor cost, which to an extent is
brought about by contractualization.

The termination of endo(end of contract) as a campaign promise of incoming president Rodrigo

Duterte will create various repercussions to the Philippine economy. The labor force especially the
proletariat sees endo as a tool of the capitalist to manipulate and exploit the vulnerability of
laborers. The laborers, as an offshoot of prolonged unemployment and uncompetitive nature,
would rather accept a below par employment contract without full benefits enjoyed by a regular
worker than have no paid employment.

The termination of endo(end of contract) as a campaign promise of incoming president Rodrigo

Duterte will create various repercussions to the Philippine economy. The labor force especially the
proletariat sees endo as a tool of the capitalist to manipulate and exploit the vulnerability of
laborers.
Although there are legal implications of endo because a company cannot just practice labor
contracting wittingly or unwittingly without having in their company a roster of regular employees,
it has nonetheless contributed a lot to the total employment and national income by way of short-
term employment opportunities. While endo has deprived many laborers of the opportunity to
enjoy the full benefit of being a regular employee, the stringent measure normally applied to a
regular applicant is relaxed in favor of an endo worker, resulting in a bigger participation of the
entire employment sector.

Cancellation of endo would most likely post stringent requirements for the employers before new
regular employees may be hired. Hiring regular employees in favor of contractual employees, we
have to admit, entails a lot of costs perhaps more than double than what a contractual employee
will get sans benefits. Although this author would not favor a full implementation of
contractualization, but the thought of full cancellation of the same would accelerate the
unemployment statistics that we currently have.

Logic tells us that you cannot force the employers to give what they do not have. Much less force
them to hire regular employees to fill in job vacancies. To escape from the responsibility of
carrying the load and additional cost of hiring regular manpower, firms would rather overload their
current roster of regular employees with work in lieu of hiring regular employees.

To escape from the responsibility of carrying the load and additional cost of hiring regular
manpower, firms would rather overload their current roster of regular employees with work in lieu
of hiring regular employees.

This is the most plausible scenario that may transpire if the government will go for the full
prohibition of contractualization. Prudence dictates that contractualization should still exist in a
case to case basis but with government regulation to avoid abuses by the employers. Firms in the
infancy stage should be allowed to some extent to hire contractual employees until such time that
firms can exist on its own and be stable enough to weather the challenges of investment risks.

Firms in the infancy stage should be allowed to some extent to hire contractual employees until
such time that firms can exist on its own and be stable enough to weather the challenges of
investment risks.

Unemployment and economic growth

With the current data on unemployment which stands at 5.8 percent, the incoming administration
under the leadership of presumptive president Duterte stands to inherit around 3.48 million people
who are unemployed. This practically puts to naught the 6.9 percent GDP growth the country was
able to accomplish in the 1st quarter of 2016.

The growth component was mainly consumer-driven fuelled primarily by election spending
estimated to be within P10-12 billion. This amount of fund injection created temporary
employment opportunities that generated an income that contributed to the 1st quarter growth
rate. This, however, is a short-term economic bliss that after certain honeymoon period will go
back to its previous dilemma of exclusive growth, an economy reserved for the ruling oligarchy.
Countless growth have been experienced but the people who consider themselves poor remain
unyielding, the number of unemployed remain at more than 3 million. Graft and corruption remain
unmoved, putting it in the upper index of most corrupt nations of the world.

Tall order
Despite the tall order that awaits the incoming Duterte regime, the resounding mandate that he
received during the last election puts to emphasis the peoples high trust in his leadership. One
thing going for the incoming president that perhaps distinguishes him from his predecessor is the
fact that he approaches the nations problem with coolness and serenity. If you are in this mood,
it is most likely you will make a good account of yourself and your decision.
His micro approach to the problem as exemplified by the news item he heard about the group of
pushers arrested in Tanauan, Batangas. The pushers were made to parade in the streets as if to
imitate the traditional Flores de mayo but this time renamed Flores de Pusher, for purposes of
putting them to shame for their criminal acts.

