Contractualization

Rodrigo on the issue Contractualization

One of the major campaign platform of then Mayor of Davao Rodrigo Roa
Duterte in the 2016 Presidential Election is to improve the “improve labor conditions
for Filipino workers”1 which prioritizes the total ban on contractualization2 in the
country.

Today as the President of the country, Rodrigo Duterte was able to offer some
measures against contractualization, but surprisingly in his 2017 State of the Nation
Address (SONA) there was no mention of such issue.

This resulted in the dismay of various Labor Groups, expressing that the lack of
action or mention of the President on the issue of contractualization in his SONA
makes it less of a priority.3

Actions speaks louder than words

The president in his first year appointed Silvestre Bello III as the Secretary of
the Department of Labor and Employment (DOLE) and ordered him to have a total
ban on the labor practice of contractualization.

After consultations with the concerned parties, the President have reconsidered
his order on the total ban on contractualization and instead ordered a manageable
eighty percent (80%) of the total employees of a company should be composed of
regular employees.

A number of measures were passed to ensure that the companies will follow the
government directive that by the end 2016 DOLE reported that around 36,000
employees have been regularized by more than 200 companies.4

1
Caduaya, E. (2015, November 28). Duterte on contractualization: Not for a country like PH. Retrieved September
15, 2018, from https://www.rappler.com/nation/politics/elections/2016/114276-duterte-contractualization-not-
good

2
“Contractualization or endo (end of contract) is the labor practice of hiring fixed-term employees and continuously
renewing their contracts to avoid giving benefits a regular worker is entitled to”. (Tomacruz, 2018)

3
Pasion, P. (2017, July 25). Dutertes silence on workers issues in SONA 2017 disappointing – labor unions.
Retrieved September 15, 2018, from https://www.rappler.com/nation/176650-duterte-silence-labor-issues-sona-
2017-philippines
 In his 2017 SONA there was a deafening silencing on the issue of
contractualization, that laborers and various groups have expressed fears that there
was inaction on the part of the government to deliver their promise.

But does the President’s silence on contractualization in his 2017 SONA means
that he has not acted on his promise. The data shows that it is the contrary, that despite
there was no mention of it in the 2017 SONA, some measures were enacted to ensure
that companies will follow the order that at least 80% of its employees should be
comprised of regular employees.

Advantages and Disadvantages

The full delivery on the promise of total ban on contractualization has both
beneficial effects and severe repercussion on the different aspect of development in
the country. The issue of Contractualization is a double edge sword that can either
alleviate or worsen the workers condition in our country.

A total ban on contractualization is catastrophic to a number of companies in

the country that will severely affect our economy. One that will bear the brunt of total
ban is the Business Process Outsourcing (BPO) Industry. It is one of the key driver of
the country’s economic growth and employs more than half a million Filipinos with a
significant number of other industries relying on BPO industry. 5

In anticipation of the total ban a number of employees have conducted pre

emptive action to ensure sustainable existence of their companies. The most evident
reaction on the order is the report of the labor group Kilusang Mayo Uno (KMU) that
from the time the order of President Duterte on the total ban on all forms of
contractualization has been handed down around 200,000 employees has been fired by
various employers.6

There is a growing fear among the business community that the order is
unsustainable to their business model that will eventually result in the collapse or
bankruptcy of the company. That is why in anticipation of the said order various
4
Tomacruz, S. (2018, May 1). TIMELINE: Duterte's promise to abolish endo. Retrieved September 15, 2018, from
https://www.rappler.com/newsbreak/iq/201468-duterte-endo-contractualization-promise-2016-to-2018

5
Gloria, M. (2018, August 07). Philippines' BPO industry: By the numbers. Retrieved September 15, 2018, from
http://www.bworldonline.com/philippines-bpo-industry-by-the-numbers/

6
Panti, L. (2018, July 04). Lawmaker: 200,000 contractual workers fired after 'endo' ban. Retrieved September 15,
2018, from https://www.manilatimes.net/lawmaker-200000-contractual-workers-fired-after-endo-ban/416158/
employers have already dismissed a number of employees in order to avoid closure
and sustain the orders of the government.

