Two days before Labor Day, business groups stressed the importance of legal contractualization in keeping work flexible and the country competitive against its peers in the region.

At the same time, top officials of business groups voiced their opposition to “endo,” a contractualization scheme that offers short-term and unprotected temporary work arrangements.

Endo workers are bound by a five-month time frame so that companies will not make them regular employees, who become entitled to various benefits after six months at work.

Ending endo was a campaign promise of President Rodrigo Duterte.

For the business groups, however, rejecting endo does not necessarily mean opposing contractualization.

The Labor Code allows contractualization. Moreover, according to Department Order No. 174, employees of contractors and subcontractors should be entitled to certain rights and privileges.

These include security of tenure, self-organization and right to strike, as well as other perks, such as retirement benefits, overtime pay and 13th month pay.

Most endo workers do not enjoy these benefits.

‘Middle ground’

The European Chamber of Commerce of the Philippines (ECCP) called legal contractualization a “middle ground” for both management and laborers.

Removing contractualization, it said, would come at the expense of business.

“Without contractualization, companies would be forced to make all employees regular, which is just not practical and would kill the business,” said ECCP president Guenter Taus.

While businesses benefit from this arrangement, those who practice unlawful contractualization should be “dealt with accordingly,” Taus said.

“There must be a clear distinction between lawful and unlawful contractualization, wherein companies operating outside the bounds of the law should be dealt with accordingly and should absorb any costs that they have been trying to avoid thus far,” he added.

The Management Association of the Philippines (MAP) echoed this, noting that legitimate businesses should avoid endo.

“This [endo] is admittedly illegal,” said Emerico de Guzman, chair of MAP’s subcommittee on labor.

“Legitimate business should really avoid this and learn to input the costs as legitimate costs for doing business,” De Guzman added.

With the government’s move to have more contractual workers regularized, the Employers Confederation of the Philippines (Ecop) said this would come at a cost to business.

Biting the bullet

Nevertheless, Ecop president Donald Dee said the group was willing to “bite the bullet” regardless of the cost of ending endo.

“There will be an increase in cost. But it will be offset by better productivity,” Dee said.

The pros and cons of legal contractualization depend on whom you ask.

For the business sector, it’s an arrangement that allows the Philippines to compete with neighbors.

Weeks before April 18, labor and management had been on their toes, wondering if Mr. Duterte would sign an executive order (EO) that would regulate legal contractualization.

After Malacañang announced on that day that the President would no longer sign the EO and just let Congress pass a law on contractualization, business leaders defended the benefits of the practice of legally hiring contractuals.

In a draft EO they submitted to the President, various labor groups sought to regulate contractualization. Under the draft, direct hiring would be the norm.

Alan Tanjusay, spokesperson for the Associated Labor Unions-Trade Union Congress of the Philippines, said contractualization would still be allowed in some cases under this draft EO.

Contractual arrangements would be allowed only in cases in which additional workers are needed to meet a temporary surge in demand, Tanjusay said, calling it a “compromise.”

Business leaders did not approve of this.

“The proposed ban on outsourcing is against the concept of free enterprise and is not necessarily prolabor, as it stifles employment growth in the economy,” De Guzman said.

The Department of Trade and Industry said the EO drafted by labor groups would diminish the country’s competitiveness.

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This article was originally published in the Philippine Daily Inquirer Online on April 30, 2018»