Perhaps in jest, incoming president Duterte made pronouncements that these people may have
been dead if he was in the position of the mayor. His ability to put premium and emphasis even
for this simple police matters if he continues doing it during his term, will endear him to people. It
shows that he does not want himself isolated from the most basic problem of the society the
society that elected him and catapulted him to the highest position of the land.
His ability to put premium and emphasis even for this simple police matters if he continues doing
it during his term, will endear him to people. It shows that he does not want himself isolated from
the most basic problem of the society the society that elected him and catapulted him to the
highest position of the land.

Emmanuel J. Lopez, Ph.D. is an associate professor at the University of Santo Tomas and the
chair of its Department of Economics. Views reflected in this article are his own. For comments
email:

What is contractualization?
A: Contractualization is a common employer practice of hiring people for a period not exceeding
five months. Employers would normally get the services of manpower companies to supply them
contractual employees after five months to ensure continuity. Nowadays, it is commonly known as
outsourcing.

Companies that hire huge number of employees with little training are the ones that often practice
contractualization. They do this to save on costs and avoid the hassle of regularizing employees
once they have worked continuously for six months.

Employers can try out employees for few months and if the employee fails to meet the minimum
standard, they can always find replacement at minimal costs until they find the right ones.
The practice of contractualization has opened a lot of opportunities in the business process
outsourcing (BPO) industry. In fact, because of the rise in demand for outsourced employees, the
minimum entry level salary for employees with acceptable skill level has increased significantly
over the past years.

Advantages of contractualization to employers

Under the labor law, when an employee gets regularized, he or she will automatically become
entitled to regular workers wage and benefits such as vacation leaves, sick leaves, maternity
leaves, Social Security System and other statutory benefits, retirements, and all other privileges
provided by law.

On the average, the additional cost for the employer to pay for these benefits in behalf of the
employees is around 7% of the total payroll costs.

While if the company practices contractualization, these entitlements would be reduced if not
totally avoided. This translates to substantial cost savings for companies that hire large number of
employees.

Companies that engage hiring agencies to supply them their manpower requirements also enjoy
the ease of recruitment. Under contractualization, the procedure for hiring is easier, simplified,
and faster because employers need to deal only with a hiring company to do all the work. This
saves a lot of time and administrative costs if they do the hiring themselves.

When it comes to firing employees, contractualization also allows companies to terminate

employment contracts easily without the hassle of due process provided by labor law for regular
employees.

Impact of contractualization to employees

While contractualization may be boon to employers, it may be bane to employees over the long
term. The practice of contractualization prevents employees to attain job security since their
contracts are terminated every five months.

Independent workers like consultants who have no employee-employer relationship with the
company are normally paid premium because it is assumed that the worker will use the extra pay
to take care of his own security benefits.

But for the unemployed, contractualization provides job opportunity albeit on short-term basis.
This allows the worker to be trained and learn new skills that she can use in her next job.

Without security of tenure, employees will not be able to get retirement benefits from their
company when they stop working in the future. They also cannot enjoy other mandatory benefits
like Philhealth or Pag-ibig when they need it.
But many workers under contractualization receive relatively lower wages compared to the
regulars. Most of them are not covered by collective bargaining agreements (CBA) for higher
wages and other benefits.

While many are able to get good employment under contractualization at decent salary, the long-
term impact of contractualization does not favor the employee.

What employers can do

Contractualization is ideal for companies that need temporary labor for limited time period. For
example, the company needs extra manpower support for three months to help handle increase
in customer demand during Christmas season, or the company may need additional employees to
work on their project that will last for one year.

During time of rising unemployment and slowing economy, contractualization may also be useful
because it allows companies to provide job employment at least on temporary basis and help the
economy to grow.

You may have to incur additional costs because of the mandatory benefits that you need to
provide, but your employees may be more productive and maybe happier because they know that
they are secure.

Perhaps, you may also want to provide training to make sure that your employees have the right
skills to help you move forward. Putting an effective appraisal system can also help you select
and retain the right employees before you make them regular after probation period has expired.
Probationary employees that do not meet your standard after six months can be terminated and
replaced.

*****
Henry Ong, CMC, is president of Business Sense Financial Advisors.
End of endo to worsen unemploymentPalscon

The move to outlaw job contractualization may increase the ranks of the unemployed, and put
the Philippines at a big disadvantage with its Asean peers, Philippine Association of Legitimate
Service Contractors Inc. (Palscon) President Rhoda Caliwara warned on Wednesday.

