News

Chambers flag risk from contracting ban

October 03, 2018 News

LOCAL AND FOREIGN business groups voiced their opposition to a legislative measure backed by President Rodrigo R. Duterte that bans project and seasonal employment schemes, arguing that it would hit micro-, small- and medium-scale enterprises (MSMEs) hard and could reverse recent employment gains.

In their Oct. 1 joint statement on Senate Bill No. 1826, or “The Security of Tenure and End of Endo Act of 2018,” the Employers Confederation of the Philippines (ECoP), the Philippine Chamber of Commerce and Industry (PCCI) and the Philippine Exporters Confederation, Inc. (Philexport) said that “existing laws already ensure the appropriate benefits, safeguards and policy environment for project, seasonal and contract workers.”

Existing rules, they explained, “allow mutually beneficial labor and market relationships where legitimate job contracting is used as a business model mainly to tap available expertise and meet surges in market demand.”

“… Senate Bill No. 1826 has the effect of totally abolishing all forms of job contracting,” the groups said, noting that “[t]he bill… outlaws project and seasonal kinds of employment, which means that project and seasonal workers shall be considered regular workers.”

“It is notable how legitimate job contracting has been an important source of industry competitiveness worldwide, with companies focusing on their core competence while contracting out the other tasks to third parties,” they explained.

“It is impractical and costly for an enterprise to maintain workers beyond what it needs, operating in a highly competitive trade environment that requires just-in-time production.”

Sought for comment on Tuesday, the American Chamber of Commerce of the Philippines, Inc. (AmCham) and the European Chamber of Commerce of the Philippines (ECCP) said any misuse of contracting schemes can be addressed by better implementation of existing law.

“Members of the Joint Foreign Chambers of the Philippines believe that the Senate should not enact… SB 1826… into law in order to protect the livelihood of hundreds of thousands of workers now in legitimate job contracting arrangements,” AmCham Senior Advisor John D. Forbes said in a mobile phone message.

“Retaining the current law on job contracting but strengthening its implementation shall make the Philippines at par with other countries in the world and… therefore… globally competitive,” he added, citing close Philippine rivals Indonesia and Vietnam which “have more flexible contracting and employment laws that allow temporary work for as long as three years.”

For ECCP President Guenter Taus, SB 1826 “restricts the flexibility of enterprises to strategically choose which parts of their work processes to outsource, which will lead to increased cost of production.”

“Increased costs could make the Philippines less competitive as a production site,” Mr. Taus said in an e-mail. “… [E]nterprises may choose to simply eliminate low-skilled work currently outsourced to service providers by automation, redesigning of work processes or by transferring the work to other labor markets.

“… [A]buses of contractualization are not caused by the inadequacy of the law, but by lack of proper monitoring, implementation and enforcement of the law,” he added. “We advocate for the retention of the current law on job contracting and to improve implementation of the same.”

SB 1826 now awaits second-reading approval, while the House of Representatives approved its version on third and final reading on Jan. 29.

“If implemented, the Philippines will be the only country in the world to ban legitimate forms of job contracting,” ECoP, PCCI and Philexport claimed in their joint statement.

Mr. Duterte, who had vowed during his presidential campaign to abolish contractual employment schemes, certified the measure as a priority on Sept. 25, meaning both chambers of Congress can approve it on second and third reading on the same day.

In order to tighten rules against labor-only contracting that is already banned under current law, SB 1826 defines such arrangement as one where, among other characteristics already provided by law, workers of the job contractor are under the control and supervision of the hiring entity.

It also requires businesses to treat project and seasonal workers as regular employees and assures that the services of an employee — regardless of employment status or position — cannot be terminated except for just cause or other reasons under Presidential Decree No. 442, or the Labor Code of the Philippines, as amended.

The joint statement said ECoP particularly “believes that this is not good for business, particularly for MSMEs.”

SMEs are estimated to account for 99.6% of all businesses and 64.9% of all jobs in the Philippines.

“Smaller companies have to be able to adapt during busy or low periods. Being able to bring in more workers or scale back the work force to respond to fluctuations in demand is highly essential to business owners, especially for MSMEs,” the statement read.

“… [T]o ban all forms of job contracting would be disastrous, particularly to MSMEs. Higher cost of doing business plus lower productivity rate will give a lot of our MSMEs no choice but to close shop or retrench employees.”

Preliminary results of the July 2018 round of the Philippine Statistics Authority’s Labor Force Survey put the country’s unemployment rate at 5.4%, down from the 5.6% recorded in the same period last year. This is equivalent to 2.323 million jobless Filipinos from 2.373 million a year ago.

However, the underemployment rate — the proportion of those already working, but were still looking for more work or longer working hours in order to make ends meet — worsened to 17.2% from 16.3%, signalling deterioration of job quality.

The government has been working to slash the country’s unemployment rate to 3-5% by 2022, when Mr. Duterte ends his six-year term. — Gillian M. Cortez

Article was originally published on October 3, 2018 at the Business World Online