The positive effect of the total ban might outweigh the problems it would
create. The main problem of contractualization in our country is the lack of security of
tenure of workers. It is best summed up by one phrase every contractual workers have
uttered “Buti pa ang patay minsan lang mamamatay, eh kami kada limang buwan eh
pinapatay” (The dead is fortunate to die once, we contractual works die every five
months.) 7. A phrase often uttered in exasperation as their source of income comes to
an end. The phrase “dying every five months” has become a part of our vocabulary.

A total ban is not the solution even if it is good for our countrymen, because if
we force it we might lose the very jobs we want to maintain. The government in
realizing that a total ban would be unlawful (as the law allows certain forms of it) and
it would be an unwise action that would severely impact key areas of our economy
have changed its policy to a more favorable 80% regular employee.

What the Government should do.

The most healthy approach of the government with regards to the

contractualization dilemma is to balance the interest of the employers and the
employees. A gradual regularization of contractual employees should be implemented
by gauging the capacity of the businesses to absorb them as regular employees8. A
total ban would not be healthy to the business atmosphere in the country and the law
does allow certain forms of contractualization9.

If the government will order an immediate regularization of all its contractual

employee, the sudden move will result in the disruption of the business model of
companies causing them to terminate employees (regular and contractual) or worse
declare bankruptcy due to insufficiency of funds to regularize contractual workers. A
lax implementation of the law in the other hand will result in the exploitation of our
human resources.

7
The expression means that contractual employees have to find another job after their contract ends which lasts
only for 5 months. The law provides that a contractual employee that has been on the payroll for six months or
more must be regularized (permanent empoloyee). Thus contractual employees maximum contract with a
company is only for five years.

8
Ibid

9
 What the government must first address the loopholes in the system often
abused by large companies. One of the sectors that need attention is in the area of
seasonal contractual employee.

The seasonal contractual scheme allows company to hire workers without

regularizing them as they deemed support of the existing workforce. They are hired
for a specific timeframe, when the regular workforce of a company is not enough to
handle the sudden increase in workload brought about by holidays or other events.
This is the loophole often abused by large companies. Best example are large retailers
often use this loophole by stating that cashiers, merchandisers and other entry level
jobs that re needed all throughout the year and yet they are contractuals. The retail
companies should regularize workers that are needed for the company to efficiently
function and be allowed to hire additional employees for times or seasons that will
entail additional workloads that regular employees cannot handle. Unfortunately the
law does not distinguish what entails seasonal worker thereby allowing an illegal form
of contractualization.

The government should address the issue by clearly defining the rule on
“seasonal worker”. There is a rampant circumvention of our laws and the
government’s inaction is tantamount to turning their backs on the people. The sad
truth in here is that a number of former labor leaders have joined the ranks of
administrations and they no longer represent the worker but rather acts as consultants
to the companies on how to avoid labor problems.

The government should always bear in mind that it should always balance the
interest of the people and the private sector. Enforcing the rights of the laborers
should not entail the end of company nor the action of the state shall fall short in
helping the workers attain better labor rights (in this case security of tenure).

The government showed an excellent response in allowing leeway for

companies to work with, instead of a total ban it allowed companies to maintain at
least 20% of its work force contractual and making 80% of its work force permanent.

Workers’ rights have been fought for thousands of years, and despite these
victories, we still have a long way to go. We must remember, the eternal words of
human rights advocate Eleanor Roosevelt that: Workplace rights are human rights”10

10
O'FARRELL, B. (2010, May 23). Eleanor Roosevelt said it well: Workplace rights are human rights. Retrieved
September 26, 2018, from http://www.post-gazette.com/opinion/Op-Ed/2010/05/23/Eleanor-Roosevelt-said-it-
well-Workplace-rights-are-human-rights/stories/201005230200