At the homestretch of the May 9 election campaign, which saw each of the four presidential
candidates issuing a pledge to end job contractualization, Caliwara said an end for the so-called
endo, or end of contract, for workers within a period of less than six months, may throw out
almost a million Filipinos out of job.
Lawmakers, however, share a different perspective. At the House of Representatives,
congressmen also on Wednesday sought for the prioritization of bills that will prohibit labor
contractualization when session resumes on May 23.
Party-list Rep. Emmeline Aglipay-Villar of the Democratic Independent Workers Association
(Diwa) said the government should put an end to the rampant practice of labor contractualization,
deriding endo practice as a work arrangement wherein workers are hired for no longer than six
months, either through fixed-term contracts with a six-month period or they are fired during their
probationary period before regularization.

This, then, denies workers of their right to security of tenure, but also prevents them from
receiving Social Security System [SSS], Philippine Health Insurance Corp. [PhilHealth], Home
Development Mutual Fund [Pag-IBIG] and other basic benefits that regular workers are entitled
to, said Aglipay-Villar, one of the authors of a measure strengthening the job tenure of
employees.
She added that several employers get away with contractualization because of the loopholes of
the Labor Code of the Philippines.

CONGRESS SHOULD PROTECT THE RIGHTS OF FILIPINO WORKERS TO SECURITY OF

TENURE. THERE ARE PENDING BILLS AIM TO FIX THE LOOPHOLES AND GRAY AREAS IN
THE LABOR CODE THAT HAVE ALLOWED CONTRACTUALIZATION TO PROLIFERATE, SHE
ADDED.

Aglipay-Villar said, Contractualization makes a mockery out of the constitutionally enshrined right
to security of tenure. In the system of endo, workers who are doing work that is essential to the
core business of the employer, for example, sales persons in the retail industry do work that is
essential to the business of selling, so they should be regularized and should receive the benefits
they deserve.

Defending Palscons position, Caliwara also pointed out that contrary to common perception,
legitimate service contractors do not deprive workers of their government-mandated benefits.
She said members of Palscon provide benefits, such as the mandated 13th-month pay, and
comply with contributions to the SSS, PhilHealth and Pag-IBIG.
We also follow the required minimum wage set by the National Wages and Productivity Council
of the DOLE [Department of Labor and Employment], and our workers get necessary leaves and
rest days as mandated by the Philippine Labor Code, Caliwara added.

Citing data from the Philippine Statistics Authority (PSA), she said contractual work employed
around 600,000 workers in 2014. This figure went up to 850,000 in 2015.

If seasonality, probationary, casual and apprenticeship employment are to be included this year,
the number of workers that will benefit from contractualization is projected to hit more than 1
million workers, Caliwara said.

The industry leader asserted that contractualization is a worldwide trend and a generally
acceptable labor practice.

THESE TRENDS ARE INCREASING DUE TO THE FAST-PACED BUSINESS TRENDS BEING
INFLUENCED BY MOBILITY THROUGH TECHNOLOGY. REMOVING OR BANNING
CONTRACTUALIZATION WOULD MEAN TAKING AWAY PRODUCTIVE JOBS FROM 1
MILLION FILIPINOS AND WOULD SET THE ECONOMY BACK, SHE SAID.

Former Palscon President Butch Guerrero, for his part, stressed that prohibiting contractualization
would diminish the countrys competitiveness in the global arena.

Removing contractualization would put the Philippines at a disadvantage vis--vis its Asean
neighbors in this age of globalization and would mean capital flight of the country to our
neighbors, such as Thailand and Vietnam, Guerrero said.
Caliwara also addressed the misconception surrounding contractualization.
She said endo, or the 5-5-5 systemwhere workers are forced to sign short, five-month
employment contracts and, thus, become unqualified to receive the benefits due themhas
already been outlawed since 2011 through Department Order 18-A issued by the DOLE.

The endo, or 5-5-5 system, is no longer being practiced by legitimate service contractors.
Admittedly, there are still service contractors which, I suppose, are illegitimately doing business,
still practicing the 5-5-5, she said.

