Trade unionists and HR managers are intrigued: Why was the President’s SONA silent on the “endo” issue? Senate Bill No. 1826 on Security of Tenure got the support of the House in the 17th Congress and was transmitted to Malacanang on June 27. If not acted upon by the President, the said bill lapses into a law on July 27.
If this happens, will this be the end of the endless debates on the “endo” issue and the supposed provisions of the Labor Code governing “independent job contracting” and “prohibited labor-only contracting” (LOC)? The answer: Unlikely.
But why the hesitance of the President to sign the Senate bill, a product of nearly three years of on-and-off Senate deliberations under the baton of Senator Joel Villanueva? The answer is plastered in the media.
The Philippine Chamber of Commerce and Industry and the Employers Confederation of the Philippines have launched a high-profile media campaign asking the President to veto the bill. Accordingly, the proposed bill, by restricting the rules on job contracting, weakens the competitive position of Philippine industry vis-à-vis other countries in the region. This position is supported by Gerardo Sicat, Neda’s first DG and one of the advisers of the Foundation for Economic Freedom. Said he: The bill, if it lapses into law, “will make it very hard for employment to rise” and “will restrict the entry of new foreign investment”.
What are the provisions of the proposed bill that elicit opposition from the employers?
There are at least two. First, the proposed bill allows the outsourcing of jobs to third-party manpower agencies so long as they are able to show proof that they have the needed business capital and equipment, OR that the workers hired are under their control doing activities directly related to the business of the agency. The “Or” conjunction makes it easy for unions or workers to file with DOLE an LOC complaint based on the perceived or alleged violation of any of the two conditions.
Another important proviso of Senate Bill 1826 is the coverage of manpower cooperatives. In the last two decades, the manpower coops have emerged as the biggest third-party agencies deploying short-term workers in various companies, including some government offices. As entities registered with the Cooperative Development Authority, they take advantage of incentives under the cooperative law. As labor-deploying agencies, some manpower cooperatives are able to escape coverage from labor laws such as the minimum wage by arguing that they, being cooperatives, are exempt from the Labor Code.
On the other hand, a number of trade unions are still unhappy over the proposed law because they believe it does not go far enough to stop the “endo” phenomenon. They fear that the proposed new rules are still weak and can easily be circumvented by unscrupulous agencies and principals. The proposed law is also silent on other forms of casualization and the hiring of short-term workers, such as the direct hiring of unlimited number of temporaries, probationaries, interns, trainees and apprentices, including K-12 understudies. The unions also want a blanket prohibition of certain forms of contracting.
Clearly, the debate will continue. How will this be resolved?
For this writer, the answer is through the accelerated growth of industry without sacrificing workers’ rights and making labor hiring “flexible” in the name of competition. In labor economics, external labor market flexibility means the ease to hire and fire workers. This ease evaporates once workers become regular or permanent.
What is the situation in our neighboring countries on labor flexibilization via subcontracting and LOC routes? In Singapore, Malaysia and Thailand, the LOC phenomenon is hardly discussed. The primary reason is that these countries have labor shortages, as reflected in the huge number of migrant workers. In Singapore, they even have a program on continuous skills development and tripartite job re-designing program so that workers can continue to have productive work life up to retirement age and beyond, up to the early 70s. Of course, Singapore, Malaysia and Thailand, all once behind the Philippines in manufacturing during the 1960s, grew their industrial base rapidly in the 1970s-1990s to become the industrial leaders in the Asean region.
So the comparable countries for the Philippines are Indonesia and Vietnam. These two countries have been pursuing industrialization aggressively and appear to be outdistancing the Philippines in the manufacturing race. All three countries happen to be still in the labor-intensive production modality (e.g., electronics assembly and auto parts manufacture). So one would expect that all the three countries would tend to relax the rules on job contracting and LOC-type arrangements.
But no, this is not the case. In 2012, a regulation (MOMT No. 19) released by the Indonesian Ministry of Manpower and Transmigration limits manpower outsourcing to the provision of support services such as cleaning, catering, security and transport services. Yes, “non-core” functions can be outsourced but there are strict guidelines to be followed such as submission of a flow chart indicating that the functions being outsourced have no direct impact on the production process and are distinctly separate from the principal’s core business. In the Philippines, in contrast, manpower agencies, so long as they are compliant with DO 174 and soon-to-be SOT law, can deploy workers virtually in any section of production or business.
In the case of Vietnam, similar rules adopted by Indonesia are in place. Under Decree No. 55 (2013), outsourcing is allowed only in the following conditions: meeting a sudden increase in labor requirements for “a definite period of time”, temporary replacement of workers on sick bay or on maternity leave, and during the interim search for highly skilled workers that are difficult to find (there is a long list of technical jobs).
So what is the point in citing the above five Asean countries? These are the countries that the Philippines is usually being compared in terms of industrial development. Yet, history and economics are not exactly on the side of those who are proposing economic and industrial parity with these countries by maintaining weak rules on job contracting and giving Philippine labor limited protection while the country is not yet fully industrialized. The obvious rationale: keeping labor is a comparative advantage for a country still climbing the industrial ladder. The experience of China, and now Vietnam, shows that there ought to be a different way, unless the Philippines want to be compared with the industrial laggards in Asean, South Asia, Central Asia and Africa.
It will be good for the President to sign Senate Bill 1826. Additionally, it will be good if he can ask the 18th Congress to develop new approaches on how to grow industry and labor welfare together, in a synergistic manner. This, in the end, will help end or minimize the long-running debate on LOC.