Caliwara also urged the presidentiables to study the issue first before they make their final
pronouncements to ban this employment practice.
Employees Confederation of the Philippines President Edgardo Lacson said there is a need to
remove the stigma on contractualization. We as employers need to inform our leaders on the
implications of their immediate response to abolish contractualization, he said.
 Talking about endo

ENDO IS not just a shortcut for end of contract, a term applied to the time when short-term
employment comes to an end (usually at five months). It is also the title of an indie movie about
the love affair of a saleslady and a temporary worker who, like his employment status, is unsure
and uncommitted, unwilling to submit to a long-term relationship and breaking the heart of the
woman he loves.

The movie was released some years back, but I am surprised that the term endo has come
back in fashion. As if labor groups, workers and presidential candidates only discovered the term
now.

How long does it take before a practice and a policy becomes so firmly entrenched in society that
a term for it is invented? That endo has emerged and become so popular that when presidential
candidates mouthed the term at the last televised debate, almost all viewers knew what they were
talking about, seems to me an indication of how common and, well, accepted the practice of
contractualization has become.

Well, labor unions and even officials of the Department of Labor and Employment have not truly
accepted the practice. Complaints have been aired periodically, and the DOLE has not been
remiss in reminding employers that the practice is illegal. But employers go on their merry way,
and young workers seeking jobs in an uncertain (even if improving) economy and job market have
little choice but to accede to the onerous conditions.
The reality is that the DOLE just doesnt have enough personnel to fully monitor employers, while
workers would settle for finding a jobany job that pays a wage even if only for a few months at a
timerather than risk continued joblessness.
***
AT the final presidential debate, almost all the candidates promised to bring an end to the days of
endo, even if some of them are government officials who could certainly have done something
about it in all their years in public service.

As expected, during the May 1 Labor Day rallies, workers groups echoed the calls for an end to
endo. But it seems security of tenure takes a back seat to security of living, when workers are
willing to put everything aside, even their rights and entitlements, in exchange for a steady wage
that would assure them of a steady income, even if this comes only in five-month spurts.
Business people argue that in uncertain times, one of the factors that they seek to control is their
labor costs, keeping wages down by limiting workers salaries and privileges and ensuring that
most remain at entry level.

Which is how businesses have come up with creative means to keep workers and employees on
a short lease without committing to any long-term career planning or development. Many resort to
hiring on a per project basis, even if its pretty obvious that most of the projects come to an end
in five months time. Others argue that those hired on a contractual basis do work that is not
essential to the business, which is why they are hired through an outside agency. But, to take one
example, how can, say, camera operators of a TV network be considered nonessential when
without them no material can be aired?
***

TRUE, endo is an issue whose time has comeif it is not in fact long overdue. Whoever
emerges the winner in the presidential race may have to take the issue seriously, even if putting
an end to contractualizationor its worst manifestationsmay tarnish rosy employment statistics
or court the ire of big businesses and even lead to the closure of smaller enterprises.
But there IS a law against labor-only contracting, and the first step that should be taken is to
simply enforce the law, which means committing the budget to hire more inspectors and beef up
the necessary legal machinery to pursue offenders and fix the system.
Plus, of course, finding the proverbial political will to go after erring employers, who sap the
young members of the work force of any hope for a brighter future with the steady, soul-draining
cycle of finding-then-losing-employment, with hardly any training or human resource development
undertaken.
***

ENDO the movie, if I remember right, ends on a hopeful note when our young male protagonist
decides it is time to bring an end to his prevarication and denial and finally commits to a long-term
relationship with his girlfriend.
In the real-life endo, the commitment-phobe is not the worker but the employer, and, in a way,
also the government. I have argued in this corner many times that the gains to be made from
ensuring security of tenure for workers far outweigh any short-term advantages from the
revolving-door employment policy.
For one thing, a secure employee is a loyal employee, who ties his or her welfare and future to the
welfare and future of the company where he or she works. Of course, there will always be the few
who take advantage and begin slacking off the minute they make permanent status. But far
more will realize that their long-term advantage rests on investing their time, talent and loyalty to a
single employer for whom the workers good redounds to the good of the enterprise as well.